Brief Fact Summary. Kevin Shirel, (Petitioner), moves to avoid a lien by Sight ‘N Sound Appliance Center, Inc., (Respondent) on the grounds that Respondent is not a secured creditor.
Synopsis of Rule of Law. A security agreement is not enforceable if it does not contain language that describes the collateral sufficiently so that a third party could reasonably identify the items that are subject to the security interest.
An adhesion contract is a standardized contract prepared entirely by one party to the transaction for the acceptance of the other.View Full Point of Law
Issue. Whether the phrase “all merchandise” sufficiently describes the collateral as to create a security interest in the refrigerator.
Held. No. No reasonable third party would understand that a security interest was created in the refrigerator by reading the phrase, “all merchandise.”
Discussion. This is an adhesion contract and the U.C.C.’s policy of moving away from the rigid requirements of a description of the collateral must be balanced against the need to interpret an adhesion contract in a way favorable to the debtor. The phrase, “all merchandise,” is too liberal, too imprecise, and is not a description. The language is too vague and a third party could not reasonably interpret this language to describe a refrigerator.