What Is UCC 9-204

Last updated on September 4, 2023

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The Uniform Commercial Code, also known as the UCC, is a valuable set of laws that work to govern various commercial transactions across the United States. There are several different articles in this outline, each with varying laws inside. One of those laws is UCC 9-204. What does this section of the Uniform Commercial Code cover?

UCC 9-204 deals with after-acquired property and future advances between participants in a contract. It discusses when security interests might be made, when the after-acquired property clause does not work, and future advances and other value. It dives into what the security agreement pertains to later in a transaction.

If you’re interested in learning more about UCC 9-204, you’ve come to the right place. Whether you’re curious about the varying sections in the Uniform Commercial Code or are just an individual who loves to know about everything, more information is never a bad thing. Read on to learn more about UCC 9-204 and other valuable items related to it.

What Is UCC 9-204?

It’s helpful to understand the varying sections of Article 9 in the Uniform Commercial Code, especially UCC 9-204. It’s a valuable contributor to the document as it deals with after-acquired property and future advances.

Here is the definition of UCC 9-204 according to Cornell Law School Legal Information Institute:

(a) After-acquired collateral

Except as otherwise provided in subsection (b), a security agreement may create or provide for a security interest in after-acquired collateral.

(b) When after-acquired property clause not effective

A security interest does not attach under a term constituting an after-acquired property clause to:

(1) consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within 10 days after the secured party gives value; or

(2) a commercial tort claim.

(c) Future advances and other value

A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.

What Is UCC 9-204 Simplified?

In simple terms, Uniform Commercial Code 9-204 ensures that future advance clauses are enforceable. By making these a possibility for later use, they allow the original security agreement to work if it applies to the situation.

This section also makes it much easier for the creditor to provide more funds to the debtor if it’s necessary. These details are critical for lines of credit in these situations.

UCC 9-204 also handles the specifics surrounding the effectiveness of the after-acquired property and collateral. It’s a specific outline for a specific situation.

What Is A Security Interest Under the UCC?

This particular section of the Uniform Commercial Code deals with security interests. Although there are varying definitions for this term in other areas of law and documents, there is a specific explanation for this word here that is critical to understand. Let’s dive into the details.

Under the UCC, a security interest is an interest in any fixtures or forms of personal property that secure the performance or payment of a specific obligation. This term might include buyer of accounts, payment intangible, chattel paper, or a promissory note in a transaction that deals with Article 9 or the interest of a consignor.

What Is An Example of an After-Acquired Property Under UCC?

It’s possible to use after-acquired property to secure a loan, and this term is mentioned in UCC 9-204. However, it can be tricky to understand the word if you aren’t familiar with the Uniform Commercial Code. Let’s discuss this term.

One example might include a retail store owner who uses all the inventory of his yet-to-open store as collateral for the loan. They and the creditor would include this amendment in their security agreement to allow the person receiving the credit to invest in more inventory for their store. The collateral typically comes after the loan is given from the available creditor.

What Laws Precede and Follow UCC 9-204?

It’s always helpful to know the sections before and after each law in the UCC. Let’s discuss the areas that precede and follow UCC 9-204.

The section before UCC 9-204 is UCC 9-203. You will find information in this portion of the Uniform Commercial Code about attachment and enforceability of security interest, proceeds, supporting obligations, and formal requisites.

The section after UCC 9-204 is UCC 9-205. You will find information in this portion of the Uniform Commercial Code about the permissible use or disposition of collateral in an agreement between a creditor and a debtor.

What Does UCC Article 9 Apply To?

If you are an individual participating in a commercial transaction in the United States of America and might be dealing with debt as it relates to a deal, UCC Article 9 will apply to you. This section is especially critical in establishing the various procedures for settling debts and the loans and bonds available.

Most would say that UCC Article 9 is in place to provide the creditors with some security and control. It’s meant to bring things together across state lines when considering security interests in a transaction.

What Does UCC Article 9 Cover?

Article 9 is a vital section of the Uniform Commercial Code that handles secured transactions. It also deals with transactions that attach a debt to a lender’s interest in a particular secured property. It regulates the enforcement and security of varying interests when dealing with intangible or movable fixtures and pieces of property from the debtor.

The entirety of Article 9 deals with a variety of possessory liens and decides what happens to the ownership of the property if the person who owes the lender money doesn’t meet their promised payments in time. It’s necessary for establishing and securing the interests of everyone involved in a commercial transaction.

Reference Legal Explanations

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