Attachment (Article 9 UCC)

A few things about the subject of Secured Transactions on the bar exam: it's a subject that many students find challenging, and it's a subject that's tested with a high frequency. Not the greatest combination for those preparing for the exam.

I have a memory from a number of years ago when a student (I still think it was a clever joke, but I didn't want to ask in case he was serious) said to me "I have just one question to ask about Secured Transactions. What's a secured transaction?"

I'm writing up a resource to assist students with the subject but highly doubtful it'll be offered by July. So instead, I'll post occasionally on here leading up to July on this subject.

Best place to begin is with attachment, since that's sort of the starting line in a Secured Transactions essay. Attachment gives the creditor rights against the debtor.

It's all about the elements, and there are three elements to attachment: (1): the parties must agree to create a security interest; (2): value must be given to the debtor by the secured party; and (3): the debtor must have rights in the collateral (for example, ownership rights, or even just possessory rights).

Numbers 2 and 3 are straight forward: they are what they say. As for the first element, there are three ways to evidence that such an agreement has taken place: (1) the creditor takes possession of the collateral; (2) an authenticated security agreement is signed by the debtor; or (3): the creditor takes control of the collateral.

That third element might seem a bit suspect. Why control if you can take possession? But control is available when possession is not possible. For example, you can't possess electronic chattel paper (a type of collateral) so the option is available to instead take control of it.

There are nuances to some of the stuff above, but that's very much the framework for attaching a security interest. The next step from there would be to get some rights against creditors who might claim priority (rather than just the debtor): that's where perfection comes in.