New York State Notary Practice Exam

What term refers to writings that evidence a payment obligation and a security interest in specific goods?

1. Promissory notes

2. Chattel paper

3. Security agreement

4. Bill of exchange

The correct answer is: Chattel paper

The correct term that refers to writings evidencing a payment obligation and a security interest in specific goods is chattel paper. Chattel paper is defined as a record or records that evidence both a monetary obligation and a security interest in specific goods, particularly in the context of personal property financing. This means that chattel paper uniquely combines both the promise to pay money (the financial obligation) and the secured interest in physical assets, which distinguishes it from other financial instruments. Promissory notes represent only a promise to pay and do not necessarily include a security interest in goods. A security agreement, while it does provide a security interest in goods, does not encapsulate the payment obligation itself. A bill of exchange is primarily an order to pay a specified amount to a designated party and is not directly related to security interests in goods. Thus, chattel paper serves a specific function in financial transactions that involve both a promise to pay and the securing of that debt with tangible assets, making it the correct answer.