What is the primary purpose of a "security agreement"?

The primary purpose of a security agreement is to outline the terms of the security interest and the collateral involved in the transaction. This document serves as a critical legal instrument between a debtor and a secured party, establishing the obligations and rights of each party concerning the secured property.

In a security agreement, specific details such as the description of the collateral, the obligations of the debtor, the rights of the secured party in case of default, and any other terms governing the relationship are set forth. Establishing these terms is essential for determining how the secured party can enforce their security interest, especially in the event of default, and to ensure that the parties have mutual understanding and clarity regarding the financial arrangement.

The other options, while related to secured transactions, do not accurately reflect the core function of a security agreement. For instance, creating binding contracts with third parties is outside the primary focus of a security agreement, and providing a warranty for the collateral does not encapsulate its legal purpose. Additionally, facilitating the sale of the collateral may occur at a later stage of the secured transaction process, but it is not a primary function of the security agreement itself.