CO Code § 4-9-204 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 9 - Secured Transactions|Part 2 - Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement|§ 4-9-204. After-Acquired Property - Future Advances

  Except as otherwise provided in subsection (b) of this section, a security agreement may create or provide for a security interest in after-acquired collateral.    A security interest does not attach under a term constituting an after-acquired property clause to:   Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within ten days after the secured party gives value; or    A commercial tort claim.       A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.     History. Source: L. 2001: Entire article R&RE, p. 1336, § 1, effective July 1.    Editor's note:   This section is similar to former § 4-9-204 as it existed prior to 2001.   OFFICIAL COMMENT   1. Source. Former Section 9-204.   2. After-Acquired Property; Continuing General Lien. Subsection (a) makes clear that a security interest arising by virtue of an after-acquired property clause is no less valid than a security interest in collateral in which the debtor has rights at the time value is given. A security interest in after-acquired property is not merely an “equitable” interest; no further action by the secured party such as a supplemental agreement covering the new collateral is required. This section adopts the principle of a “continuing general lien” or “floating lien.” It validates a security interest in the debtor's existing and (upon acquisition) future assets, even though the debtor has liberty to use or dispose of collateral without being required to account for proceeds or substitute new collateral. See Section 9-205. Subsection (a), together with subsection (c), also validates “cross-collateral” clauses under which collateral acquired at any time secures advances whenever made.   3. After-Acquired Consumer Goods. Subsection (b)(1) makes ineffective an after-acquired property clause covering consumer goods (defined in Section 9-109), except as accessions (see Section 9-335), acquired more than 10 days after the secured party gives value. Subsection (b)(1) is unchanged in substance from the corresponding provision in former Section 9-204(2).   4. Commercial Tort Claims. Subsection (b)(2) provides that an after-acquired property clause in a security agreement does not reach future commercial tort claims. In order for a security interest in a tort claim to attach, the claim must be in existence when the security agreement is authenticated. In addition, the security agreement must describe the tort claim with greater specificity than simply “all tort claims.” See Section 9-108(e).   5. Future Advances; Obligations Secured. Under subsection (c) collateral may secure future as well as past or present advances if the security agreement so provides. This is in line with the policy of this Article toward security interests in after-acquired property under subsection (a). Indeed, the parties are free to agree that a security interest secures any obligation whatsoever. Determining the obligations secured by collateral is solely a matter of construing the parties' agreement under applicable law. This Article rejects the holdings of cases decided under former Article 9 that applied other tests, such as whether a future advance or other subsequently incurred obligation was of the same or a similar type or class as earlier advances and obligations secured by the collateral.   6. Sales of Receivables. Subsections (a) and (c) expressly validate after-acquired property and future advance clauses not only when the transaction is for security purposes but also when the transaction is the sale of accounts, chattel paper, payment intangibles, or promissory notes.. This result was implicit under former Article 9.   7. Financing Statements. The effect of after-acquired property and future advance clauses as components of a security agreement should not be confused with the requirements applicable to financing statements under this Article's system of perfection by notice filing. The references to after-acquired property clauses and future advance clauses in this section are limited to security agreements. There is no need to refer to after-acquired property or future advances or other obligations secured in a financing statement. See Section 9-502, Comment 2.   ANNOTATION   Law reviews. For article, “The Revolution in Consumer Credit Legislation”, see 45 Den. L.J. 679 . For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75). For article, “Commercial and Corporate Law”, which discusses a Tenth Circuit decision dealing with a participating bank's risk under a loan participation agreement, see 65 Den. U. L. Rev. 469 (1988).   Annotator's note. The following annotations include cases decided under this section as it existed prior to its 2001 repeal and reenactment.   It is determined when security interest may attach to debtor's accounts receivable. A security interest cannot attach to the accounts receivable of a debtor, if the debtor does not have a “right to payment”. Weld Colo. Bank v. E & E Constr., Inc., 653 P.2d 758 (Colo. App. 1982).   Future advance clauses on printed forms are not to secure later purchases unless it is clear the parties contemplated this at the time the agreement was made. The true intent of the parties is the sole controlling factor. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982 ).   “Floating liens” are limited. Even though “floating liens” are sanctioned under subsection (3), the secured party does not obtain a security interest in collateral for contingent contractual liabilities not of the same nature. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982 ).   “Dragnet” clauses construed against drafter. A clause in a printed form attempting to draw in as security all other and future debts and all present and future property, which is called a “dragnet” clause, is to be construed strictly against the party drafting the clause. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982 ).   Bank's security interest is attached at instant title certificates delivered. A bank's security interest in automobiles attached to the automobiles at the same instant that the titles were delivered to the bank. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166 , 519 P.2d 354 (1974).   After the purchaser of some automobiles delivered its check to the seller, but before the certificates of title were transferred to a bank as the purchaser's agent, the purchaser executed a security agreement with the bank, intending to create a security interest in the automobiles to secure repayment of the bank's financing loan, until the certificates of title were properly transferred to the purchaser's agent, no right, title, or interest was created in the purchaser which would enable it to legally convey or encumber the automobiles. Therefore, although the bank and purchaser fully intended that the security interest attach to the automobiles at the time the loan funds were deposited in the purchaser's account, the absence of any legal right, title, or interest by the purchaser in the automobiles prevented the bank's security interest from attaching prior to the time that the certificates of title were delivered. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166 , 519 P.2d 354 (1974).   Attachment was never effected where bailee at the time it gave a security interest in its inventory to a bank had no rights of its own in the property. Midland Bean Co. v. Farmers State Bank, 37 Colo. App. 452, 552 P.2d 317 (1976).   Applied in Greeley Nat. Bank v. Sloan, 677 P.2d 409 (Colo. App. 1983); Janitell v. State Bank of Wiley, 919 P.2d 921 (Colo. App. 1996).