Turning lead into gold: The uncertain alchemy of all obligations clauses

• Author(s) / Creator(s)

  • Wood, Roderick J.

• This article examines the use of all obligation clauses in security agreements and their potential to transform an unsecured claim into a more valuable secured claim upon an assignment of the unsecured claim or the security agreement. The author addresses three arguments that have been levelled against the use of all obligations clauses: unfairness to the debtor, distortion of the pro rata sharing principle of bankruptcy law, and the disruption of the Personal Property Security Act priority regime. The author also examines tivo analogous transactions and explains why these do not create similar problems. | Cet article porte sur l 'utilisation de tous les articles d'obligation dans les contrats de garantie et leur potentielde transformer une crgance ordinaire en une criance garantie d'une plus grande valeur au moment de la cession de la crgance ordinaire ou du contrat de garantie. L 'auteur soulbve trois arguments contre le recours aux articles d 'obligation. 6 savoir l 'injustice envers le dibiteur, la distorsion du principe de partage proportionnel de Ia 1oi sur la faillite et Ia rupture du r~gime prioritaire de la Loi sur les sfiretds relatives aux biens personnels. L 'auteurexamine aussi deux transactions analogues et explique la raison pour laquelle elles ne crient pas de problbmes semblables.

• Date created

  2003

• Subjects / Keywords

  • Covenants (Law)
  • Collateral Security
  • Assignments (Law)

• Type of Item

  Article (Published)

• DOI

  https://doi.org/10.7939/R3CR5NS8S

• License

  © 2003 Roderick J. Wood et al. This version of this article is open access and can be downloaded and shared. The original author(s) and source must be cited.