UCC Security Agreement Requirements - What Must the Secured Party Give for Valid Agreement?
I'm putting together a security agreement for a commercial loan and want to make sure I understand what's required from the secured party side. I know the debtor has to sign and we need to describe the collateral properly, but what exactly must the secured party give for the security agreement to be valid under UCC? I've heard different things about consideration, value, or commitments but want to get this right. We're dealing with equipment financing and I don't want to mess up the fundamentals. Anyone have experience with what the secured party's obligations are to make the agreement legally binding?
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Jenna Sloan
The secured party has to give value - that's the key requirement. Could be the loan itself, a commitment to extend credit, or even accepting a pre-existing debt. Without the secured party giving something of value, you don't have a valid security agreement under UCC Article 9.
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Christian Burns
•This is exactly right. The value requirement is fundamental and it's usually satisfied by the loan proceeds or credit commitment.
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Sasha Reese
•So if we're already extending the loan, that counts as the value given by the secured party? That seems straightforward enough.
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Muhammad Hobbs
Just went through this exact issue last month with an equipment loan. The secured party must give value - typically the loan amount or credit line. But here's what tripped me up initially: the value doesn't have to be given at the same time as signing the security agreement. A binding commitment to extend credit in the future counts too. Make sure your loan documents clearly spell out what value you're providing as the secured party.
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Raul Neal
•That's really helpful about the timing. So the commitment itself satisfies the value requirement even before funds are disbursed?
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Muhammad Hobbs
•Exactly. As long as there's a legally binding commitment to provide the credit, that meets the UCC requirement for value.
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Noland Curtis
•I had a similar situation where we signed the security agreement but funding was delayed by a week. The commitment language in our loan docs covered us.
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Diez Ellis
Been doing UCC work for years and this comes up constantly. Under UCC 1-204, value includes consideration sufficient to support a contract. For security agreements, this usually means the loan proceeds, but it could also be taking on a pre-existing debt or even past consideration in some cases. The key is that the secured party must give something - you can't have a valid security interest without value changing hands.
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Vanessa Figueroa
•What about situations where the debt already exists? Can you create a security interest after the fact?
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Diez Ellis
•Yes, you can secure pre-existing debt. The original loan value can support a later security agreement, though you want to be careful about preference issues in bankruptcy.
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Abby Marshall
Had a nightmare scenario last year where we thought we had a valid security agreement but missed the value requirement documentation. Learned the hard way that just having a signed agreement isn't enough. I started using Certana.ai's document verification tool to catch these issues early - you can upload your security agreement and loan docs and it cross-checks that all the UCC requirements are properly documented, including the value element.
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Raul Neal
•How does that tool work exactly? Does it check for specific language about value?
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Abby Marshall
•You just upload your PDFs and it analyzes whether your security agreement properly references the value being given, checks that your collateral descriptions match between documents, and flags any inconsistencies that could invalidate the agreement.
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Sadie Benitez
•That sounds like it would have saved me a lot of headaches. I've had to redo security agreements because of missing value documentation.
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Drew Hathaway
WAIT hold on everyone. Are we talking about value or consideration? I thought UCC had different rules than regular contract law. I'm getting confused about what exactly the secured party has to provide.
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Jenna Sloan
•Value under the UCC is broader than traditional contract consideration. UCC 1-204 defines it to include any consideration sufficient to support a simple contract, plus some additional things.
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Drew Hathaway
•OK so value is the UCC term but it includes regular consideration plus more? That makes more sense.
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Christian Burns
•Right, and for security agreements the value is almost always the loan or credit being extended, so it's usually pretty straightforward.
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Laila Prince
This is bringing back memories of my first equipment financing deal. I was so focused on getting the debtor's signature and collateral description right that I completely forgot about documenting the value requirement. Loan officer had to explain that our loan commitment letter served as proof of value. Sometimes the basics trip you up more than the complex stuff!
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Raul Neal
•I'm definitely overthinking this. The loan itself is the value, and our loan docs should make that clear.
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Isabel Vega
•Don't feel bad, I made the same mistake on my first deal. Now I always double-check that the value element is clearly documented.
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Dominique Adams
Here's what I tell everyone: for a security agreement to be valid under UCC 9-203, you need (1) value given by secured party, (2) debtor has rights in collateral, (3) authenticated security agreement OR possession/control of collateral. The value part is usually satisfied by the loan proceeds or credit commitment. Don't overthink it - if you're lending money or extending credit, you're giving value.
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Raul Neal
•That's a really clear breakdown. So as long as we're extending the loan, we've satisfied the value requirement?
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Dominique Adams
•Exactly. The loan proceeds or binding commitment to lend is value under the UCC.
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Marilyn Dixon
•This is the clearest explanation I've seen. Sometimes the simple answer is the right answer.
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Louisa Ramirez
I work with a lot of equipment financing and this comes up regularly. The secured party must give value - period. Usually that's the loan amount, but it could be accepting assignment of a pre-existing debt, providing a letter of credit, or even past consideration in some situations. The key is that something of value must flow from the secured party to support the security interest. Your loan documentation should make this clear.
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Raul Neal
•What about situations where the equipment is already purchased and we're just securing an existing debt?
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Louisa Ramirez
•Pre-existing debt can be secured, but you want to make sure your security agreement references the original value that was provided when the debt was created.
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TommyKapitz
Been lurking but had to chime in - just closed a deal where this exact issue came up. We used Certana.ai to verify our security agreement had proper value documentation before finalizing. Super easy process, just uploaded our loan agreement and security agreement PDFs and it flagged that we needed clearer language connecting the loan proceeds to the security interest. Saved us from potential problems down the road.
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Raul Neal
•That's exactly the kind of verification I need. How quickly does it analyze the documents?
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TommyKapitz
•Pretty much instant. You upload the docs and it highlights any inconsistencies or missing elements that could affect the validity of your security interest.
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Angel Campbell
Quick question - does the value have to be equal to the amount of the secured debt? Or can you have a security interest worth more than the value given?
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Jenna Sloan
•The value just has to be sufficient to support the security agreement. It doesn't have to equal the value of the collateral or even the debt amount.
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Diez Ellis
•Right, you can have a $100,000 piece of equipment securing a $50,000 loan. The value requirement is about the consideration for the security agreement, not matching values.
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Angel Campbell
•Got it, that makes sense. The value requirement is just about having valid consideration for the agreement itself.
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Payton Black
Bottom line for everyone still reading: the secured party must give value. In equipment financing, that's your loan. Make sure your documents clearly show the connection between the loan and the security interest. If you're worried about getting it right, tools like Certana.ai can verify your documentation meets all the UCC requirements before you finalize anything. Much better to catch issues early than deal with an invalid security interest later.
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Raul Neal
•Thanks everyone, this has been really helpful. I feel much more confident about the value requirement now.
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Harold Oh
•Great thread, learned a lot about the secured party obligations I hadn't considered before.
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