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Simple English definitions for legal terms
commingled goods
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A quick definition of commingled goods:
Commingled goods are things that have been mixed together so much that you can't tell what they were before. For example, when you make bread, the flour becomes commingled with other ingredients. This can be a problem when people have different rights to the goods that have been mixed together. The law says that if someone has a right to one of the original goods, they also have a right to the new thing that was made from all the mixed-up goods. But if more than one person has a right to the original goods, it can be hard to figure out who has the most important right to the new thing.
A more thorough explanation:
Definition: Commingled goods are goods that have been physically combined with other goods to the point where their original identity is lost. For example, when flour is used to make bread, it becomes a commingled good.
When goods become commingled, it can create complications in secured transactions. Independent security interests cannot exist in commingled goods, but they can exist in the product or mass that is created from the commingled goods. If a good with a security interest becomes commingled, a security interest is created in the new product.
For example, if a farmer has a security interest in a specific type of grain, and that grain is used to make bread, the farmer's security interest would extend to the bread that is produced. This can create issues when multiple security interests exist in the commingled goods, such as when yeast, water, and flour are combined to make bread.
To resolve these issues, UCC §9-336 creates a priority system for security interests in products or masses. Perfected security interests take priority over unperfected security interests, and if multiple perfected security interests exist, the interest with greater value before the goods were commingled takes priority.
Commingled goods are different from accessions, which occur when goods are combined but their original identity is not lost. For example, if a car is fitted with new tires, the tires are an accession to the car, but the car's original identity is not lost.