Attachment

Question 1

Requirements for attachment

Answer 1

There is attachment if:

(1) The secured party gives value;
(2) The debtor has rights in the collateral, and;
(3) Either:
(a) The debtor authenticates an agreement describing the collateral; or
(b) The secured party has possession or control of the collateral pursuant to a security agreement.

Question 2

Requirements for attachment: value given

Answer 2

Giving value includes:

(1) Providing consideration sufficient to support a simple contract;
(2) Extending credit, either immediately or under a binding obligation to do so;
(3) As a buyer, accepting delivery under a preexisting contract, thereby converting a contingent obligation into a fixed obligation; and
(4) Satisfaction of, or security for, part or all of a preexisting claim.

Question 3

Requirements for a security agreement

Answer 3

A security agreement must:

(1) Be in a record—e.g., a signed or written document;
(2) Contain a description of the collateral—e.g., “all of debtor’s equipment”; and
(3) Be authenticated by the debtor—e.g., by signature.

Question 4

After-acquired property

Answer 4

The security interest for after-acquired property attaches as soon as the debtor obtains an interest in the property.

Question 5

Requirements for attachment: rights in the collateral

Answer 5

A debtor’s limited rights in collateral—e.g., in property acquired on credit as in a PMSI—suffice for a security interest to attach.

The secured party’s rights in the collateral are no greater than the debtor’s rights.

Question 6

Purchase money security interest

Answer 6

A PMSI attaches if the seller sells property to the buyer on credit and retains a security interest in the property.

Question 7

Proceeds

Answer 7

A security interest in collateral automatically attaches to identifiable proceeds.

Proceeds include that which is acquired upon the sale, exchange, or other disposition of collateral.