An important part of business and commercial law is drafting security agreements and UCC filings. These sorts of documents require a certain degree of specificity to be valid. However, just as with anything, too much specificity can be too much of a good thing. Being too specific in these documents can lead to ambiguities that can lead to protracted litigation.
Court Discusses Whether UCC Financing Statements Adequately Perfected a Security Interest
A federal court in New York recently addressed the issue of specificity in Ring v. First Niagra Bank, N.A. It all started because of a Chapter 7 bankruptcy filing. The trustee started an adversary proceeding alleging avoidable preferential transfers to First Niagra. The issue before the Court was whether what it termed a “needlessly convoluted description of collateral” in a succession of U.C.C. Financing statements caused a claim of security to fail as “seriously misleading” under the U.C.C. as adopted by New York.