How should collateral be described in a security agreement?

In a security agreement, collateral must be described in a manner that "reasonably identifies" the collateral in order to fulfill the requirements set by the Uniform Commercial Code (UCC). This means that the description should be specific enough that it enables a third party to determine what assets are encompassed within the security interest.

The standard for "reasonable identification" is intended to ensure that the secured party and the debtor have a clear understanding of what is being secured, as well as to provide notice to other parties about the assets that are subject to the security interest. This is essential for the enforceability of the security interest against third parties and for the effective perfection of the security interest.

Thus, a generic or overly broad description like "all assets" may be insufficient, as it does not provide clarity about which specific assets are included. Similarly, focusing only on future assets or maintaining vagueness for flexibility fails to meet the identifiable standard, potentially undermining the effectiveness of the security interest. Therefore, a clear and reasonable identification is crucial for the validity and enforceability of the collateral description in the security agreement.