PP#4

Question 1

Under the PPSA, What is a security agreement?

Answer 1

Under the PPSA a security agreement is a financing contract that is written and signed by the debtor that reasonable states, what is the collateral, how does a default occur, and how is the loan structured. A description of the collateral also has to be done in a financing statement in order to perfect the agreement. Perfection can also occur by possession.

Question 2

Collateral Descriptions

Answer 2

Typical Descriptions of Collateral:

• Goods: Everything that is tangible
• Chattel Paper: Loan Agreement
• Investment Property: Future contracts etc.
• Documents of Title: Bill of Lading
• Instruments: Checques, Letters of Credit,
• Money: Currency / Cash
• Intangibles: Accounts Receivable/ Book Debt

Question 3

Limitations on Security Agreements

Answer 3

You cannot make any additions to a contract that state that you are engaged in a security agreement after the agreement had already been signed at an earlier date. This is not warranted as their is no proof that the other party was made aware and agreed to accept the additional terms and conditions.

Question 4

What happens if you have a security agreement but do not obtain perfection?

Answer 4

In this event, you could have registered your interest under the PPSA (or UCC in America). As a result, you give up priority against the debtors other creditors if they do register the goods (even if their agreement occurs after yours).

Question 5

Are you allowed to offer the proceeds of crime as collateral under a PPSA?

Answer 5

No, you are not the legal owner of the proceeds of crime as the law doesn’t constitute ownership over an acquisition of funds that were not legally obtained. The Nemo Dat Quod non Habet principle applies here.