2. Attachment - Creation of a Security Interest Flashcards
Requisites for Attachment
1) parties must agree to create the SI
2) Value must be given by the secured party (no preexisting)
3) ) the debtor must have rights(ownership) in the collateral Rights DOES NOT mean title
Evidence of agreement to create SI
1) creditor takes possession of the collateral
2) debtor’s authentication of a security agreement describing the collateral
or
3) creditor taking control of certain types of collateral
Description of Collateral
Can be broad, cant say “all debtors assets”
Types of collateral for Obtaining Control
1) non-consumer deposit accounts
2) electronic chattel paper
3) investment property
Method of Obtaining Non-consumer Deposit Accounts
The bank automatically has control.
If not the bank then 1) putting account in secured party’s name or 2) agreeing on authenticated record
Method of Obtaining Electronic Chattel Paper
once it is shown that the transfer of interests in chattel paper reliably establishes the secured party as the assignee
Method of Obtaining Investment Property
1) Certificated Securities - taking possession of the certificate if it is in bearer form. IF registered form then must take possession AND indorsed or registered
2) Securities Accounts - owner of the account instructs the securities intermediary
Rights and Duties of Secured Party in Possession or Control
Reasonable care in storing and preserving collateral.
Entitled to reimbursement for reasonable expenses in storing
After-Acquired Property
The SI will attach as soon as the debtor acquired an interest in the collateral. Generally need a “after-acquired clause”
When do After-Acquired Property claims not apply
1) Does not apply to consumer goods unless debtor acquires rights within 10 days after creditor gives value
2) commercial tort claims
