Some security agreements have a kind of middle ground: an indispensable document. Not exactly tangible or immaterial, this includes any document absolutely necessary to safeguard the value of material goods. Precise classification of security is essential for security agreements. Often, classification depends on exactly how the debtor uses a particular asset. For example, a titled vehicle, primarily used for personal or family purposes, may be considered a consumer product. However, if the vehicle is put up for sale, it can be considered an inventory. If the vehicle is regularly used for commercial purposes, it must be considered equipment. A notary may serve as a witness for a security agreement, but this is not necessary for the agreement to be considered valid. However, it is recommended that a notary be used to ensure that there is proof of contractual validity in the event of a dispute. If a notary is not available, it is important (but still not necessary) to sign the agreement in front of a non-notarian witness. Ideally, security agreements will be concluded in both a notary and a separate undistated witness.
Some creditors may refuse to enter into security agreements if the debtor lacks a notary and/or a witness. Parties to security agreements can negotiate the terms of virtually any provision they contain. For example, while many security agreements closely comply with the UCC`s Article 9 definitions, parties to the agreements may prefer to use definitions in one of the other sections of the UCC instead. However, many security agreements provide that, if in doubt, the contract follows the definitions of Article 9. Negotiable provisions can also determine whether the treaty deals with existing obligations (as opposed to future commitments). Caution is essential because not all courts are able to apply negotiable provisions in the event of litigation. The security agreement defines the different rights that the donor will have with respect to guarantees that, in addition to all other rights that the lender may have by law, such as the rights of Article 9 of the Single Code of Commerce, which has been adopted in one way or another by each state in the United States. The security agreement also covers issues such as authorized sales or other transactions relating to the donor`s guarantees in due form, as well as the communications that the recipient must provide to the donor when certain measures are taken.