Creation of a Security Interest - Technical Validity of Forms Flashcards
Security Agreement
The security agreement is the contract between the debtor and the creditor by which the debtor grants to the creditor (the secured party) a security interest in the collateral
Possession
Where the collateral is in the possession of the secured party (a pledge), no written security agreement is required by law
No Possession
If the collateral is not in the secured party’s possession or control, the §9-203 security agreement must (1) be authenticated by the debtor and (2) describe the collateral (plus the land if timber is involved).
Format
The security agreement need not be in any particular form or contain any particular words. It needn’t call itself a security agreement
Security Agreement v. Financing Statement
The purpose of the security agreement is to create property rights between the debtor and the creditor, and the purpose of a financing statement is to create property rights in the creditor against most of the rest of the world.
Financing Statement
the notice that is filed in the place specified in §9-501 (and indexed under the debtor’s name) in order to give later creditors an awareness that the collateral is encumbered
For a financing statement to perfect a security interest, it must be
(1) filed in the appropriate office (typically secretary of state) and
(2) properly completed (debtor’s name and mailing address; name of the secured party or its representative; and indication of the collateral covered by the financing statement)
The Debtor’s Identity
When the financing statement is filed (typically in the Secretary of State’s office), it will be indexed under the debtor’s name
Generally…
…listing the debtors trade name alone is not sufficient. If registered organization, financing statement must list the organization’s correct and complete legal name exactly as it appears on the public, organic record most recently filed with the state in which the organization is registered
For a financing statement to be effective to perfect a security interest
it must list the debtor’s correct and complete legal name. If it does not, it is seriously misleading. A financing statement is seriously misleading if a third party searching the appropriate online records could not locate the financing statement by typing int he debtor’s correct, complete legal name. A seriously misleading financing statement is generally ineffective to perfect a security interest
Description of the Collateral
The financing statement must indicate the collateral. An indication must convey what the collateral is, but it need not be as specific as the description of the collateral required in the security agreement. Unlike a security agreement, in the financing statement, supergeneric language is a sufficient indication of the collateral.
