Legal Definitions - tangible chattel paper

Tangible chattel paper refers to a physical document that serves two purposes simultaneously: it evidences a monetary obligation (a promise to pay money) and also grants a security interest in specific goods (personal property, not real estate).

Essentially, it's a paper contract that shows someone owes money for an item, and that item itself is used as collateral to secure the payment. The "tangible" aspect means it exists as a physical piece of paper that can be held, touched, and transferred by hand, distinguishing it from an electronic record.

Here are some examples:

• Example 1: Car Loan Agreement

  Imagine a customer purchases a new truck from a dealership. They sign a multi-page loan agreement that details the payment schedule, interest rates, and explicitly states that the truck itself serves as collateral until the loan is fully repaid. This physical document, which the dealership holds, is an example of tangible chattel paper. It represents the customer's obligation to pay money and the dealership's (or the financing company's) security interest in the truck.

• Example 2: Farm Equipment Lease

  A farmer leases a new tractor from an agricultural equipment supplier. The lease agreement, printed on paper and signed by both parties, outlines the monthly payments and specifies that the supplier retains a security interest in the tractor throughout the lease term. This physical lease document is tangible chattel paper because it combines the farmer's financial obligation with the supplier's claim on the specific piece of equipment.

• Example 3: Furniture Store Financing Contract

  A customer buys a new living room set from a furniture store on an installment plan. They sign a printed contract that details the total cost, monthly payments, and a clause stating that the furniture itself acts as collateral until the full purchase price is paid. This physical contract is tangible chattel paper, as it embodies both the customer's promise to pay and the store's security interest in the furniture.