Case 13 - Bank loan on the basis of money claims (II)

Summary

(Security right to a claim against a debtor whose identity is unknown at the time the security right is created – rights of the secured party in execution)

B, an engineer, is a sole trader. He wishes to expand his business. As security for a bank loan from A, he can offer only the claims that will arise against future customers who, at the present time, are unidentified.

Questions

1. (a) Is there an arrangement by which B can grant to A a security in his claims against future customers? If so, describe its main features and prerequisites. How common are agreements of this kind in business practice?

2. (b) After concluding the security agreement with A, B acquires a claim against customer D worth 3,000 Euros. A bailiff wishes to execute against that claim on behalf of an unsecured creditor of B. Who has priority, A or the unsecured creditor? On what further circumstances does A's right depend (e.g. communication of the assignment to D, revocation of B's entitlement to collect the claims against his customers)?

3. (c) B becomes bankrupt, having outstanding claims worth 10,000 Euros against customers C1–C5. Does A have any rights in respect of these claims? On what further circumstances do any rights of A depend (e.g. communication of the assignment to C1–C5, revocation of B's entitlement to collect the claims against his customers)?

4. (d) If B grants to A a security right in all his claims against his customers, are there any limits as to the value of the collateral in relation to the amount of the secured loan?