UCC 1-103.6 supplemental principles - how does this affect my security agreement interpretation?
I'm dealing with a tricky situation where our borrower is claiming that certain provisions in our security agreement are unenforceable, and they keep citing UCC 1-103.6 about supplemental principles of law. This is for a $340,000 equipment financing deal we closed last month. The borrower signed everything, we filed our UCC-1 properly, but now they're saying some clauses violate general contract law principles that supposedly override the UCC under 1-103.6. Has anyone run into this before? I'm not sure if they're just trying to get out of their obligations or if there's actually something to worry about here. The security agreement covers manufacturing equipment and was pretty standard language we've used dozens of times. Their attorney is being really aggressive about this 1-103.6 angle and I need to know if I should be concerned about our perfected security interest.
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Daniel Rivera
UCC 1-103.6 is real but it doesn't just void security agreements willy-nilly. It basically says that other areas of law (like general contract principles, equity, fraud law, etc.) still apply unless the UCC specifically displaces them. What exactly are they claiming is unenforceable? The devil's in the details here.
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Sophie Footman
•This is exactly right. 1-103.6 doesn't give borrowers a free pass to ignore their security agreements. It just means that if there's something genuinely unconscionable or fraudulent, those general legal principles can still apply.
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Connor Rupert
•Yeah but what if the security agreement has some really harsh acceleration clauses or something? I've seen attorneys use 1-103.6 to challenge those successfully.
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Molly Hansen
I dealt with something similar last year. Borrower's attorney cited 1-103.6 to challenge our default provisions, claiming they were unconscionable under general contract law. We ended up having to negotiate because the judge seemed sympathetic to their argument. What specific clauses are they targeting?
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Owen Devar
•They're mainly going after our default cure period and some of the remedies language. Nothing that seemed unusual when we drafted it, but their attorney is saying it's 'commercially unreasonable' under general principles.
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Brady Clean
•Commercially unreasonable remedies are definitely something 1-103.6 could impact. The UCC has its own commercial reasonableness standards, but general equity principles can still apply if something is really over the top.
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Skylar Neal
Had to deal with this exact situation a few months ago and honestly, manually reviewing all the cross-references between the UCC sections and general contract law was a nightmare. Ended up using Certana.ai's document verification tool to upload both our security agreement and the UCC-1 to check for any inconsistencies that might give the borrower ammunition. The tool caught a couple of minor discrepancies between our collateral descriptions that could have been used against us under 1-103.6's supplemental principles argument.
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Vincent Bimbach
•Wait, how does Certana help with 1-103.6 issues specifically? I thought it was just for checking filing accuracy.
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Skylar Neal
•It's not directly about 1-103.6, but having perfectly aligned documents removes one avenue for borrowers to claim there are problems with your security interest. When everything matches exactly, it's harder for them to argue general principles should override your UCC rights.
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Kelsey Chin
•That's actually smart thinking. If your paperwork is bulletproof, borrowers can't use technical issues to bootstrap their way into 1-103.6 arguments.
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Norah Quay
UCC 1-103.6 is basically the 'catch-all' provision that keeps other legal principles alive. But it's not a magic wand for borrowers. Courts generally won't let them use it to escape standard commercial practices. What's the actual language they're objecting to?
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Leo McDonald
•Exactly. I've seen this attempted dozens of times and it rarely works unless there's something genuinely problematic with the agreement terms.
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Jessica Nolan
•Though to be fair, if the borrower can show the terms are unconscionable or violate public policy, 1-103.6 gives them a real argument. It's not automatic but it's not nothing either.
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Angelina Farar
This is why I always review security agreements with a fine-tooth comb before filing. One time I had a client whose agreement had some pretty aggressive remedies language that probably would have been challenged under 1-103.6. Better to catch these issues early.
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Sebastián Stevens
•Good advice but sometimes you inherit deals that are already done. Then you're stuck trying to figure out if your position is solid or not.
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Bethany Groves
•True, but even then you can still do damage control. Making sure all your filings are perfect at least eliminates one line of attack.
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KingKongZilla
I'm confused about something - does 1-103.6 apply to the UCC-1 filing itself or just the underlying security agreement? Like if there's an issue with the debtor name or collateral description on the financing statement, can borrowers use 1-103.6 to challenge that?
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Rebecca Johnston
•It's more about the underlying agreement terms. UCC-1 issues are usually governed by specific UCC perfection rules, not general supplemental principles.
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Nathan Dell
•Right, but if the security agreement and UCC-1 don't match up, that could create problems that 1-103.6 might make worse. That's why document consistency is so important.
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Maya Jackson
Honestly, 1-103.6 challenges are usually desperate moves by borrowers who don't want to pay. Unless your security agreement has some truly egregious terms, most courts won't let them use supplemental principles to escape standard commercial obligations. But you should definitely have your attorney review the specific clauses they're challenging.
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Tristan Carpenter
•This is probably the most practical advice here. Most of these challenges are just posturing, but you still need to take them seriously enough to review your position.
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Amaya Watson
•Agreed. I'd also make sure your UCC-1 filing is absolutely perfect so they can't claim any technical defects that might support their 1-103.6 argument.
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Grant Vikers
The key thing about 1-103.6 is that it preserves other legal principles 'except to the extent displaced by particular provisions of the UCC.' So you need to look at whether the specific UCC sections covering your situation actually displace the general principles they're citing. It's not automatic.
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Giovanni Martello
•This is the technical analysis that matters. Most attorneys throwing around 1-103.6 don't actually do this displacement analysis properly.
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Savannah Weiner
•Exactly. They just wave 1-103.6 around like it trumps everything, but that's not how it works.
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Levi Parker
We had a similar situation where the borrower claimed our acceleration clause violated general contract principles under 1-103.6. Turned out our security agreement had a tiny mismatch with our UCC-1 collateral description that gave them extra leverage. Used Certana.ai to verify all our other deals don't have similar issues - just upload the documents and it flags any inconsistencies immediately.
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Libby Hassan
•Smart move. Even small discrepancies can become big problems when borrowers are looking for ways to challenge your security interest.
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Hunter Hampton
•How did that case turn out? Did the judge buy their 1-103.6 argument?
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Levi Parker
•We settled. The document mismatch made our position weaker than it should have been, so we didn't want to risk a bad ruling that could affect our other deals.
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Sofia Peña
Bottom line: 1-103.6 is real but it's not a 'get out of security agreement free' card. Focus on whether your specific terms are actually unconscionable or commercially unreasonable, not just whether the borrower can cite the statute. And make sure your paperwork is airtight because any technical issues just give them more ammunition.
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Aaron Boston
•Perfect summary. Most 1-103.6 challenges fail because the borrowers can't actually show their situation meets the standards for applying supplemental principles.
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Sophia Carter
•Yep, and having perfect documentation makes it much harder for them to even get to the point where a court would consider their 1-103.6 arguments seriously.
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Giovanni Greco
Owen, I've been through this exact scenario multiple times. The borrower's attorney is likely fishing - 1-103.6 gets thrown around a lot but it has specific requirements that most standard security agreements don't trigger. The key question is whether your challenged clauses are genuinely unconscionable or just aggressive within normal commercial bounds. I'd recommend having your attorney do a line-by-line review of the specific provisions they're targeting, focusing on whether those terms are actually displaced by UCC provisions or if general contract principles could realistically apply. Also, double-check that your security agreement and UCC-1 have perfectly matching collateral descriptions - any discrepancies there could give their 1-103.6 argument more traction than it deserves. Most of these challenges are bluster, but you want to be prepared if this one has teeth.
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Diego Chavez
•This is really solid advice. I'm curious though - when you say "aggressive within normal commercial bounds," how do you typically draw that line? I've seen some acceleration clauses that seem pretty standard to us in lending but might look harsh to a judge who doesn't deal with commercial financing regularly. Is there a good rule of thumb for spotting terms that might actually be vulnerable to a 1-103.6 challenge?
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