Certainty, Efficiency, and Realism: Rights in Collateral under Article 9 of the Uniform Commercial Code

Abstract:     
Article 9 of the Uniform Commercial Code requires that the debtor have "rights in the collateral" for the attachment of a security interest. The drafters, however, left the determination of the phrase's meaning to the courts. This article argues that the requirement of "rights in the collateral" is unnecessary as it relates to tangible goods and should be deleted from Article 9. As an alternative to the uncertainty engendered by the phrase, the article proposes substituting a set of notice and priority rules that more clearly define the rights and obligations of the parties undertaking an Article 9 transaction involving tangible goods. It concludes by observing that Karl Llewellyn's philosophy of Legal Realism would best be served by such an amendment.

Number of Pages in PDF File: 70

Keywords: Article 9, Secured Transactions, Attachment, Rights in Collateral

JEL Classification: K22

Accepted Paper Series