Legal Definitions - security agreement

A security agreement is a legal document that establishes an interest in a specific property, either real or personal, to ensure that an obligation is fulfilled. The agreement must include a security interest, a description of the collateral, and the debtor's signature. It may also contain other important covenants and warranties.

Example 1: John wants to borrow money from a bank to buy a car. The bank requires John to sign a security agreement that gives the bank a security interest in the car. If John fails to repay the loan, the bank can repossess the car to recover the money owed.

Example 2: Sarah wants to rent an apartment but has bad credit. The landlord requires Sarah to sign a security agreement that gives the landlord a security interest in Sarah's personal property, such as her furniture and electronics. If Sarah fails to pay rent, the landlord can seize her property to cover the unpaid rent.

These examples illustrate how a security agreement can be used to protect a lender or creditor's interests in case the borrower or debtor fails to fulfill their obligations. The agreement establishes a legal claim on the collateral, which can be used to recover the money owed or compensate for any losses incurred.