IV. ATTACHMENT

Question 1

general

Answer 1

Attachment is the process by which a security interest is created and becomes enforceable against the debtor so the creditor can repossess the collateral if the debtor does not pay.

Question 2

Three elements

Answer 2

(VCR):

1. Creditor gave value
2. Contract — The __security agreemnt_
3. Debtor has __rights__ in collateral

Question 3

B. CONTRACT — THE SECURITY AGREEMENT

Methods of proving the security agreement:

Answer 3

The contract between the debtor and creditor in which the debtor gives the creditor a security interest in the collateral.
Methods of proving the security agreement:
1. Oral
ok only if the collateral is in the creditor’s possession (pledge)
The creditor has a duty to take __reasonable__ care of collateral in the creditor’s possession.

2. Authenticated Record
   Requirements of an authenticated record:
   a. Evidence of Record
   Record may be written or __electronic_ as long as it is signed or marked electronically with present intent to identify the debtor and adopt the agreement.
   b. Description of Collateral
   Description must __reasonably identify __ the property, that is, make it clear what property the creditor may repossess if the debtor defaults.
   wrong serial number for the only thing may be ok; consumer goods and commercial tort claims may not be described by type alone
3. Control
   The security agreement may be demonstrated by control if the collateral is nonconsumer deposit accounts, electronic chattel paper, or investment property.
   Control basically means the creditor has the right to sell or cash in the collateral without further action from the debtor.

Question 4

C. DEBTOR HAS RIGHTS IN THE COLLATERAL

Answer 4

A debtor cannot give a security interest in property without having rights in the property such as ownership or identification to a contract.
Debtor cannot use another person’s property as collateral without that person’s ____permission___.

Question 5

D. AFTER-ACQUIRED PROPERTY

Answer 5

1. Using New Property As Collateral For Old Loan
   The debtor can agree that new acquisitions of property will serve as additional collateral for an old loan.
   This situation is often referred to as a __floating lien__ and is very common with inventory.
2. Consumer Good Exception — 10 day limitation from creditor giving value
   An after-acquired property clause will work only for consumer goods acquired within __10 days_ of the creditor giving value.
3. Commercial Tort Claim Exception
   After-acquired property clauses will not work with commercial tort claims.