Attachment Flashcards
When does “attachment” of a security interest occur?
- When value has been given (includes past or present loan, or binding promise of future loan
- The debtor must have rights in the collateral
- The debtor must have “authenticated” a “security agreement that provides an adequate description of the collateral”
What does it mean to be “authenticated”
Signed or otherwise indicated assent in some perceivable form
Is oral agreement ok for attachment?
yes, if debtor agreed to put the collateral in the creditor’s possession or control. This is rarely done.
What is a proper description of collateral?
Description must simply “reasonably identify” generally by categories discussed earlier (inventory, equipment, accounts), can’t be vaguely “all assets”
Can you include after-acquired collateral in your description?
Yes, description doesn’t have to be limited to present collateral, usually will be consumer collateral.
Whats the description rule for consumer transactions?
The descriptions must be more specific and after-acquired clauses apply to consumer goods only if the consumer acquires the property within 10 days of the secured value having been given.
What about future loans?
Future obligations can be secured, usually using the terms “all indebtedness”
Can you attach proceeds?
Yes, whether or not the security agreement says so, a security interest ATTACHES AUTOMATICALLY to whatever the debtor receives for or on account of the collateral.
Rule for perfected S.I. changing hands?
A perfected security interest follows property into the hands of other people who acquire the collateral from the debtor unless the creditor consents to a RELEASE of the security interest.
*When a debtor sells collateral, the creditor’s collateral quite often doubles!
What is an inadvertent and undesired attachment? How is it treated?
Basically what it says, creditor is treated as an unperfected secured creditor who loses priority.
When does an inadvertent attachment usually occur?
- Lease distinguished as a sale
- Consignment: non-consumer goods worth more than $1000 to a merchant for sale, acts under its own name, and is not generally known to sell other’s goods.
