Attachment Flashcards
What is attachment?
An arrangement linking a debt to a particular piece of collateral
What does it mean for a security interest to have “attached” to collateral?
The security interest is enforceable against the debtor
What are the conditions for a security interest to be enforceable against a debtor?
- Value has been given by the secured party
- The debtor has rights in the collateral
- There is a security agreement where:
- The agreement is authenticated and describes the collateral, or
- The secured party has possession or control of the collateral pursuant to an oral or unauthenticated security agreement
UNLESS there is an agreement to postpone the time of attachment
Mnemonic: Violet Roses Smell Amazing
True or False: The secured party must give value for the security interest.
True
Can value be given by providing the same consideration needed for a contract?
Yes
Can value be a binding commitment to extend credit?
Yes
Can a security agreement provide that collateral secures future advances?
Yes
What does a security interest attach to?
Only the rights that the debtor has in the collateral (e.g. leasehold, joint tenancy, full ownership)
Can thieves grant security interests in stolen good?
No, they have no rights in the collateral
If a debtor has voidable title but could transfer full title to a good-faith purchaser for value, can the debtor create an enforceable security interest?
Yes
For after-acquired property, when does a security interest attach?
When the debtor obtains rights in the collateral
If a debtor has sold an account, does the debtor still retain “rights” in the account for attachment purposes?
Yes, until the purchaser perfects the security interest
If a consignor retains title to the consigned goods, does the consignee have rights in the consigned goods?
No, unless the consignment is covered by Article 9
With an agreement between a debtor and secured party that prohibits the transfer of the debtor’s rights, what happens after a transfer?
The secured party has rights against the debtor for the transfer
Note: the transfer does still take effect
With an agreement between a debtor and secured party that makes a transfer of the debtor’s rights a default, what happens after a transfer?
It might make the transfer a default
Note: It does not prevent the transfer from taking effect
What is required for a security agreement?
- A record
- A description of the collateral, and
- Authentication by the debtor
Mnemonic: security agreements are RAD
What is required for a security agreement to be in a record?
Must be in a tangible medium OR a medium that can be retrieved in a perceivable form
What is required for a security agreement’s description of collateral?
Must reasonably identify the collateral