Attachment

Question 1

What is attachment?

Answer 1

Attachment means that the security interest is enforceable

i.e., if not “attached,” then not enforceable

Question 2

What are the three requirements for attachment?

VCR

Answer 2

1. VALUE must be given by the Creditor (e.g., Bank lends $10k to Debtor)
2. CONTRACT (i.e., the security agreement a.k.a. “the record”) must evidence the secured transaction UNLESS the secured party has already taken possession of the collateral
3. Debtor must have RIGHTS in the collateral (i.e., Debtor can’t use something to which he has no claim/ownership as collateral)

Question 3

When is a contract/record not necessary for attachment?

Answer 3

A contract/record is not necessary for attachment when the secured party (Creditor) is in possession of the Debtor’s collateral

Question 4

What are the two requirements for a valid record?

Answer 4

A valid record must:

1. Be authenticated by the DEBTOR (i.e., signed or e-signed) AND
2. Reasonably identify the collateral

Question 5

What are after-acquired collateral clauses? Are they enforceable?

Answer 5

After-acquired collateral clauses include in the security interest goods that have yet to be acquired by the Debtor (e.g., Secured Party lends $10k to Debtor retailer, taking a security interest in Debtor’s inventory “whether now held or hereafter acquired”)

After-acquired collateral clauses are enforceable