Scope of the Security Interest

Question 1

after-acquire property clause

Answer 1

W/o explicit AAPC, creditor’s interest only reaches collateral that debtor had rights in at the time of signing the sec. agreement

Question 2

Exceptions to the After-Acquired Property Clause

Answer 2

1. Type of collateral that is rapidly depleted or replenished (ex: accounts or inventory)
2. Identifiable proceeds of collateral

• Only applies to consumer goods of acquired w/in 10 days after signing
• NEVER applies to commercial tort claims

Question 3

proceeds

Answer 3

• Anything recieved from sale, exchange, colelction or other disposition of collateral or proceeds
• Must be “identifiable” (tracable back to original colalteral; burden on SC)

Question 4

lowest intermediate balance rule

Answer 4

If comingling proceeds…
* * Look to bank account starting at time the proceeds were deposited and ending at the time of application of rule
* Lowest balance during this period is identifiable proceeds
* ID proceeds cannot exceed value of proceeds originally deposited

Question 5

supporting obigations

Answer 5

A guaruntee or surety