When does an after-acquired property clause cover property acquired after the agreement?

When does an after-acquired property clause cover property acquired after the agreement?

• A. It covers any future property without description.
• B. An after-acquired property clause covers property acquired after the agreement only if described or within the general security interest.
• C. It cannot cover after-acquired property.
• D. It only applies to consumer goods.

Answer: (B)

In secured lending under the UCC, an after-acquired property clause reaches property the debtor buys after the agreement only if the language describes the collateral in a way that includes future acquisitions or states a broad general security interest. If the contract says a specific list of property and does not extend to future items, new property of that class isn’t automatically covered. But if the clause says something like “all equipment now owned or hereafter acquired by the debtor” or “all of the debtor’s inventory,” then future purchases in those categories automatically become part of the collateral. The key is that the description must either explicitly include after-acquired property or describe a broad category that encompasses future items. After-acquired coverage is not limited to consumer goods and is not granted by a vague promise of “any future property” without a proper description.

In secured lending under the UCC, an after-acquired property clause reaches property the debtor buys after the agreement only if the language describes the collateral in a way that includes future acquisitions or states a broad general security interest. If the contract says a specific list of property and does not extend to future items, new property of that class isn’t automatically covered. But if the clause says something like “all equipment now owned or hereafter acquired by the debtor” or “all of the debtor’s inventory,” then future purchases in those categories automatically become part of the collateral. The key is that the description must either explicitly include after-acquired property or describe a broad category that encompasses future items. After-acquired coverage is not limited to consumer goods and is not granted by a vague promise of “any future property” without a proper description.