Also known as: accept collateral in full satisfaction · accept collateral in partial satisfaction · acceptance of collateral · strict foreclosure · UCC 9-620
Written by attorneys · grounded in primary & secondary sources — see below
An alternative remedy available to a secured party after default by which the secured party retains the collateral in full or partial satisfaction of the secured obligation rather than disposing of it. For partial satisfaction the debtor must consent in an authenticated record after default. For full satisfaction consent may also occur through the secured party's proposal procedures. Partial satisfaction is prohibited in consumer transactions.
Aether Technologies defaulted on a loan from Alliance Holdings secured by manufacturing equipment. After default, Aether authenticated a record agreeing that Alliance would keep half the equipment in partial satisfaction of the debt and sell the rest. Alliance retained the equipment without conducting a sale and released Aether from the corresponding portion of the obligation.
Argonaut Shipping defaulted on a loan from Arcadia Retail secured by its artwork inventory. Arcadia proposed in writing to accept the entire inventory in full satisfaction of the debt. Argonaut authenticated the proposal after default, and Arcadia took title to the artwork, extinguishing the entire obligation without any disposition sale.
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The debtor must agree to the terms of the acceptance in a record authenticated after default. For full satisfaction the secured party may also propose acceptance in the proposal itself under certain conditions.
No. In a consumer transaction a secured party may not accept collateral in partial satisfaction of the obligation it secures.
Acceptance allows the secured party to retain the collateral itself in satisfaction of the debt without a sale. Foreclosure by sale requires disposing of the collateral and applying proceeds to the obligation.
A purported acceptance is ineffective unless the debtor consents in the required authenticated record after default or the secured party follows the proposal procedures for full satisfaction.