Attachment of SI

Question 1

Attachment
(gen def)

Answer 1

A SI that is enforceable against the debtor with respect to the collateral is said to have “attached” to the collateral.

Question 2

What are the 3 requirements for attachment?

Answer 2

1. Value given by the SP
2. The debtor has rights in the collateral, AND
3. the Debtor has authenticated a SA that describes the collateral, or the SP has possession or control of the collateral.

Question 3

What is required in a SA for it to be valid?

Answer 3

The SA must be:
* in a record;
* contain a description of the collateral
* be authenticated by the debtor

It MUST satisfy the SOF!

Question 4

How must collateral be described in the
Security Agreement?

Answer 4

It can list specific items or can identify the Art. 9 TYPE of collateral (“all debtor’s equipment”) unless the collateral is consumer goods or a commercial tort claim; a super-generic description (such as “all debtor’s assets”) is NOT sufficient.

Question 5

Possession or Control of collateral,
How to satsify SOF?

Answer 5

Can satisfy SOF; the SP’s possession or control must be pursuant to the SA.

Question 6

What is the general rule regarding
after-acquired collateral?

Answer 6

The SI may cover the collateral that is owned and the collateral that is acquired after the SI is given; but the Security Agreement must include an “after-acquired clause.”

Question 7

What exceptions apply to after-acquired collateral clause?
(not included)

Answer 7

• Not effective for consumer goods, UNLESS the debtor acquires them within ten days after the SP gives value
• Not effective for a commercial tort claim

Question 8

What about proceeds?

Answer 8

The SI attaches automatically to identifiable proceeds
(i.e., whatever is acquired upon disposition of the collateral)

Question 9

What duties does a SP who has possession or control of collateral have?

Answer 9

• duty of care
• duty to keep collateral identifiable
• duty to relinquish possession or control of collateral

Question 10

What rights & risks arise when a SP has possession or control of collateral?

Answer 10

• SP has the right to charge for reasonable expenses
• Risk of loss or damage is on the debtor
• SP has right to use or operate collateral
• SP has the right to hold proceeds

Question 11

A PMSI in goods exists when:

Answer 11

• a SP gave value to the debtor and the debtor used the value to incur an obligation that enabled the debtor to acquire goods; OR
• a SP sold goods to the debtor, and the debtor incurred an obligation to pay that SP all or part of the purchase prices.

Question 12

A PMSI in software exists only when:

Answer 12

The debtor acquired his interest in it in an integrated transaction in which the debtor also acquired an interest in goods (ex: a computer), and the debtor acquried that interest in the software for the principal purpose of using the software in the goods.

Question 13

What are accessions?

Answer 13

Goods that are physically united with other goods in such a way that the identity of the orginal goods is NOT lost.

Question 14

What happens when an SI created in collateral becomes an accession?

Answer 14

SI is NOT lost due to the collateral becoming an accession;
also, an SI can be created in collateral that IS an accession.

Question 15

What are commingled goods?

Answer 15

Goods that are physically united with other goods such that there identity IS lost in a product or a mass.

Question 16

What happens when an SI created in specific goods becomes commingled?

Answer 16

the SI is transferred to the resulting product or mass