222 MODULE 26 SECURED TRANSACTIONS

b. Debtor has rights in collateral

(1) Debtor must have rights in collateral

(a) Ownership interest suffices or having some right to possession of c~lateral but debtor is
not required to have actual legal title
EXAMPLE: M obtains a loanfram a bank to. purchase a sofa. She signs a security agreement granting
the credit union a security interest in any sofa that she will buy with this loan. Attachment cannot occur
until she buys a sofa. Note that the other two elements of attachment have occurred.

c. And either
(1) Collateral must be in possession of secured party by debtor's agreement (third party may pos-
sess if debtor agrees); or

(2) Secured party must have "control" of collateral if it is investment property, deposit account,
electronic chattel paper, or a letter-of-credit right; or
(3) A record of security agreement must exist
(a) Record may be in traditional writing or in electronic or other form that is retrievable in
perceptible form

(b) Security agreement must be signed or in case of electronic form, it must be authenticated
1] Exception to need to sign or authenticate in case of pledge when secured party has
possession or control of collateral '
C. Perfecting a Security Interest
1. Entails steps in addition to attachment (with one exception discussed later) to give secured party
pri-
ority over many other parties that may claim collateral

a. Attachment focuses primarily on rights between creditor and debtor

b. However, perfection focuses on rights between various other parties that may claim an interest in
same collateral
(1) Generally, perfecting a security interest gives (constructive) notice to other parties that the
perfecting party claims an interest (security interest) in certain collateral

(2) Only an attached security interest can be perfected

2. There are three primary ways that an attached security interest may be perfected-these are
important
a. Most security interests either can or must be perfected by filing financing statement( s) in the ap-
propriate office

b. Secured party takes possession of collateral, or in certain cases takes control

c. In a few cases, security interest is perfected automatically upon attachment
3. Depending on the type of collateral there may be only one or several ways to perfect
4. Perfection by filing financing statement(s)
a. These requirements are streamlined from previous
law
(1) Contents of financing statement

(a) Debtor's name

1] Most jurisdictions now use electronic filing systems which mandate specific rules for
use of names to avoid confusion

2] Providing debtor's fictitious name or trade name normally not sufficient

(b) Indication of collateral covered
1] Descriptions such as "all assets" are sufficient.
 (c) Name of secured party or agent

(d) Signature of debtor is no longer required if debtor approves

(e) Minor errors in financing statement do not invalidate it if they are not seriously mislead-
ing
(f) Law now allows that filing may be done either electronically or in writing
(2) Filings last for five years but can be continued with a continuation statement if filed within six
months of expiration