Issue: What are the guidelines for defining collateral in a security agreement according to the Uniform Commercial Code?
| Area of Law: | UCC & Secured Transactions |
| Keywords: | Collateral; Security agreement |
| Jurisdiction: | Minnesota |
| Cited Cases: | 384 N.W.2d 442; 654 F.2d 1245; 194 N.W.2d 775 |
| Cited Statutes: | Article 9 of the Uniform Commercial Code; Minn. Stat. § 336.9-102(12) (2012); Minn. Stat. § 336.9-102(64)(B), (C); Minn. Stat. § 336.9-102, n. 3(a); Minn. Stat. § 336.9-204(a); Minn. Stat. § 336.9-203; U.C.C. § 9-402, cmt. 2 |
| Date: | 12/01/2012 |
Article 9 of the Uniform Commercial Code defines “collateral” broadly as all of the property subject to a security interest, including “proceeds” to which a security interest attaches. Minn. Stat. § 336.9-102(12) (2012). “Proceeds” is defined to include whatever is collected on collateral, and rights arising out of collateral. Id. § 336.9-102(64)(B), (C). The current definition of “collateral” is intended to be broader than its predecessor, reflecting the broadened scope of Article 9. Id., § 336.9-102, n. 3(a). The revised definition of “proceeds” also expands that term beyond its former scope. Id. at n. 13.
A security agreement may create or provide for a security interest in after-acquired collateral. Id. § 336.9-204(a). No specific language is required; Article 9 requires only that a security agreement contain “a description of the collateral.” World Wide Tracers v. Metropolitan Protection, Inc., 384 N.W.2d 442, 444 (Minn. 1986) (citing Minn. Stat. § 336.9-203). In order to perfect a security interest, the description in both the security agreement and the financing statement must simply be “sufficient.” Id. at 444. A description is sufficient, whether or not it is specific, it if reasonably identifies what is described. Id. Courts have held, for instance, that a description of collateral in a security agreement as “all farm and other equipment” was adequate to perfect a security interest in the debtor’s after-acquired irrigation equipment. Id. at 445 (citing United States v. First Nat’l Bank, 470 F.2d 944, 947 (8th Cir. 1973)). And a description of collateral as “the […]