#8 - Attachment of Security Interest Flashcards
Attachment Definition & Requirements
Attachment means making the security interest effective between debtor and creditor.
Section 9-203 contains attachment rules.
Requirements for a security interest to attach:
1) Value must have been given by creditor to debtor (usually this is a loan) (creditor gives value to debtor in exchange for the security interest)
2) The debtor must have rights in the collateral (the debtor must have the right to give a security interest to someone else) (this only becomes a problem when a leaseholder tries to give a security interest in the land itself that they don’t own instead of granting a security interest in just the lease)
3) The debtor must have 1) AUTHENTICATED SECURITY AGREEMENT (a record) that
DESCRIBES the collateral OR 2) the creditor has possession or control of the property
ATTACHMENT ONLY HAPPENS AFTER ALL 3 (4 if you consider description of collateral like Quimbee does) OCCUR
Non-Possessory and Possessory Security Interests
The debtor having authenticated a security agreement describing the collateral means giving the creditor a non-possessory security interest (named as such because the creditor doesn’t have possession).
If the creditor has possession (or control, for some assets), then it’s called a possessory security interest.
Why is attachment important?
Attachment makes security interests enforceable between the debtor and creditor.
What is the
composite document approach?
Two or more documents can be used to evidence an intention to create a security interest. The docs must show:
1) a signed agreement evincing an intent to create a sec int AND
2) actual intent to create a sec int
how to “authenticate” a security agreement or record?
Authenticate means: 1) to sign or 2) with present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.
present intent language can authenticate a security agreement
