Article 9 — Secured Transactions · Section 9-203
Understand the requirements for attachment of a security interest under UCC § 9-203.
Source: U.C.C. § 9-203
A security interest is not enforceable against the debtor or third parties unless: (1) value has been given; (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and (3) either the debtor has authenticated a security agreement that provides a description of the collateral or the secured party has possession of the collateral.
UCC § 9-203 outlines the requirements for a security interest to be legally enforceable. It states that a secured party must give value, the debtor must have rights to the collateral, and there must either be a written agreement describing the collateral or the secured party must possess the collateral.
An interest in personal property or fixtures that secures payment or performance of an obligation.
Property that is subject to a security interest.
Example 1
A bank gives a loan to a business and takes a security interest in the business's inventory as collateral under a written agreement.
Example 2
A car dealership finances a car purchase by taking a security interest in the vehicle, with the buyer signing a security agreement detailing the car as collateral.