Feb 082012
 

The new PPSA introduces changes that should prompt review of many of your contractual arrangements. Below is a short list of challenges to common operating assumptions.

Equipment: Supplies of or Leases, bailments over plant and equipment may be registrable security interests, whether by agency, outsourcing or franchise.

Receivables: Assignments of receivables should be registered.

Intellectual property: PPSA can deem IP rights to be covered by a security agreement. You should review all security interests over computer and computer controlled equipment, computer code, photos and marketing materials.

Commingling: Where goods are commingled (like wheat in a silo, the holders of security interests over small parts can get a security interest over all of the combined goods (the mass).

Confidentiality clauses: Amend confidentiality clause to provide that disclosure to the extent required by law does not include disclosure required by the PPSA. After default, your documents may be disclosed to third parties.

Joint ventures: Cross charges and some default clauses in joint venture agreements should be reviewed. Joint venture agreements may create any security interests and should be checked to see if interests need to protected. Some cross charges may be included in side documents to preserve confidentiality.

Enforcement: You should decide whether to contract out of the new enforcement rules (except in consumer transactions).

Contracts – restrictions on assignment: Even if your contract prohibits assignment, the exercise of rights under PPSA may result in assignment, whether on not you agree.

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