chattel paper
Chattel paper is a legal document that records a monetary obligation from one party to another and a security interest used in secured transactions to sell property on credit while retaining some interest in the property. (See: UCC § 9-102 )
As such, chattel paper must show the following:
- A monetary obligation from Party A to Party B, and
- A security interest or other interest retained in the property by Party B.
For example, in the case of a car sale, chattel paper records both a buyer’s obligation to pay for a car over time and the corresponding seller’s interest to keep certain rights to the car until the buyer completes the payment.
While traditional chattel papers were physical, UCC §9-105 authorizes the use of chattel papers in electronic form, namely electronic chattel papers. The Uniform Commercial Code (UCC) clarified conditions for a secured party to establish control over an electronic chattel paper. (See: UCC § 9-105 ) The UCC’s clarification on electronic chattel papers ensures that both physical and electronic chattel papers are under the same degree of security protection by the law.
[Last reviewed in January of 2025 by the Wex Definitions Team ]
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