Also known as: collateral descriptions · description of collateral
Written by attorneys · grounded in primary & secondary sources — see below
A statement in a security agreement identifying the property subject to a security interest. The statement must reasonably identify the collateral for the security interest to attach and become enforceable.
Select any source to read its text and confirm it supports the definition.
Continental Bank and Christopher Collins executed a security agreement granting the bank an interest in all of Collins's business assets and personal property. Collins later defaulted. The bank could not enforce the interest against any specific items because the description used prohibited super-generic language that failed to reasonably identify the collateral.
FSL Acquisition Corp. and Freeland Systems, LLC entered an asset purchase agreement and bill of sale that together listed specific purchased assets. The secured party relied on the cross-referenced documents to describe the collateral. A court held the combined description objectively determinable and therefore sufficient to create an enforceable security interest.
A description fails when it uses super-generic language such as all the debtor's assets or all the debtor's personal property. The statute expressly disqualifies such phrasing because it does not reasonably identify the collateral.
Supporting sources
Yes. Courts may apply the composite document rule to combine an asset purchase agreement and bill of sale when the documents cross-reference each other and the identity of the collateral remains objectively determinable.
Supporting sources