Creation (Attachment) of Security Interest

Question 1

Attachment

Answer 1

Security interest becomes enforceable when (1) VALUE is given by the creditor, (2) a CONTRACT evidences the secured txn (unless the sec’d party has taken possession of the collateral), and (3) the debtor has RIGHTS in the collateral; these three things must be in coexistence at the time of attachment

Question 2

Security Agreement

Answer 2

Synonym for the contract needed for the security interest to attach (i.e., become enforceable); evidenced by a written record that (1) is authenticated by debtor thru signature AND (2) reasonably identifies the collateral
NOTE: If secured party has possession, we don’t need a record

Question 3

After-Acquired Property

Answer 3

Secured party obtains security interest in property that the debtor will obtain in the future; such after-acquired collateral clauses are enforceable and the interest attaches to the property as soon as the debtor acquires the interest (except for consumer goods!)

Question 4

Floating Lien

Answer 4

A security interest in an aggregation of individual items expected to be disposed of and replaced (e.g., inventory, equipment); automatically attaches to the new individual items as they replace individual items that have been disposed of

Question 5

Future Advances

Answer 5

Secured party contemplates making future loans to debtor and wants to secure them in the present security agreement (e.g., a line of credit arrangement); allowed