Perfecting a Security Interest: Is a Vessel a Consumer or Commercial Good?

Perfecting a Security Interest: Is a Vessel a Consumer or Commercial Good?

by Robert S. Fisher

Enforcing security interests in tangible personal property depends on the characterization of the goods and the actual or intended use of the goods. The distinction between "consumer" and "commercial" characterization of goods in the context of yachts and other large vessels is examined in this article.


When it comes to perfecting or enforcing your clients' security interests in tangible personal property or its related insurance coverage, the devil is in the details -- characterization of the goods, the actual or intended use of the goods, characterization of your client, and consideration of the quality of title it expects to receive. For related insurance coverage, it is also a question of which use(s) may be specifically allowed by the policy and which uses your client must promise to forego, usually found in what are euphemistically called owner warranties.

Some Pivotal Words: Consumer, Individual, and Recreational

One of the most pivotal words in the legal lexicon today is "consumer." The word is making its ascent as a noun or adjective for a non-commercial party to a transaction, an adjective for a non-commercial transaction itself, or as its oft-seen relatives, "individual" or "natural person," generally as a noun setting a condition for being a "consumer" in a given context or as its adjectival cousin, "recreational." Like all relatives, these words are not always synonymous in scope and each has its own personality and legal gloss. Also, more regulatory interpretation will emerge from the newly-formed federal Bureau of Consumer Financial Protection ("BCFP" or "CFPB"), recently appointed as the latest federal interpreter of such words.

Consumer Good v. Commercial Good

We all have heard the remark, "Oh, that couldn't be a consumer good." Even courts or arbitrators occasionally jump to such a conclusion by analogizing to other legal arenas historically associated with the term "consumer." For example, the consumer's degree of presumed sophistication based on prior employment or product-owning history resulted in artificial, politically-spawned dollar cut-offs in early consumer credit protection legislation when prices were still relatively low and volume of higher-end goods much lower and more obsolescence starting to be built in. Size or useful life of the goods also could play a role in a decision because many did not associate ordinary consumers with very expensive or long-wearing products.

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