Article 9 of the Uniform Commercial Code covers most types of security agreements for personal property that are both consensual and commercial. All states have adopted and adapted the entire UCC, with the exception of Louisiana, which only adopted parts of it.
A Security Agreement is a contract that establishes the rights of a lender to a borrower’s property in the event the borrower fails to repay the loan. Security Agreements are used in Inventory, Accounts Receivable, Chattel Paper, and Instruments as a form of collateral to secure the loan. Inventory Security Agreement: An Inventory Security Agreement is a contract between a borrower and a lender that allows the lender to take possession of the borrower's inventory if the borrower fails to repay the loan. The inventory may include goods, raw materials, and finished products. Accounts Receivable Security Agreement: An Accounts Receivable Security Agreement is a contract between a borrower and a lender that allows the lender to take possession of the borrower's accounts receivable if the borrower fails to repay the loan. The accounts receivable may include payments from customers, vendors, or other sources. Chattel Paper Security Agreement: A Chattel Paper Security Agreement is a contract between a borrower and a lender that allows the lender to take possession of the borrower's chattel paper if the borrower fails to repay the loan. Chattel paper is a written document that is used to transfer rights to personal property such as cars, boats, or furniture. Instrument Security Agreement: An Instrument Security Agreement is a contract between a borrower and a lender that allows the lender to take possession of the borrower's instruments if the borrower fails to repay the loan. Instruments may include stocks, bonds, promissory notes, and other financial instruments.
