The debtor most often signs the security contract or written contract. The UCC states that “the debtor must have authenticated a security contract that contains a description of the security… “Authenticate” (or “sign,” “accept” or accept) means sign or, in recognition of electronic business transactions, “execute or repossess a symbol, encrypt or process a data set in the same way… with the authenticating person`s current intention to identify the person and accept or accept a registration. The “record” is the replacement of the modern UCC with the term “writing.” It contains information stored electronically or on paper. Single Code of Trade, Section 9-102, Official Note 9. Here is a free example of an online security agreement: Docstoc, “Free Business Templates – Sample Open-Ended Security Agreement,” www.docstoc.com/docs/271920/Free Business-Templates-Sample Open-Ended-Security Agreement. The issue of interest in leasing or security is being tried because of the requirements of section 9 that a security interest is enhanced in some way (as we shall see). If the transaction is found to be of safety interest, a lessor who does not comply with these requirements may lose ownership to a third party. And look at this example. Ferrous Brothers Iron Works “rents” a $25,000 cutting machine at the De Millie machine shop. Under the terms of the lease, Millie`s must pay an annual rent of $5,000 for five years, after which Millie`s can take the title directly from the machine for the payment of $1. During the rental period, the title remains with the Eisen brothers. Is this “leasing” really an interest in security? Since the ownership is done with a nominal fee when the entire lease is executed, the transaction would be interpreted as a transaction creating a security interest. What difference does it make? Suppose Millie went bankrupt in the third year of the lease, and the bankrupt agent sold the percussion press to pay off the engine room debts.
If it were a real lease, Ferrous Brothers would have the right to recover the machine (unless the agent took the lease). However, if the lease is truly unifying to create a security interest, Ferrous Brothers can only recover its guarantees if it has complied with the obligations of Article 9 , for example by identifying its security interest, as we shall see.