Also known as: right in the collateral · rights in collateral
Written by attorneys · grounded in primary & secondary sources — see below
A debtor's interest in or authority over property designated as collateral. This interest or authority is required before a security interest can attach and become enforceable against the debtor and third parties.
Rachel Ramirez plants hemp on leased land after signing a security agreement with Regal Apparel. Once the hemp begins to grow, Rachel acquires rights in the crop. Regal Apparel's security interest therefore attaches to the hemp as collateral.
Rising Sun Electronics defaults on its loan from Rocky Mountain Mining. Rocky Mountain Mining sells the pledged inventory to a buyer for value. The sale transfers all of Rising Sun Electronics's rights in the inventory to the buyer.
Raphael Rivera agrees with Radiance Media that he will not sell his equipment without consent. Raphael nevertheless sells the equipment to Rebecca Ross. The contractual prohibition does not prevent the transfer of Raphael's rights from taking effect.
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A debtor acquires rights in crops to be grown once the crops are planted or begin to grow. The security interest then attaches to the crops as they come into existence.
Supporting sources
A debtor may grant a security interest in property in which the debtor holds only a partial interest. The security interest attaches only to the debtor's interest in the collateral.
A contractual prohibition on transfer or a clause making transfer a default does not prevent the transfer from taking effect. The buyer still receives the debtor's rights in the collateral.
Supporting sources