Inter-American Law on Secured Transactions
SCOPE AND GENERAL APPLICATION
of the Model
Inter-American Law on Secured Transactions (hereinafter,
the “Law”) is to regulate security interest in movable
property securing the performance of any obligations
whatsoever, of any nature, present or future, determined
State may declare that this Law does not apply to the
types of collateral expressly specified in this text.
A State adopting this
Law shall create a unitary and uniform registration
system applicable to all existing movable property security
devices in the local legal framework, in order to give
effect to this Law.
2. The security interests to which this Law refers are created
contractually over one or several specific items of
movable property, on generic categories of movable property,
or on all of the secured debtor’s movable property,
whether present or future, corporeal or incorporeal,
susceptible to pecuniary valuation at the time of creation
or thereafter, with the objective of securing the fulfillment
of one or more present or future obligations regardless
of the form of the transaction and regardless of whether
ownership of the property is held by the secured creditor
or the secured debtor.
When a security interest
is publicized in accordance with this Law, the secured
creditor has the preferential
right to payment from the proceeds of the sale of the
3. For purposes of this law, the following terms mean:
Registry: is the Registry of Movable Property Security
II. Secured Debtor: the person, whether the principal
debtor or a third party, who creates a security interest
over movable property in accordance with this Law.
III. Secured Creditor: the person in whose favor a security
interest is created, possessory or non-possessory, whether
for its own benefit or for the benefit of other persons.
IV. Buyer [or transferee] in the Ordinary Course of
Business: a third party who, with or without knowledge
of the fact that the transaction covers collateral subject
to a security interest, gives value to acquire such
collateral from a person who deals in property of that
Movable Property Collateral: any movable property, including
receivables and other kinds of incorporeal property,
such as intellectual property, or specific or general
categories of movable property, including attributable
movable property, that serves to secure the fulfillment
of a secured obligation according to the terms of the
security interest in the collateral extends to, regardless
of any mention in the security contract or in the registration
form, the right to be indemnified for any loss or damage
affecting the collateral during the course of the security
interest, as well as to receive the product
of an insurance policy or certificate
that covers the value of such property.
VI. Attributable Movable Property: the movable property
that can be identified as derived from the originally
encumbered property, such as fruits, or property resulting
from its sale, substitution or transformation.
VII. Registration Form: the form provided by the Registry
referred to in Article 3.I, to register a security interest,
and which will include at least the data prescribed
by the regulations necessary to identify the applicant,
the secured creditor, the secured debtor, the collateral,
the maximum amount secured by the security interest,
and the termination date of registration.
VIII. Inventory: movable property held by a person
for sale or lease in the ordinary course of that person’s
business operations. Inventory does not include
movable property held by the secured debtor for its
IX. Acquisition Security Interest: a security interest
granted in favor of a creditor -- including a supplier
-- who finances the acquisition by the debtor of the
moveable corporeal property over which the security
interest is granted. Such security interest may
secure the acquisition of present or subsequently acquired
movable property so financed.
Receivable: the secured debtor’s right (contractual
or extra-contractual) to claim or receive payment of
any monetary sum, currently or thereafter due, from
a third party, including accounts receivable.
Article 4. The secured obligation, in addition to the principal debt may
Ordinary and default interests generated by the principal
sum of the secured obligation calculated according to
what is stated in the security contract, with the understanding
that, if no rate has been stated, said interest will
be calculated at the legal rate applicable at the time
II. The commissions which must be paid to the secured
creditor as provided in the Security contract;
Reasonable expenses incurred by the secured creditor
for the maintenance and custody of the secured property;
IV. Reasonable expenses incurred by the secured debtor,
generated by the acts necessary to effectuate the enforcement
of the security interest;
V. Damages caused by the breach of the security contract
as determined by a court, arbitration award or private
The liquidated damages, if any, when these have been
interest is created by contract between the secured
debtor and secured creditor.
If the security
interest is non-possessory, the contract creating the
security must be in writing and the security interest
takes effect between the parties from the moment of
the execution of the writing, unless the parties otherwise
a security interest in future
or after-acquired property encumbers the secured debtor’s
rights (personal or real) in such property only from
the moment the secured debtor acquires such rights.
7. The written security contract must contain, as a minimum:
Date of execution;
Information to identify the secured debtor and the secured
creditor, as well as the written or electronic signature
of the secured debtor;
The maximum amount secured by the security interest;
A description of the collateral, in the understanding
that such description may be generic or specific;
An express indication that the movable property described
is to serve as collateral to a secured obligation; and
A generic or specific description of the secured obligations.
writing may be manifested by any method of communication
that leaves a permanent record of the consent of the
parties to the creation of the security interest, including
telex, telefax, electronic data interchange, electronic
mail, and any other optical or similar method, according
to the applicable norms
this matter and taking into account the resolution
of this Conference attached to this Model Law (CIDIP-VI/RES.
the security interest is possessory, it takes effect
from the moment the secured
debtor delivers possession or control of the collateral
to the secured creditor or a third person designated
on its behalf, unless the parties otherwise agree.
If the security
interest is non-possessory, the secured debtor or any
person that acquires the collateral subject to the security
interest, unless otherwise agreed, has the following
rights and obligations:
The right to use and dispose of the collateral and any
proceeds derived from the original collateral in the
ordinary course of the debtor’s business;
The obligation to discontinue the exercise of such right
when the secured creditor notifies the secured debtor
of its intention to enforce the security interest in
the collateral under the terms of this Law;
The obligation to prevent damage and loss of the collateral
and do what ever is necessary for such purpose;
The obligation to allow the secured creditor to inspect
the collateral to verify its quantity, quality and state
of conservation; and
The obligation to adequately insure the collateral against
destruction, loss or damage.
Article 10. The rights conferred by the security interest take effect against
third parties only when the security interest is publicized.
A security interest may be publicized by registration
in accordance with this Title and Title IV or by delivery
of possession or control of the collateral to the secured
creditor or to a third person on its behalf in accordance
with this Title.
A security interest in
any type of collateral may be publicized by registration,
except as provided in Article 23.
A security interest may be publicized by delivery
of possession or control only if the nature of the collateral
so permits or delivery is effected in the manner contemplated
by this Title.
A security interest publicized
by one method may later be publicized by another method
there is no intermediate lapse without publicity, it
will be considered that the security interest was continuously
publicized for the purposes of this Law.
A security interest may cover attributable movable property
if this consequence is mentioned in the registration
security interest must be publicized by filing of a
registration form that refers to the special character
of this security interest and that describes the collateral
The provisions of this Law concerning security
interests over receivables are applicable to every type
of assignment of receivables.
If the assignment is not for security it must
comply only with the publicity provisions of this Law;
if it fails to so comply, it will be subject to the
priority rules of this Law.
interest granted by the secured debtor in receivables
owed to the secured debtor is publicized by registration.
otherwise provided in this Law, a security interest
granted in receivables shall not modify the underlying
legal standing nor increase the obligations of the account
debtor without this party’s consent.
The account debtor of a receivable assigned in
security has the rights and is subject to the obligations
stated in this Chapter.
debtor of the assigned receivable may discharge its
obligation by paying the secured debtor or the assignor
as the case may be. However, any outstanding amount
owed to the secured debtor or assignor at the time or
after the account debtor of the assigned receivable
receives notice from the secured creditor to make payment
to the secured creditor, the outstanding amount must be paid to the secured creditor. The account debtor may request the secured creditor to provide
reasonable proof of the existence of the security interest,
and, if reasonable proof is not provided within a reasonable
time, the account debtor may make payment to the secured
The notice to the account
debtor may be given by any generally accepted means
In order for such notice to be effective, it
must identify the receivable in respect of which payment
is requested, and include sufficient payment instructions
to enable the account debtor to comply.
Unless otherwise agreed, the secured creditor
shall not deliver such notice before the occurrence
of an event of default that entitles the secured creditor
to enforce the security interest.
If an account
debtor receives notice of more than one security interest
over the same receivable, the account debtor shall make
payment of the obligation in conformity with the payment
instructions contained in the first notification received.
Any actions between secured creditors designed
to give effect to the priority provisions of Title V
of the Law are preserved.
interest in a receivable, other than a claim under a
letter of credit, is effective notwithstanding any agreement
between the account debtor and the secured debtor limiting
the right of the secured debtor to grant security in
or assign the receivable. Nothing in this Article affects
any liability of the secured debtor to pay damages to
the account debtor for breach of any such agreement.
account debtor may raise against the secured creditor
all defenses and rights of set-off arising from the
original contract, or any other contract that was part
of the same transaction, that the
account debtor could raise against the secured
account debtor may raise against the secured creditor
any other right of set-off, provided that it was available
to the account debtor when notification of the security
interest was received by the account debtor.
account debtor may agree with the secured debtor or
assignor in a writing not to raise against the secured
creditor the defenses and rights of set-off that the
account debtor could raise pursuant to the first two
paragraphs of this Article. Such an agreement precludes
the account debtor from raising those defenses and rights
account debtor may not waive the following defenses:
I. Those arising from
fraudulent acts on the part of the secured creditor
or assignee; or
II. Those based on the
account debtor’s incapacity.
interest granted by the secured debtor in a claim that
is a non-monetary obligation, owed to the secured debtor,
is publicized by registration.
When the collateral
is a claim that is a non-monetary obligation, the secured
creditor has the right to notify the person obligated
on the claim to render performance of the obligation
to or for the benefit of the secured creditor and to
otherwise enforce the obligation to the extent that
obligated on the claim
may refuse only based on reasonable cause.
Article 23. A security interest in a letter of credit the terms and conditions
of which require that it be presented in order to obtain
payment shall be publicized by the beneficiary’s (secured
debtor’s) delivery of the letter of credit to the secured
creditor, provided that such a letter of credit does
not forbid its delivery to a party other than the paying
the letter of credit has been amended to permit the
secured creditor’s draw, the delivery to the secured
creditor does not entitle the latter to draw on the
letter of credit and solely prevents the beneficiary’s
(secured debtor’s) presentment of the letter of credit
to the paying or negotiating bank.
Article 24. A beneficiary (secured debtor) may transfer or assign its right
to draw on a letter of credit to a secured creditor
by obtaining the issuance of a credit transferable to
the name of the secured creditor as a transferee-beneficiary.
The validity and effect upon third parties of such a
transfer is governed by the applicable provisions of
the prevailing version, at the moment in which it takes
place, of the Uniform Customs and Practices for Documentary
Credits of the International Chamber of Commerce.
Article 25. The existence of a security interest in the proceeds of a letter
of credit is conditioned upon the beneficiary complying
with the terms and conditions of the letter of credit
thereby becoming entitled to payment thereon.
To be publicized, such a security interest must
be filed in the registry but not be enforceable against
the issuing or confirming bank until the date and time
on which this party accepts, under the terms and conditions
governing the payment of the letter of credit.
Article 26. If the secured obligation consists of a future extension of
credit or the giving of value in the future to the beneficiary
(secured debtor), the secured creditor must extend such
credit or value no later than 30 days from the date
on which the issuing or confirming bank accepts the
terms and conditions of the security interest in the
proceeds of the letter of credit, unless otherwise agreed.
If such credit is not extended or value is not
given within this period, the security interest terminates,
its registration, if any, may be cancelled, and the
secured creditor must execute a signed release to the
issuing or confirming bank allowing them to pay the
beneficiary (secured debtor) according to its original
terms and conditions.
the collateral is an instrument or document, the title
to which is negotiable by endorsement and delivery,
or delivery alone, the security interest may be publicized
by delivery of possession of the instrument or document
with any necessary endorsement.
the transfer or a pledge of a document of title has
taken place in an electronic format, or its transfer
or pledge has been effectuated in an electronic registry,
the special rules governing such electronic registry
If the secured
creditor publicizes its security interest by possession
and endorsement of the document but subsequently delivers
it to the secured debtor for any purpose including withdrawing,
warehousing, manufacturing, shipping or selling the
movable property represented
by the document, the secured creditor
must register its security
interest before the document is returned to the secured
debtor in accordance with Article 10 of this Law.
When the movable property
represented by a document is in the possession of a
third party depository or a bailee, the security interest
may be publicized by the delivery of a written notice
to the third party.
in Possession of a Third Party
The secured creditor, with
the consent of the secured debtor, may hold the property
through a third person; detention by a third person
effects publicity only from the time the third person
receives evidence in writing of the security interest.
The third person must at the request of any interested
person disclose forthwith whether or not it has received
notice of a security interest covering property in its
Article 31. A security interest over inventory, comprised of present and
future property, and its attributable movable property,
or any part thereof, may be publicized by a single registration.
A security interest in intellectual property
rights, such as patents, trademarks, trade-names, goodwill,
royalties and other attributable movable property derived
therefrom, is governed by this Law, including Article
of a Creditor in Possession of Collateral
Article 33. A creditor in possession of the collateral:
I. Shall exercise reasonable
care in the custody and preservation of the collateral.
Unless otherwise agreed, reasonable care implies the
obligation to take the necessary steps to preserve the
value of the collateral and the rights derived therefrom.
II. Shall maintain the
collateral in such a way that it remains identifiable,
unless it is fungible.
III. May use the collateral
only as provided in the security contract.
Article 34. A possessory security interest may be converted into a non-possessory
security interest and retain its priority provided that
the security interest is publicized by registration
before the collateral is returned to the secured debtor,
in accordance with Article 10.
REGISTRY AND RELATED MATTERS
Article 35. The security interest publicized by registration takes effect
against third parties from the moment of its registration.
Article 36. Any person may effect a registration authorized by the secured
creditor and the secured debtor, and any person may
register a continuation of an existing registration
with the authorization of the secured creditor.
Article 37. Where another law or an applicable international convention
requires title to movable property to be registered
in a special registry, and contains provisions relating
to security interests created over such property, such
provisions shall have precedence over this Law, to the
extent of any inconsistency between the two.
form shall be in the standard form and medium prescribed
Such form shall provide for entry of the following
The name and address of the secured debtor;
II. The name and address of the secured creditor;
III. The maximum amount secured by the security interest;
IV. The description of the collateral, which can be
generic or specific.
When there is more than
one secured debtor granting a security interest over
the same movable property, all secured debtors must
be separately identified in the registration form.
in the Registry will be valid for a term of five years,
renewable for three-year terms, preserving the original
In order for an acquisition security
interest to be publicized and have priority over previous
creditors with security interests over property
of the same type, the secured creditor of the
acquisition security interest must comply with
the following requirements, before
the debtor takes possession of such property:
Register in the registration form a notation that indicates
the special character of the acquisition security interest;
Notify the holders of previously perfected security
interests over property of the same kind that the secured
creditor has or expects to acquire an acquisition security
interest in the collateral described in the notice.
data may be amended at any time by the registration
of an amendment form; the
amendment shall take effect only from the time of its
Article 42. The secured creditor may cancel the original registration by
filing a cancellation form.
If a cancellation is made
in error or in a fraudulent manner, the secured creditor
may reregister the registration
form in substitution of the cancelled form.
Such secured creditor retains its priority
in relation to other secured creditors that registered
a security interest during the time of validity of the
erroneously cancelled registration form, but not
secured creditors who registered their security after
the date of cancellation and before the date of registration.
Article 43. The entity designated by the State will operate and administrate
the Registry, which will be public and automated and
in which there will be an electronic folio, which will
be indexed by the name of the secured debtor.
will have a central database constituted by the registration
records of the security interests inscribed in the State.
Article 45. For the registration and searches of information, the Registry
will authorize remote and electronic access to users
who so request.
Article 46. The users will have a confidential key to access the Registry
system in order to register security interests by sending
the registration form via electronic means or via any
other method authorized by the legislation of this State,
as well as in order to conduct the searches that are
The right conferred by a security interest in
respect of the collateral is effective against third
persons only when the publicity requirements have been
The priority of a secured interest is determined
by the time of its publicity.
A security interest confers
on the secured creditor the right to follow the collateral
in order to exercise its rights under the security.
Nevertheless, a buyer or transferee of collateral in
the ordinary course of the transferor’s business takes
free of any security interest in the collateral.
The secured creditor cannot
interfere with the rights of a lessee or a licensee
under a lease or a license
lessor’s or licensor’s
business after the publication of the security interest.
50. The priority of a security interest can be modified by written
agreement between the secured creditors involved, unless
it affects the rights of third parties or is prohibited
security interest will have priority over a previous
security interest that encumbers future movable property
of the secured debtor, as long as it is created according
to the provisions of this law and even when it was publicized
after the previous security interest.
The acquisition security interest will cover
exclusively the specific movable property acquired with
it and the cash proceeds attributable to their sale,
provided the secured creditor has complied with the
conditions set out in Article 40.
A possessory security interest in a document of title
has priority over a security interest in the property
covered by such document of title if the latter is publicized
after the document of title is issued.
II. The holder of money
or a transferee of negotiable instruments who takes
possession with any necessary endorsement in the ordinary
course of the transferor’s business takes free of any
III. The secured creditor
who received notice of acceptance by the issuing or
confirming bank, of its publicized security interest
over the proceeds of a letter of credit, has priority
over any security interest over such proceeds, regardless
of the time of its publicity,
obtained by another secured
creditor who did not receive such acceptance or who
received it at a later date. Where the security interest
covers the proceeds of a letter of credit, the ordinary
rule of priority set out in this Law applies.
IV. A publicized security
interest in a movable that is affixed to an immovable,
without losing its identity as a movable, has priority
over security interests in the relevant immovable, provided
the security interest over the movables has been registered
in the immovable registry before affixation.
The secured creditor may authorize the secured debtor
to dispose of the collateral free
of encumbrance, subject to any terms and conditions
agreed to by the parties.
A secured creditor who intends to commence
enforcement, in case of default of the secured debtor,
shall register an enforcement form in the Registry and
deliver a copy to the secured debtor, to the principal
debtor of the secured obligation, to the person in possession
of the collateral and to any person who has publicized
a security interest in the same collateral.
enforcement form shall contain:
A brief description of the default by the secured debtor;
A description of the collateral;
A statement of the amount required to satisfy the secured
obligation and to pay the secured creditor's enforcement
expenses as reasonably estimated;
A statement of the rights provided by this Title to
the recipient of the enforcement form; and
A statement of the nature of the remedies provided by
this Title that the secured creditor intends to exercise.
case of default on the secured obligation, the secured
creditor shall require the payment from the secured
of this requirement shall be issued in a notarized or
judicial form, at the creditor’s option, to the debtor’s
address as indicated in the registration form.
In the requirement or notification process, the
debtor shall be given a copy of the enforcement form
filed with the registry.
shall have a period of three days from the day following
receipt of the enforcement form to object by giving
evidence to the Judge or the Notary involved that full
payment of the amount and its accessories has been made. No exception or defense, other than full payment, will be admitted.
57. In case of a non-possessory security interest over corporeal
property, once the period indicated in the previous
Article has elapsed, the secured creditor may ask the
Judge to issue an order of repossession, which shall
be enforced forthwith, without granting a hearing to
the debtor. In
accordance with a Judge’s order the collateral shall
be delivered to the secured creditor, or to a third
party at the request of the secured creditor.
Any exception or defense that the debtor wishes
to make against such order, other than that indicated
in the previous Article, shall be initiated through
an independent judicial action, as provided for in local
procedural law; such independent judicial action shall
not prevent the secured creditor from exercising its
enforcement rights against the collateral.
58. At any time before the secured creditor disposes of the collateral,
the secured debtor, as well as any other interested
person, has the right to terminate the enforcement proceedings
Paying the full amount owed to the secured creditor,
as well as the reasonable enforcement costs of the secured
If the secured obligations are installment obligations,
reinstating the security contract by paying the amounts
actually in arrears together with the secured creditor’s
reasonable enforcement expenses and remedying any other
act of default.
With respect to a possessory security interest, or with
respect to a non-possessory security interest in incorporeal
property, or with respect to a non-possessory security
interest in corporeal property after repossession:
If the collateral is movable property that is customarily
priced in the market in the State where enforcement
takes place, it may be sold directly by the secured
creditor at a price in accord with such market.
If the collateral consists of receivables, the secured
creditor has the right to collect or enforce the receivables
against the third person obligated on the receivable
in accordance with the provisions of Title III of this
If the collateral consists of stocks, bonds or similar
types of property, the secured creditor has the right
to exercise the secured debtor’s rights in relation
to the collateral, including redemption rights, rights
to draw, voting rights and rights to collect dividends
or other revenues derived from the collateral.
The collateral may be sold privately, or taken in payment
against the debt, provided that it has been previously
appraised by a single qualified appraiser designated
by the secured creditor, for the price of the appraisal.
The secured creditor may elect to sell the collateral
in a public auction previously announced in two daily
publications of major circulation, at least five days
before the sale, without minimum bid, to the highest
60. The proceeds of the sale or auction will be applied in the
The costs of enforcement, storage, repair, insurance,
preservation, sale or auction, and any other reasonable
cost incurred by the creditor;
The payment of any outstanding taxes owing by the secured
debtor if they are secured by a lien on the collateral
provided by operation of law;
The payment of the outstanding amount of the secured
The payment of secured obligations stemming from security
interests with a secondary priority; and
Any remainder will be returned to the debtor.
If the outstanding loan
amount owed by the secured debtor exceeds the proceeds
of the disposition of the collateral, the secured creditor
shall have the right to demand payment for any deficiency
from the debtor of the obligation.
61. The possible appeals of any judicial decision mentioned in
this Title will not have suspensive effect.
62. At any time, before or during the enforcement proceeding, the
debtor may reach an agreement with the creditor on terms
other than those previously established, either for
the delivery of the goods, the terms of the sale or
auction, or any other matter, provided that said agreement
does not affect other secured creditors or buyers in
the ordinary course of business.
In any event,
the debtor retains
the right to claim damages against a creditor that abuses
its enforcement rights.
Article 64. Any subsequent secured creditor may subrogate the rights of
a preceding secured creditor by paying the secured obligation
of the secured debtor.
secured debtor’s right to sell or transfer collateral
in the ordinary course of business operations is suspended
from the moment the secured debtor receives notice of
the commencement of enforcement proceedings against
the secured debtor, pursuant to the enforcement rules
of this Law. This
suspension will continue until the completion of the
enforcement proceedings, unless the secured creditor
Article 66. Secured creditors are entitled to exercise their enforcement
rights and to assume control of the collateral in the
order of their priority rank.
A person who
purchases the collateral at a sale or auction, takes
the property subject to the real rights with which it
is encumbered, with the exception of the security interest
of the creditor who sold the property and the security
interests or claims which were subordinate to such security
arising out of the interpretation and fulfillment of
a security interest may be submitted to arbitration
by the parties, acting by mutual agreement and according
to the legislation applicable in this State.
CONFLICT OF LAWS AND
SCOPE OF APPLICATION
Article 69. In cases where a security interest has contacts with more than
one State, the law of the State in which the collateral
is located at the time the security interest is created
shall govern issues relating to the validity, publicity
and priority of: I. A security interest in corporeal movable property
other than movable property of the kind referred to
in the next Article; and
II. A possessory security interest in incorporeal movable
If the collateral is moved
to a different State than that in which the security
interest was previously publicized, the law of the State
to which the collateral has been moved governs issues
relating to the publicity and priority of the security
interest as against unsecured creditors and third persons
who acquire rights in the collateral after the relocation.
However, the priority of the security interest
acquired under the law of the previous location of the
collateral is preserved if the security interest is
publicized in accordance with the law of the State of
the new location within 90 days after the relocation
of the property.
Article 70. In cases where a security interest has contacts with more than
one State, the law of the State in which the secured
debtor is located when the security interest is created
governs issues relating to the validity, publicity and
I. A non-possessory security interest in incorporeal
II. A security interest in movable corporeal property
if the property is held by the secured debtor as equipment
for use in the secured debtor's business, or as inventory
If the secured debtor
changes its location to a different State than that
in which the security interest was previously publicized,
the law of the State of the secured debtor’s new location
governs issues relating to the publicity and priority
of the security interest as against unsecured creditors
and third persons who acquire rights in the collateral
after the relocation.
However, the priority of the security interest
acquired under the law of the previous location of the
secured debtor is preserved if the security interest
is publicized in accordance with the law of the State
of the secured debtor’s new location within 90 days
after the relocation of the debtor.
Article 71. The priority of a non-possessory security interest in negotiable
incorporeal property as against third persons that acquire
a possessory interest in the property is governed by
the law of the State where the collateral is located
when the possessory interest is acquired.
Article 72. For the purposes of applying Article 70, a secured debtor is
considered located in the State where the secured debtor
maintains the central administration of its business.
secured debtor does not operate a business or does not
have a place of business, the secured debtor is
considered located in the State of its habitual