1. Application: – This Part applies only to security interests in moveable property and does not apply to the creation or assignment of an interest in moveable property, including  a  mortgage, charge or assignment of an interest in movable property, including a mortgage, charge or lease of immovable property, other than,
  • an interest in a fixture or addition, or
  • an assignment of a right to payment under a mortgage, charge or lease where the assignment does not convey or transfer the assignor’s interest on the immovable property.
  1. (1) Attachment of security interests required: – A security interest, though effective as between the parties to the agreement under Part II of this Act, is not enforceable against a third party unless it has

(2) When a security interest attaches: – A security interest attaches when,

(a)   the secured party or a person on behalf of  the secured party other than the debtor    obtains possession of the collateral; or when the debtor signs a security agreement    that contains a description of the collateral sufficient to enable it to be identified;

(a)        value is given; and

(c)        the debtor has rights in the collateral,

unless the parties have agreed to postpone the time for attachment, in which case the security interest attaches at the agreed time.

  1. Future Advances: – A security agreement may secure advances of money, credit or other value to be made in the
  2. Unperfected security: – Notwithstanding that a security interest has attached under Section 24, a security interest in collateral, which is not perfected,
  • has lower priority than the interest of a person,
  • who has a perfected security interest in he same collateral,  or  who  has  priority or a lien given under any other Act or by a rule of law; or
  • who assumes control of the collateral through execution of court
  • is not effective against a person who represents the creditors of the debtor;
  • in documents of title, securities, instruments or goods is not effective against a purchaser of the same who gives value and receives delivery without knowledge of the security interest, provided the purpose of the transfer is not solely for securing payment or performance of an
  1. Perfection of security interest: – A security interest is perfected when,
  • it has attached; and
  • all steps required for perfection,
  • by registration under Section 29, or
  • by possession or repossession under Section 31, or
  • by the rules governing temporary perfection under Section 32, have been completed, regardless of the order of
  1. (1) Continuity: – If a security  is  originally  perfected  in  any  way  permitted  under  this  Act and is again perfected in some other way permitted under this Act, the security interest shall be deemed to be perfected continuously for the purpose of this Act, provided that there was no period between the first and second perfection when the interest was

(2) Assignees: – Where a security interest is assigned or transferred, the person who receives the security interest assumes the perfection status the transferor had at the time  of  the  transfer.

  1. Perfection by registration: – Registration perfects a security interest in any type of
  2. Filing of registration statements: – In order to perfect a security interest by registration under this Act, a registration statement shall be registered in accordance with the provisions   of this Act and the regulations.
  3. Perfection by Repossession: – Possession or repossession of the collateral by the secured party, or on the secured party’s behalf by a person other than the debtor perfects a security interest in,
  • goods;
  • instruments;
  • securities;
  • negotiable documents and titles; and
  • but only while it is actually held as collateral.
  1. (1) Temporary perfection: – Where a person takes a security interest in an instrument, security or negotiable document of title, and the security is  documented  in  a  written  security agreement, then such security interest shall be deemed to be perfected for the first    ten days after the agreement is
  • Temporary perfection of other movables: – A security interest  perfected  by possession in movable property that a secured party delivers to the debtor remains perfected  for the first ten days after the collateral comes under the control of the debtor, provided the property is delivered for,
  • unlimited sale or exchange,
  • presentation, collection or renewal,
  • registration of transfer,
  • loading, unloading, storing, shipping or transshipping, or
  • manufacturing, processing, packaging or otherwise dealing with goods in a manner preliminary to their sale or
  • After ten days the rules in the Act apply: – Beyond the period of ten days referred to in Subsection (1) or (2), a security interest under this section becomes subject to the provisions of this Act for perfecting a security
  1. (1) Care of collateral: – Where a secured party has perfected his security  interest  in  movable property by possession or repossession, the secured party shall use reasonable care in the custody and preservation of collateral in his possession. In the case of an instrument, reasonable case includes taking necessary steps to preserve rights against prior parties unless otherwise
  • Rights and duties of secured party: – Unless otherwise agreed, where collateral is in   the secured party’s possession,
  • reasonable expenses, including the cost of insurance and payment of taxes and other charge incurred in obtaining and maintaining possession of the collateral and in its preservation, are chargeable to the debtor and are secured by the collateral;
  • the risk of loss or damage, except where caused by the negligence of the secured party, is on the debtor to the extent of any deficiency in any insurance coverage;
  • the secured party may hold as additional security any increase or profits, except money, received from the collateral, and money so received, unless remitted to the debtor, shall be applied forthwith upon its receipt in reduction of the obligation  secured; and
  • the secured party shall keep the collateral identifiable, but fungible collateral may be commingled mixed with like
  • Definition of fungible: – For the purposes of Subsection 2(d) fungible goods and fungible securities are goods or securities, as the case may be, of which any unit is, by nature or business practice, the equivalent of any other like unit, and includes unlike units to the extent that they are treated as equivalents under a security
  • Liability for loss: – A secured party is liable for any loss or damage caused by his failure to meet any obligations imposed by Subsection (1) or (2), but does not lose the security interest in the
  • Use of collateral: – A secured party may use the collateral,
  • in the manner and to the extent provided in the security agreement;
  • for the purpose of preserving the collateral or its value; or
  • pursuant to an order of the Court upon application by the secured
  • Inventory to be taken at time of possession: – At the time a secured party takes possession of collateral, a list or itemized inventory of all property and its condition must be prepared by the secured party and signed by both parties. Failure to sign leads to a rebuttable presumption that the inventory is
  1. (1) Statement of accounts: – A debtor, or a person who has an interest in the collateral or who is the authorized representative of such a person, may require by a written notice, that    the secured party to furnish to the person at the address specified in the notice, the following:
  • a statement in writing setting out, or approving or correcting the amount of the indebtedness, and the terms of payment as of the date specified in the notice; or
  • a statement in writing, approving or correcting as of the date specified in the notice, a statement of the collateral or a part of the collateral as specified in a list attached to the notice; or
  • a true copy of the security

(2) Inspection of security: – The secured party, on the request of  a  person  entitled  to  receive a true copy of the security agreement under Subsection 1(c), the secured party must permit the person, or the person’s authorized representative to inspect the security agreement or a true copy of the agreement during normal business hours.

13.    Perfecting as to proceeds: –

  • Where collateral gives rise to proceeds, the security interests also covers the
  • Where the security interest was perfected by registration when the proceeds arose, the security interest in the proceeds remains continuously perfected so long as the registration remains
  • Where the security interest is perfected with respect to the proceeds by any other method permitted under this Act, the security interest in the proceeds remains perfected so long as the conditions of such perfection are
  1. Transaction in ordinary course of business – Goods: – A person who buys goods from a seller who sells the goods in the ordinary course of business takes them free from any security interest in the goods given by the seller to another person, even though the security interest of the other person is perfected, unless the buyer also knew that the sale constituted a breach  of the security
  2. Purchase of instruments: – A purchaser of collateral that is an instrument, negotiable document of title, or a security, has priority over any security interest in the collateral perfected by registration or temporary perfected under Subsection 32 if the purchaser,
  • gave value for the interest purchased;
  • purchased the instrument or negotiable document of title without knowledge that it was subject to a security interest; and
  • has taken possession of the instrument or negotiable document of
  1. (1) Priorities, general rules: – If no other provision of this Act is applicable, the following priority rules apply where more than one security interest exists in the same collateral:
  • Where priority is to be determined between security interests perfected  by  registration, priority shall be determined by the order of registration regardless of the order of perfection.
  • Where priority is to be determined between a security interest perfected  by  registration and a security interest perfected otherwise than by registration,  the  security interest which was first perfected has priority over the other security
  • First method of perfection continues: – For the purpose of Subsection (1), a continuously perfected security interest shall be treated at all times as if perfected by the method in which it was first
  • Future advances: – Where subsequent advances of money, credit or other value are   made while a security interest is perfected, the security interest has the same priority with respect to each subsequent advance as it has with respect to the first
  1. Liens for materials: – Where a person in the ordinary course of business furnishes materials or services with respect to goods that are subject to a security interest, any lien that the    person has in respect of the materials or services has priority over a perfected  security
  2. (1) Crops: – Where a creditor provides funds to a debtor to enable the debtor to produce crops, and the creditor has perfected its security interest in the crops or the proceeds from   their disposition, then the security interest has priority over other security interests which the debtor may have granted in the same

(2) Idem: – Where more than one perfected security interest is given priority by Subsection  (1), each ranks equally according to the ratio that the amount advanced with respect to each bears to the total amount advanced.

  1. (1) Fixtures and additions, removal: – If a secured party  has  interest  in  a  fixture  or  goods that are installed or affixed to other goods and that interest has priority over the claim   of any person having an interest in the immovable or movable property to which the goods   are attached, the secured party may remove the fixture or the installed or affixed goods if, unless otherwise agreed, the secured party reimburses any encumbrancer or owner of the  whole property who is not the debtor for the cost of repairing any physical injury caused by their removal. The right to fixtures and additions may only be exercised on default  and remains subject to the provisions of this Act respecting
  • Security: – A person entitled to reimbursement under Subsection (1) may refuse permission to remove the fixtures or additions until the secured party has given adequate security for the
  • Retention of collateral: – A person having interest in the whole property, and whose interests is lower in priority to another security interest in the fixtures or additions, may retain the fixtures or additions if, before the fixtures and additions have been removed by  the secured party, the person pays to the secured party the amount owing in respect  of  the security interest in the fixtures and
  1. Subordination: – A secured party may, in the security agreement or otherwise, subordinate its security interest to any other security interest and such subordination is effective according to its
  2. Debtor may transfer: – The rights of a debtor in collateral may be transferred but such a transfer does not prejudice the rights of the secured party under the security agreement or otherwise.