What is electronic chattel paper, and how does it affect perfection?

• A. It is a physical paper document.
• B. It is an electronic record evidencing a monetary obligation and a security interest; perfection may require control by the secured party over the electronic record.
• C. It has no relation to perfection.
• D. It is a type of intangible asset not subject to perfection.

Answer: (B)

Electronic chattel paper is a record stored electronically that evidences a monetary obligation and a security interest in or on specific goods. Perfection of a security interest in electronic chattel paper relies on control by the secured party over that electronic record, meaning the secured party has exclusive power to access and direct the disposition of the record. This contrasts with traditional paper chattel paper, where perfection could be achieved by possession or filing; for electronic chattel paper, control is the key method to establish priority. If the secured party lacks control, the security interest may not be perfected, risking weaker priority against other claimants. In short, electronic chattel paper is an electronic record of debt and security, and perfection depends on the secured party’s control over that record.