Security Interests in Receivables

Abstract

Receivables financing transactions are necessarily more complex than when the security right attaches to a tangible object such as an item of equipment. Account must be taken not only of the usual rules governing the creation, third party effectiveness, priority and enforcement of security rights, but also of the interrelationship of these rules with the rules regulating the rights of the debtor of the receivable. Moreover, unlike financing against the security of tangible assets, receivables financing may involve an outright sale of the encumbered assets to the financer. The evolution of the law has not necessarily kept pace with developments in commercial practice. Combined with the complexity of the assignment matrix in both its sale and security variants, this has resulted in diverse state approaches on such fundamental issues as the assignability of future and multiple receivables, the effectiveness of an anti-assignment clause in the contract generating the receivable, and the substantive and choice of law rules governing the third party effectiveness and priority of the security right or assignment against competing claimants.