Also known as: supporting obligation · support obligation
Written by attorneys · grounded in primary & secondary sources — see below
A letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property. Attachment of a security interest in the collateral automatically attaches a security interest in the supporting obligation. Perfection of a security interest in the collateral also perfects the security interest in the supporting obligation, and the time of filing or perfection as to the collateral is also the time of filing or perfection as to the supporting obligation.
Starlight Media grants a security interest in promissory notes to Sapphire Holdings. The notes are secured by mortgages on real property. Sapphire Holdings files a financing statement covering the notes. The filing date for the notes also serves as the filing date for the mortgages as supporting obligations, giving Sapphire Holdings priority over a later filer claiming an interest in the mortgages.
Apex Bank takes a security interest in accounts receivable from Delta Corp. The accounts are backed by a secondary payment obligation from a guarantor. When Apex Bank's security interest attaches to the accounts, it automatically attaches to the guarantor's secondary obligation as a supporting obligation.
Select any source to read its text and confirm it supports the definition.
Vertex Finance obtains a security interest in chattel paper from Orion Distributors. The chattel paper is supported by a letter-of-credit right issued by a third-party bank. The letter-of-credit right meets the statutory definition of a supporting obligation because it backs payment of the chattel paper.
Silverline Industries takes a security interest in chattel paper from Sapphire Technologies. The chattel paper is supported by a letter-of-credit right. Silverline Industries perfects its interest in the chattel paper by filing. That perfection automatically perfects the security interest in the letter-of-credit right as a supporting obligation.
Attachment of a security interest in the underlying collateral automatically attaches a security interest in any supporting obligation for that collateral.
Supporting sources
Yes. Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.
Supporting sources
The time of filing or perfection as to a security interest in the collateral is also the time of filing or perfection as to a security interest in the supporting obligation.
Supporting sources
A supporting obligation backs the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property.
Supporting sources