Personal Property Security Act

Sec 5

Creation of a Security Interest. — (a) A security interest, shall be created by a. security agreement. (b) A security agreement may provide for the creation of a security interest in a future property, but the security interest in that property is created only when the grantor acquires rights in it or the power to encumber it.

Sec 6

A security agreement must be contained in a written contract signed by the parties. It may consist of one or more writings that, taken together, establish the intent of the parties to create a security interest. The security agreement shall likewise provide for the language to be used in agreements and notices. The grantor shall be given the option to have the agreement and notices in Filipino. The Department of Finance (DOF) shall prepare model agreements in plain English and Filipino.

Sec 7

A description of collateral shall be considered sufficient, whether it is specific or general, if it reasonably identifies the collateral. A description such as "all personal property", "all equipment", "all inventory", or "all personal property within a generic category" of the grantor shall be sufficient.

Sec 8

Right to Proceeds and Commingled Funds and Money. (a) A security interest in personal property shall extend to its identifiable or traceable proceeds. (b) Where proceeds in the form of funds credited to a deposit account or money are commingled with other funds or money: (1) The security interest, shall extend to the commingled money or funds, notwithstanding that the proceeds have ceased to be identifiable to the extent they remain traceable: (2) The security interest in the commingled funds or money shall be limited to the amount of the proceeds immediately before they were commingled; and (3) If at any time after the commingling, the balance credited to the deposit, account or the amount of the commingled money is less than the amount of the proceeds immediately before they were com mingled. the security interest against the commingled funds or money shall be limited to the lowest amount of the commingled funds or money between the time when the proceeds were commingled and the time the security interest in the proceeds is claimed.

Sec 9

A security interest shall continue in collateral notwithstanding sale, lease, license, exchange, or other disposition of the collateral, except as otherwise provided in Section 21 of this Act, or agreed upon by the parties.

Sec 10

Contractual Limitation on the Creation of a Security Interest. — (a) A security interest in an account receivable shall be effective notwithstanding any agreement between the grantor and the account debtor or any secured creditor limiting in any way the grantor's right to create a security interest. (b) Nothing in this section shall affect any obligation or liability of the grantor for breach of the agreement in subsection (a). (c) Any stipulation limiting the grantor's right to create a security interest shall be void. (d) This section shall apply only to accounts receivable arising from: (1) A contract for the supply or lease of goods or services other than financial services; (2) A construction contract or a contract for the sale or lease of real property; and (3) A contract for the sale, lease or license of intellectual property.