Attachment of an SI Flashcards
What affect does attaching an SI have?
It permits the SI to be enforceable against the debtor for the collateral
What are the 3 requirements for an SI to be “attached?”
- Value given by the secured party;
- debtor has rights in the collateral; and
- debtor has authenticated a security agreement that describes the collateral or the secured party has possession/control of the collateral.
Can future advances be secured by collateral?
Yes
Does the SI attach to rights that the debtor doesn’t have in collateral?
No
What are the 3 requirements that satisfy a security agreement?
The security agreement must:
- Be in a record;
- Contain a description of the collateral; and
- Be authenticated by the debtor
Does “debtor’s assets” satisfy the description requirement in a security agreement?
No
Can a SI cover a debtor’s collateral owned after the SI is given?
Yes
When is an after-acquired clause effective?
Where the debtor acquires them within 10 days after the secured party gives value, or a commercial tort claim.
What does an SI automatically attach to?
Identifiable proceeds that are acquired upon disposition of the collateral
What are the 3 duties required by the secured party’s possession/control of the collateral?
- Duty of care;
- Duty to keep collateral identifiable; and
- Duty to relinquish possession/control of the collateral
What are the 3 rights a secured party has over the collateral?
- Right to charge for reasonable expenses;
- Right to use/operate collateral; and
- Right to hold proceeds that are acquired upon disposition of the collateral.
Who has the risk of loss or damage on the collateral?
The debtor
Can a debtor assign his right to receive payment to an account?
Yes if the secured party notifies the account
How may an assigned account from debtor discharge her obligation to pay?
Upon receipt of notification from secured party, only by paying the assignee.
PMSI
Purchase Money Security Interest
When does a PMSI exist?
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
What 2 requirements are necessary for a PMSI to exist in software?
- When the debtor acquired interest in software in a transaction where the debtor also acquired interest in goods; and
- The debtor acquired said interest for the principal purpose of using the software in the goods.
Accession
Goods that are physically united with other goods without destroying the identity of the original goods
Is an SI in accessions lost?
No
Commingled Goods
Goods that are united with other goods destroying their original identity
Can an SI attach to specific goods that are being commingled?
No
Can an SI attach to commingled goods that are a product of results from the product or mass?
Yes
