Attacment of Secured Transactions

Question 1

Attachment

Answer 1

The process by which the security interest is created
A security interest is created by a contract between the debtor and the secured party

Question 2

Attachement - Process

Answer 2

The security interest attaches when:
- the secured party gives value;
- the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and
- the debtor has authenticated a security agreement that sufficiently describes the collateral
- A collateral description is sufficient if it reasonably identifies what is described
- A description of collateral by UCC type is sufficient unless the collateral is consumer goods and the transaction is a consumer transaction.
- A supergeneric description is not sufficient in a security agreement

Question 3

Attachment - After-Acquired Collateral

Answer 3

Property obtained after the security agreement is created
A security interest will attach to after-acquired collateral if the agreement specifically says it includes after-acquired collateral
- Exceptions
- A security agreement specifying an interest in inventory or accounts receivable will create an interest in after-acquired collateral, notwithstanding the fact that there is no explicit after-acquired property clause
- A security agreement cannot provide that it covers after-acquired consumer goods, unless the debtor acquires rights in the consumer goods within 10 days of the secured party giving value

Question 4

Attachment - Future Advances

Answer 4

A security agreement may also provide that the collateral secures future advances

Question 5

Attachment - Proceeds

Answer 5

A security interest in collateral automatically extends to identifiable proceeds of the collateral

Question 6

Attachment - Transfer

Answer 6

A secured party’s security interest in collateral will continue regardless of a sale, lease, or other disposition of the collateral, unless the secured party authorized disposition of the property free of the security interest
- A secured party may end up with both a security interest in the original collateral and the identifiable proceeds of the collateral.