Calling All Secured-Transactions Lawyers: Issues Regarding Language Granting a Security Interest

I culled the following from a security agreement on EDGAR:

… SwissINSO hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to the Secured Party a lien on and security interest in, all of SwissINSO’s right, title and interest in, to and under, all of the property and assets currently owned by or owing to, or hereafter acquired by or arising in favor of, SwissINSO, wherever located …

I’d be pleased to have secured-transactions lawyers sound off on the following issues:

  • The string “grants, assigns, conveys, mortgages, pledges, hypothecates and transfers” seems way out of control. Why not just “grants”? For example, why “hypothecates”? Yes, I know that it means, in a nutshell, “to pledge without delivery of title and possession.” But consistent with what I said in this recent post, to accomplish a hypothecation, you don’t need to use that clunky word, thank goodness—instead, that’s determined by the terms of the deal.
  • And why use both “lien” and “security interest”? Are those meant to be synonyms? Or are two different rights being granted?
  • Why use “right, title and interest”? Why not just “interest”?  That seems the broadest term.
  • Do we really need “in, to, and under”?
  • What’s the difference between “property” and “assets”?
  • And do you get tired of dealing with this sort of verbiage?

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

9 thoughts on “Calling All Secured-Transactions Lawyers: Issues Regarding Language Granting a Security Interest”

  1. Ken, I would so love to see a justification for this string of words, which is similar to strings I have seen in some US IP assignments.

    As for “right, title and interest”, this set of words has a long tradition in the common law of property. For example, section 63 of the English Law of Property Act 1925 ( provides as follows:

    (1) Every conveyance is effectual to pass all the estate, right, title, interest, claim, and demand which the conveying parties respectively have, in, to, or on the property conveyed, or expressed or intended so to be, or which they respectively have power to convey in, to, or on the same.
    (2)This section applies only if and as far as a contrary intention is not expressed in the conveyance, and has effect subject to the terms of the conveyance and to the provisions therein contained.
    (3)This section applies to conveyances made after the thirty-first day of December, eighteen hundred and eighty-one.

    I have never researched the precise difference between a right and an interest in property law (guess: is a right a contractual right, but an interest a property right?), but would be nervous about assuming that one is subsumed by the other, and think these are probably terms of art (to respond to your other post).

    As for in, to or under, that is just pedantic grammar (right in, title to, interest under). I agree we can probably ditch it in the interests of simplicity.

    A further guess (working assumption) is that lien is an example of a security interest. From looking into something called vendor’s liens a couple of years ago, I think liens are certainly examples of charges. I am not sure without thinking about it whether there are other types of security interest that are not charges.

  2. I write not as an expert on security interests, but just as plain ol’ country lawyer (which isn’t true either). I did, however, take the course.

    Since security interests in chattels (is that word jargon or a term of art?) are governed, in 49 of 50 US states, by the Uniform Commercial Code, it may be instructive to look at the terminology used in that statute. In the general definitions we find the following:

    interest” means an interest in personal property or fixtures which
    secures payment or performance of an obligation. “Security interest” includes
    any interest of a consignor and a buyer of accounts, chattel paper, a payment
    intangible, or a promissory note in a transaction that is subject to Article
    9. “Security interest” does not include the special property interest
    of a buyer of goods on identification of those goods to a contract for
    sale under Section 2-505,
    the right of a seller or lessor of goods under Article
    2 or 2A to retain or acquire possession of the goods is not a “security
    interest”, but a seller or lessor may also acquire a “security interest” by
    complying with Article 9. The retention or reservation of title by a seller
    of goods notwithstanding shipment or delivery to the
    buyer under Section 2-401 is limited in effect to a reservation of a “security
    interest.” Whether a transaction in the form of a lease creates a “security
    interest” is determined pursuant to Section 1-203.

    The first sentence does all the heavy lifting, and (pace the improper use of “which”) says that a security interest is, duh, an interest. Therefore all the rest of the string you cite is superfluous.

    As to “grant,” etc., one will search in vain for the term (or any of them) in Article 9 of the UCC, which covers security interests, except for one use in connection with filing forms. The operative provision about the creation of a security interest is section 9-203:

    Except as otherwise provided in subsections (c) through
    (i), a security interest is enforceable against the debtor and
    third parties with respect to the collateral only if :

    (1) value has been given;

    (2) the debtor has rights in the
    collateral or the power to transfer rights in the collateral to a secured
    party; and

    (3) one of the following conditions is met:

    (A) the debtor has authenticated a security
    agreement that provides a description of the collateral and, if the security
    interest covers timber to be cut, a description of the land concerned;

    (B) the collateral is not a certificated security and
    is in the possession of the secured party under Section 9-313 pursuant
    to the debtor’s security agreement;

    (C) the collateral is a certificated security in registered
    form and the security certificate has been delivered to the secured party under
    Section 8-301 pursuant
    to the debtor’s security agreement; or

    (D) the collateral is deposit
    accounts, electronic chattel paper, investment
    property, or letter-of-credit rights,
    and the secured party has control under Section 9-104, 9-105, 9-106,
    or 9-107 pursuant to the debtor’s
    security agreement.

    What I take away from this is that, like other areas of the law that Ken discusses, the recitation that something is being done is irrelevant, and what counts is whether the thing is actually done. One may call it what one wills, or call it nothing at all.

  3. I stopped being a lending lawyer about 10 years ago, but IIRC “grant a security interest” covers everything (other than agricultural liens) under UCC Article 9, full stop.

    The revision of Article 9 in 2001 got rid of a lot of this garbage.
    Not everyone got the message.

  4. Ken:

    What follows is based on my understanding of Canadian (Alberta) law. Whether
    there are similar issues raised under US federal/state law I cannot say.
    aeronautics, etc).

    Also the PPSA/UCC9 type legislation does not deal with
    interests in real property. Many of the security agreements you are reviewing
    are probably trying to include language to include all types of property
    (regular personal property, real property interests, and interests in assets
    that have specialized statutes addressing them). The interaction of the PPSA/UCC9 type
    legislation which deals with “security interests” and some of the
    really old federal legislation that fixates on “title” has yielded
    some weird priority results.

    For purposes of a pure PPSA type priority battle (i.e. all claimants
    subject to PPSA with no unusual priority regimes under federal law), I would
    agree that “grants a security interest” would be sufficient.

    However, for those “weird” federal statutes
    (particularly for “bank act security” under the the Bank Act) “title”
    is king. It is generally accepted that “granting” a PPSA security
    interest does not transfer/move “title”. However, under the federal
    legislation such as the Bank Act the efficacy of bank act security is affected
    by “title”. Thus a creditor that wanted to try to prevent a future
    bank lending to the same borrower from making a bank act security claim in
    priority to the creditors security interest claim, that creditor would want
    language that indicated that the title held by the debtor had been transferred
    to the creditor as part of the arrangement. Thus the creditor will probably
    include words such a “conveys”, “mortgages”,
    “pledges”, or “transfers” to indicate that this higher
    plane of “title” interest had been achieved.

    As for interests in real property (speaking from the narrow
    perspective of Alberta land titles Torrens system) I believe that it is generally understood
    that “grants a security interest” would not be sufficient and that
    some words of “conveyance” would be needed (i.e. mortgages or transfers).

    This is a contorted area of law which many attempts have
    been made to try to fix over the years. Given
    the contorted nature of the law it probably not surprising that the documents
    drafted to try to navigate this legal landscape also use contorted language.

    FYI as an aside. In many of Canadian jurisdictions there is
    a specific section that says if the property charged is described as “all
    present and after-acquired personal property” these words with nothing
    else will catch all assets that could be caught under the PPSA.

    FYI as an aside. Many agreements in Canada try to be set up to be used across all
    Provinces in Canada.
    The legislation in all Provinces is not the same. It is my understanding that
    historically in Quebec (the only civil law jurisdiction
    in Canada)
    the term “hypothec” was the key term to be used in secured
    transactions. This may be a reason for the reference to “hypothecate”
    in Canada (i.e. so the
    agreement contains the necessary “magic words” to fit within the old Quebec regimes). I
    believe that Quebec
    also has adopted a PPSA/UCC9 type statute so I suspect that the need for
    “hypothecate” is probably now gone.


    • Gord: Thank you for this; I’ll chew it over. If you’d like to tell me what text is missing from your second sentence, I’d be happy to restore it. And sorry about the glitchy formatting; I haven’t been able to fix it entirely. Ken

  5. I am a finance lawyer and a real estate lawyer.

    To me, the word “mortgage” seems particularly out of place in a straight security agreement. I would typically use a security agreement to grant a security interest in UCC collateral. For real estate, there would be a mortgage or deed of trust to record in the land records of the county in which the real estate is located. (As a matter of practice, it would likely be a combination mortgage, security agreement and fixture filing, to cover the related personal property as well).

    If this were a real estate document, I would be careful about messing with the granting clause, though. The reason is that I would want the document to include whatever words the applicable mortgage or conveyance act uses. If the form might be used by different authors or for different jurisdictions, I’d probably err on the safe side and leave all that verbiage in – with the possible exception of “hypothecate”, which to me at least has a distinctive Canadian connotation.


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