A Security Agreement Does Not Need To Contain A Description Of The Collateral
The official wording of article 9 does not take a position on whether a description of the security contained in a guarantee contract would include property acquired by the debtor if the parties do not contain an acquired wealth clause. Official notice 3 on section 9-108 states that this is an “interpretation of the contract.” Therefore, in the absence of a ownership clause, the decision is left to the courts. The rules for financial statements vary somewhat from state to state. However, as a general rule, all parties involved should be mentioned in the document. In addition, guarantees should be clearly identified in the funding plan. These goals can usually be achieved by filling out the UCC-1 form with the Secretary of State in your area. Secure transactions are essential to a company`s growth. Almost all individuals and organizations need to take on debts at some point, but attracting creditors on board can be a struggle. Security interests ensure the security of the creditor, who then provides a particular debtor with the means he or she needs most.
In addition, the debtor is more likely to obtain a low interest rate if the creditor has some form of guarantee. Security agreements play a central role in this agreement by outlining the conditions under which debts can be guaranteed and what happens in the event of default by the debtor. Since a default represents such a significant risk, debtors should be fully aware of their obligations when entering into security agreements. As noted above, a security agreement cannot be considered valid if the guarantees are not properly described. In particular, security descriptions should not be overly broad or general. Too broad a description may include a lump sum description or call the debtor “all assets.” A security agreement reduces the lender`s risk of default. With respect to the interpretation of these contracts, some courts have found that the parties implicitly intend to include acquired real estate when a securities interest is granted in securities categories that regularly return so that the coverage of acquired property can be implied, such as the above inventory and the above accounts. For example, one court held that when a security agreement characterized collateral as “receivables,” that description implicitly included claims that were acquired. The Tribunal justified this decision by the fact that such an interpretation was economically defensible in most companies because of the revolving nature of the receivables15.15 A guarantee agreement may be oral if the secured party (the lender) is in fact in possession of the guarantees. If the guarantee is physically held by the borrower or if the guarantee is an intangible value (.
For example, a patent, [1) of claims or a debt title), the guarantee agreement must be made in writing to comply with the fraud law. The security contract must be authenticated by the debtor, i.e. it must bear the debtor`s signature or be marked electronically.