A Security Agreement Must Contain A Description Of The Collateral That Reasonably Identifies It
Finally, the description should avoid unnecessary descriptions of security that is confusing, for example. B the identification of the security that is at a given address. Debtors can move sites and thus ask a potential legal question on the description of the security, since it is no longer at that address. There`s a case in point, Des Packers du Nord. It occurred here that the insured party had a general security interest in its funding statement. Subsequently, it took two additional guarantees, and an amendment was made to replenish the security, and only the two new security assets, the two additional assets, were described. For example, if one goes back to this case of Holiday House, the funding list refers to the inventory provided in the security contract in accordance with a given shipment. But there was a broader language in the consignment and security agreement. Again, because of the restrictions, the court limited it to narrowing the two. A valid security agreement consists at least of a description of the guarantees, a declaration of intent to generate security interests and all signatures of all parties involved.
However, most security agreements go beyond these essential requirements. Many include alliances (or debtor bonds) and guarantees (guarantees). Examples of agreements or safeguards could be as follows: it follows that a security agreement that does not reasonably describe the security cannot pass the section 1309.108 test. If so, the descriptions of each device by title, manufacturer, identification or serial number, etc., are entirely appropriate. Books, recordings, sales minutes, patents, etc., are described in detail. Summary descriptions are risky. In Article 9, it is also possible to use a super-gene description of guarantees on a funding list. This is what you`ll find in section 9-504. It is said that the financing establishment sufficiently indicates security when it indicates that it covers all of the debtor`s personal assets or assets.
Secondly, I would like to address briefly the amendment of the guarantees, an amendment to add guarantees. This is about adding additional safeguards to the funding establishment. It is very easy to do, just indicate that it is a change of warranty, activate the checkbox to add warranties and describe the additional guarantees. The second principle is illustrated in In re Martin Grinding – Machine Works, Inc.20. In this case, the security agreement unintentionally omitted the inventory and claims of the security description. Although these two types of security were included in the funding statement, the Tribunal found that the insured party had no security interest in the inventory and accounts because they had been removed from the security agreement. Funding returns are sometimes subject to security interest prior to placement. Creditors often prefer this approach because it avoids a delay between attachment and perfection. 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.” There is a case related to the example I have at the bottom of the screen where the court said that there was only one grocery store described at that address, gave no indication as to what it covered. Were they fixtures, accounts, an inventory at this address? If the court could not determine what it meant, apparently no one else could do it and the funding declaration was therefore insufficient.
In the end, therefore, you do not accidentally limit the extent of the interest of security.