Creation (Attachment) of Security Interests

Question 1

What source governs attachment?

Answer 1

Article 9 of the UCC

Question 2

What established rights against the debtor?

Answer 2

Attachment

Question 3

What establishes rights agains third parties?

Answer 3

Perfection

Question 4

What are the three necessary requirements for attachment?

Answer 4

All three must coexist:

1. Value must be given by the creditor;
2. The parties contract to create the security interest or the creditor takes possession, evidenced by (i) the creditor taking possession of the collateral, (ii) the debtor’s authentication of a security agreement describing collateral (or land if timber), or (iii) the creditor taking control of certain types of collateral; and
3. The debtor must have rights in the collateral.

Question 5

Records or contracts used to create a security interest must be:

Answer 5

1. Authenticated by the debtor - signed phsycially or electronically; and
2. Reasonably identify the collateral. Generic descriptions of collateral in the security agreement are not allowed.

Question 6

What are accessions?

Answer 6

Good that are physically united with other “original” goods in such a manner that the identity of the original good is not lost.

Question 7

What happens to accessions when there is a security interest on the property they are fixed to?

Answer 7

The secuirty interest in the whole has priority over interests in the accessions alone. As such, the accessions will go to the party with a security interest in the entire property, including the accessions, as opposed to the party with an interest in the accessions alone.