What are the requirements for a lender to create valid rights against a debtor?

For a lender to create valid rights against a debtor, it is essential that three specific requirements are met: the lender must give value, the debtor must have rights in the collateral, and a security agreement must be signed.

This process is part of the attachment of the security interest, which is a crucial step in secured transactions under Article 9 of the Uniform Commercial Code (UCC).

When the lender gives value, it typically means that they are providing a loan or some form of consideration that serves as a basis for the secured interest. The debtor must then have rights in the collateral because only someone with an interest in the property can grant a security interest in it. Lastly, a security agreement must be signed to create the legal framework for the security interest. This agreement outlines the terms of the loan and the collateral involved, thus establishing the rights and responsibilities of both parties.

Meeting these three criteria ensures that the security interest is enforceable and effective against third parties, providing the lender with legal rights to the collateral in case of default by the debtor. Overall, these requirements are fundamental to the validity and enforceability of a security interest in secured transactions.