What is a Security Agreement?

A Security Agreement is a legal document that establishes a lien on goods or personal property to secure payment or performance of an obligation, typically a loan or credit. This agreement enables a lender to have a claim over specific assets of the borrower in the event of default. The security interest created by the agreement essentially secures the lender's right to repossess or foreclose on the collateral if the borrower fails to meet their payment obligations.

In the context of financing, the Security Agreement provides the necessary assurance to the lender that they have a recourse to reclaim their funds by seizing the collateral, which could be inventory, equipment, or other personal property. This is particularly relevant in commercial transactions and is often a crucial part of the lending process.

The other options do not accurately describe a Security Agreement. A contract securing rights to a trademark relates to intellectual property rights, while an agreement to pay an outstanding debt describes a general repayment obligation without specifying collateral. A waiver of rights in collateral agreements would imply relinquishing claims rather than establishing security interests. Therefore, the definition involving a lien on goods or personal property directly corresponds to the primary function of a Security Agreement in securing loans or performance through specific collateral.