Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Home
  • Law, Transactions, & Risk Management
  • Commercial Law: Contract, Payments, Security Interests, & Bankruptcy

Attachment of a Security Interest - Explained

Using the Security Agreement to Attach the Security Interest

Written by Jason Gordon

Updated at September 26th, 2021

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

How does one establish a security interest in personal property?Discussion QuestionPractice QuestionAcademic Research

How does one establish a security interest in personal property?

A security interest in property begins when personal property is identified as collateral for a loan. This is known as attachment or attaching the property. Attachment takes place when the following conditions are met:

Security Agreement - The secured party and the party granting a security interest (debtor) must enter into a written security agreement. The security agreement must be signed by the debtor and contain a reasonable description of the collateral.

Value Given - The secured party must give or transfer value to the debtor. This generally means that the loaned funds are transferred to the borrower.

Ownership in Collateral - The debtor must acquire ownership of the collateral. The debtor does not necessarily have to own the collateral at the time of entering into the security agreement. In some cases the debtor will use the value received from the secured party to purchase the collateral. Also, the security agreement may include an after-acquired collateral clause. This means that property acquired by the debtor after the loan is made can serve as collateral for the original loan.

Example: Jack loans Katy money to buy inventory to sell. Every new set of inventory replacing the sold inventory can be made subject to the security agreement.

Next Article: Perfection of a Security Interest Back to: SECURED TRANSACTIONS

Related Topics

  • What is a security interest in personal property?
  • How does one establish a security interest in personal property?

Discussion Question

Why do you think the law requires the above-referenced elements before a security interest attaches? Can you think of situations where any of the above elements are absent, but fairness would indicate that a security interest should attach? How do you feel about the ability of the secured party to acquire an interest in collateral that is later acquired by the debtor? Does it affect your opinion if the after-acquired property clause is very broad and includes all assets of the debtor?

Practice Question

ABC Inc., enters into an agreement with Sasha to purchase equipment that he sells. Sasha agrees to finance the purchase but wants to establish a security interest in the equipment to make certain that ABC pays the full purchase price. What elements must be present for Sasha to establish as security interest?

Academic Research


security interest attachment of a security interest

Was this article helpful?

Yes
No

Related Articles

  • Security Interest Priority based on Consents, Disclaimers, and Rights to Remove
  • Negotiable Instrument - Accord and Satisfaction
  • Backup Line of Credit - Explained
  • Protections of a Buyer in the Ordinary Course of Business - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand