Security Interest Agreement Practical Law

The UCC notes that any description of personal property in a security agreement is sufficient if it “reasonably identifies what is described.” [15] Many security agreements developed by banks contain long lists of all possible security classes to ensure they cover everything. Depending on the circumstances, adding photographs of goods or detailed diagrams of individual assets can be a good way to define the collateral involved. The standard is to determine whether the description identifies the security in an “objectively identifiable” manner. [16] A funding statement meets the same requirements for the description of the security of a security agreement. Let`s go back to Ohio law as an example. Ohio Revised Code Section 1309.506 states that a funding statement that “essentially” meets the requirements of the law is sufficient even if it has minor errors or omissions, unless errors or omissions render the funding statement seriously misleading. [23] For example. a financing statement that does not give the debtor`s name is seriously misleading. A debtor is the party that accepts the loan and provides security interest for the guarantees. A creditor who can be insured or uninsured is the lender or seller. One of the objectives of a secured transaction is to facilitate the recovery of a debt against the rights of an unsecured creditor. We can recognize the importance of secure transactions by comparing the situation of both parties in the event of debtor default. Article 9 also regulates the right to ship.

A shipment similar to a secure transaction occurs when the owner of the goods cedes the property to a seller who then sells the goods to the buyer. [7] Shipments are common when owners pass on unique products such as antiques, oriental rugs, used furniture, artwork, etc. to professional sellers such as real estate agents or auction houses. The owner is the insured part and the point of sale fulfils the role of the debtor. This ensures that the seller`s own creditors cannot treat the goods shipped as an inventory, since they actually belong to someone else. Let`s say, for example, that Sue has a classic painting. It`s Jim`s auction house to sell it on his behalf for a commission. With Sue having an interest in the safety of the painting, the painting, if Jim is sued in person, would not normally be vulnerable to Jim`s creditors. A security agreement reflects the concept that security interests are always created on a voluntary basis and with the debtor`s agreement; never through involvement or violence. It is important that the security agreement specifies the safeguards so that the conditions under which the newly created security interest applies are clearly defined. [14] Something like “my 2018 Chevrolet Cruze” is enough (as long as I only own a 2018 Chevrolet Cruze).

You don.B not need to include the VIN number or a more formal legal description. Collateral descriptions are among the most common sources of error in a security agreement. The most common problems with such an agreement are: “I, the debtor, give a safety interest to my 2018 Chevrolet Cruze at First Bank.” Section 9 “Regulates security interests and applies to all transactions that create a security interest in personal property,” including goods, inventory, equipment, accounts, documents and instruments. [5] Section 9 generally applies to transactions “that contractually arouse security interest in personal property or devices.” [6] Section 9 also applies to other transactions such as farm deposit fees, mailings and sales of accounts or debt securities.