Attachment Flashcards
What is the process by which the security interest is created?
Attachment
A security interest is created by a contract between the debtor and the secured party.
What rights does a secured party have once the security interest has attached?
All enforcement rights provided by Article 9
This includes the right to repossess the collateral upon the debtor’s default.
What are the three conditions for a security interest to attach according to [§ 9-203]?
- The secured party gives value
- The debtor has rights in the collateral
- The debtor has authenticated a security agreement that sufficiently describes the collateral
What does it mean for a secured party to give value?
The secured party provides consideration, such as a loan
Example: Chris borrows $10,000 from Bank.
What is required for a debtor to have rights in the collateral?
The debtor must either own the collateral or have the power to transfer rights in it
Example: Chris purchasing a snowmobile gives him rights in that collateral.
What is a security agreement?
A contract in which the debtor grants a security interest in collateral
It must sufficiently describe the collateral.
What type of collateral description is sufficient?
A description that reasonably identifies what is described
Is a supergeneric description sufficient in a security agreement?
No
Example: ‘All the debtor’s property’ is not sufficient.
What is after-acquired collateral?
Property obtained after the security agreement is created
When can a security agreement cover after-acquired consumer goods?
A security interest will attach if the agreement specifies inclusion of after-acquired collateral in the Security Agreement
Only if the debtor acquires rights within 10 days of the secured party giving value.
What is a future advance in the context of a security agreement?
Collateral may secure future advances, such as under a revolving credit agreement.
What happens to a security interest in collateral when the collateral is sold?
The security interest continues unless authorized disposition occurs
A secured party may have a security interest in both original collateral and identifiable proceeds.
Fill in the blank: A security interest in collateral automatically extends to _______.
identifiable proceeds of the collateral.
True or False: A security interest cannot cover after-acquired inventory.
False
A security agreement specifying an interest in inventory will create an interest in after-acquired collateral.
IMPORTANT: A UCC type description is sufficient unless it involves __________________ in a consumer transaction.
Consumer goods
