Also known as: reserving a security interest · reserve a security interest · reserved security interest · security interest reservation · reservation of title
Written by attorneys · grounded in primary & secondary sources — see below
A contractual device by which a seller of goods retains title after delivery or shipment. The device is limited in effect to an interest in personal property or fixtures that secures the buyer's payment or performance obligation.
Metro Concrete delivered and installed precast panels into Harborview's building under a contract stating that Metro retained all right title and interest until full payment. Harborview later defaulted and City Bank asserted its own perfected interest in the building fixtures. Metro's retained interest operated solely to secure the unpaid price and attached to the panels as fixtures.
Plains Automotive delivered tires to Ridge Fleet under a consignment agreement that reserved title until sale and required separate accounting. Ridge Fleet commingled the tires with its own inventory and sold some as its own. Harbor Cars held a perfected blanket security interest in Ridge Fleet's inventory and seized all tires upon default. Plains's reserved interest secured Ridge Fleet's obligation to account for the tires and therefore attached as a security interest in the goods.
Select any source to read its text and confirm it supports the definition.
The retention or reservation of title by a seller after delivery or shipment is limited in effect to a reservation of a security interest. The buyer acquires ownership of the goods and the seller holds only an interest that secures payment of the price.
Supporting sources
A security interest expressly includes the interest of a consignor in a transaction subject to Article 9. When the consignment arrangement functions to secure the consignee's obligation to account for the goods the consignor's retained title is recharacterized as a security interest.
Supporting sources
The definition of security interest includes any interest of a buyer of accounts in a transaction subject to Article 9. Recourse provisions or performance covenants that tie repayment to the assigned accounts cause the transaction to be treated as creating a security interest rather than an outright sale.
Supporting sources