Attachment of the interest

Question 1

Attachment defined

Answer 1

Attachment is the process by which the security interest is created and becomes enforceable - it “attaches” to the collateral. This is the substantive requirement that must accompany the contract

Question 2

Attachment - 3 part test

Answer 2

• Secured party gives value (usually, gives the actual cash for the loan)
• debtor has rights in the collateral
• debtor has authenticated a security agreement that sufficiently describes the collateral

Sufficient description: description by UCC type is fine (“all inventory”) EXCEPT consumer goods and transaction is a consumer transaction. Can’t give everything you own as collateral lol

Question 3

After-acquired collateral

Answer 3

Property obtained after the security agreement is created.
RULE: applies if agreement specifically says it’s included - “all equipment now owned or hereafter acquired”

EXCEPTIONS:

• interest in inventory or accounts receivable ALWAYS includes after-acquired collateral
• CANNOT give interest in after-acquired consumer goods, unless acquired within 10 days of value given

Question 4

Future advances

Answer 4

Security agreement can specify that collateral secures future advances (i.e. more loans later)