Attachment

Question 1

Generally

Answer 1

There are three things required: (1) parties must have an agreement that the security interest attach; (2) value must be given by the secured party; and (3) the debtor must have rights in the collateral.

These three requirements may occur in any order but they must co-exist before the security interest attaches.

Question 2

Element #1: Agreement

Answer 2

Agreement to create a security interest must be evidenced in one of the following ways:

(1) Security Agreement
(2) Possession
(3) Control

Question 3

Element #1: Agreement by Authenticated Security Agreement

Answer 3

Agreement may be evidenced by a record (written or electronic) authenticated by the DEBTOR that describes the collateral (if timber, then describes the land) concerned.

It is authenticated if it is signed.

A description is sufficient if it reasonably identifies the collateral (CANNOT be super generic - “all assets”). Exceptions requiring more (cannot be described by type alone): (1) consumer goods, and (2) consumer securities account.

Question 4

Element #1: Agreement by Possession

Answer 4

Agreement may be evidenced by creditor’s possession. Such an arrangement is called a pledge. If this is the case, secured party has duties and rights.

Duty: Duty of reasonable care.

Rights: right to reimbursement for expenses incurred to preserve; risk of loss is on the debtor; accounting for profits; and right to rep ledge the collateral

Question 5

Element #1: Agreement by Control

Answer 5

If non consumer deposit account, electronic chattel paper, or investment property, security agreement may be evidenced by control.

Question 6

Element #2: Value

Answer 6

Any consideration given by the secured party is sufficient. Additionally, pre-existing debt is considered value given IF the security interest is intended as security for the preexisting debt.

Question 7

Element #3: Rights in Collateral

Answer 7

Debtor must have rights in the collateral to create a security interest. Ownership or right to possession qualifies. It does not matter who holds title.

Question 8

Scope: After-Acquired Property

Answer 8

General rule: without an explicit after-acquired property clause in a security agreement, the secured party’s interest only reaches collateral that the debtor had rights to at the time the debtor signed the agreement. Rights don’t attach in consumer goods (even with clause) unless the debtor acquires rights within 10 days after the secured party gives value.

Also, clause is ineffective to commercial tort claims.

Exceptions:
- Court will imply if collateral is of a type that rapidly depletes and replenishes

Question 9

Scope: Future Advances

Answer 9

A security agreement MAY cover future advances on present collateral. A new security agreement is not needed when a future loan is made.