Secured Transactions - Creation of Security Interests
Prof. Pryor, Fall 2012
Terms in this set (7)
The security interest becomes enforceable as against debtors.
Requirements for Enforceability/Attachment
1.) Value is given
2.) Debtor has rights in the collateral
3.) Authenticated security agreement with description of the collateral
A person gives value if the person acquires them:
-In return for binding commitment to extend credit
-As security for partial satisfaction of a pre-existing claim
-As a pre-existing contract
-As consideration for a contract
Rights in Collateral
Usually when title passes, but doesn't have to be the entire interest.
Description of the Collateral
Would a third party, reading the description of the collateral, be able to identify the items in question?
-Party's intent: more important between parties themselves, not third parties
-No "Mother Hubbard" clauses. Must be a specific description based on the definitions of property in the UCC
-Terms will be interpreted in accordance with statutory definition, regardless of what parties thought they meant.
-Goldilocks of Descriptions: vague enough to cover all property, but specific enough to be identifiable
Authenticated Security Agreement
-Language objectively indicates that the parties may have intended to create a security agreement
-Did the parties actually intend to create a security agreement?
-No magic language
Composite Document Rule
Look at the transaction as a whole to determine if there are writings, signed by the debtor describing the collateral which demonstrates an intent to create a security interest.