Attachment of an SI

Question 1

What affect does attaching an SI have?

Answer 1

It permits the SI to be enforceable against the debtor for the collateral

Question 2

What are the 3 requirements for an SI to be “attached?”

Answer 2

1. Value given by the secured party;
2. debtor has rights in the collateral; and
3. debtor has authenticated a security agreement that describes the collateral or the secured party has possession/control of the collateral.

Question 3

Can future advances be secured by collateral?

Answer 3

Yes

Question 4

Does the SI attach to rights that the debtor doesn’t have in collateral?

Answer 4

No

Question 5

What are the 3 requirements that satisfy a security agreement?

Answer 5

The security agreement must:

1. Be in a record;
2. Contain a description of the collateral; and
3. Be authenticated by the debtor

Question 6

Does “debtor’s assets” satisfy the description requirement in a security agreement?

Answer 6

No

Question 7

Can a SI cover a debtor’s collateral owned after the SI is given?

Answer 7

Yes

Question 8

When is an after-acquired clause effective?

Answer 8

Where the debtor acquires them within 10 days after the secured party gives value, or a commercial tort claim.

Question 9

What does an SI automatically attach to?

Answer 9

Identifiable proceeds that are acquired upon disposition of the collateral

Question 10

What are the 3 duties required by the secured party’s possession/control of the collateral?

Answer 10

1. Duty of care;
2. Duty to keep collateral identifiable; and
3. Duty to relinquish possession/control of the collateral

Question 11

What are the 3 rights a secured party has over the collateral?

Answer 11

1. Right to charge for reasonable expenses;
2. Right to use/operate collateral; and
3. Right to hold proceeds that are acquired upon disposition of the collateral.

Question 12

Who has the risk of loss or damage on the collateral?

Answer 12

The debtor

Question 13

Can a debtor assign his right to receive payment to an account?

Answer 13

Yes if the secured party notifies the account

Question 14

How may an assigned account from debtor discharge her obligation to pay?

Answer 14

Upon receipt of notification from secured party, only by paying the assignee.

Question 15

PMSI

Answer 15

Purchase Money Security Interest

Question 16

When does a PMSI exist?

Answer 16

When a secured party sold goods to the debtor or gave value to the debtor and the debtor used the value to incur an obligation that enabled the debtor to acquire goods

Question 17

What 2 requirements are necessary for a PMSI to exist in software?

Answer 17

1. When the debtor acquired interest in software in a transaction where the debtor also acquired interest in goods; and
2. The debtor acquired said interest for the principal purpose of using the software in the goods.

Question 18

Accession

Answer 18

Goods that are physically united with other goods without destroying the identity of the original goods

Question 19

Is an SI in accessions lost?

Answer 19

No

Question 20

Commingled Goods

Answer 20

Goods that are united with other goods destroying their original identity

Question 21

Can an SI attach to specific goods that are being commingled?

Answer 21

No

Question 22

Can an SI attach to commingled goods that are a product of results from the product or mass?

Answer 22

Yes