Creation of an Article 9 Security Interest (Attachment) Flashcards
Unless the collateral is in the possession or control of the secured party pursuant to an agreement:
a written (or electronically stored) security agreement is required.
Most often, the debtor wants possession of the collateral, so a writing is necessary.
Pledge
If the collateral is in the possession of the secured party pursuant to an oral security agreement (I’ll loan you $50 but we agree that I will keep your watch until you pay me back; if you don’t pay me back, we agree that I can sell your watch), this meets the “security agreement” requirement.
Form of the Written Security Agreement - Step 1
Agreement must be evidenced by a record (written or ESI) and must show an intent to create a security interest.
Form of the Written Security Agreement - Step 2
Must be “authenticated” by the debtor. This means signed by the debtor.
Any symbol, including an electronic symbol, that is made with the present intent to authenticate the record will do.
Form of the Written Security Agreement - Step 3
Must contain a description of the collateral (and if security interest covers timber to be cut, a description of the land concerned).
Must “reasonably identify” the collateral.
3 Steps for Creation of Article 9 Security Agreement
(1) A security agreement (written, authenticated by debtor and describe the collateral).
(2) Secured party must have given value.
(3) The debtor must have rights in the collateral.
Secured party must have given value:
Any consideration sufficient to support a simple K is enough.
Even past consideration is enough.
The debtor always gives value because the debtor, at a minimum, promises to pay. SO the question is whether the SECURED PARTY gave value.
Debtor must have rights in the collateral:
Debtor must have rights in the collateral because the debtor cannot grant a contingent property interest in property that it does not own.
