Open AccessTurning Lead into Gold: The Uncertain Alchemy of All Obligations Clauses
Author(s) -
Roderick J. Wood
Publication year - 2004
Publication title -
alberta law review
Language(s) - English
Resource type - Journals
eISSN - 1925-8356
pISSN - 0002-4821
DOI - 10.29173/alr1305
Subject(s) - debtor , bankruptcy , obligation , law and economics , business , order (exchange) , law , property (philosophy) , unjust enrichment , alchemy , economics , political science , creditor , restitution , finance , debt , philosophy , epistemology , theology
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 two analogous transactions and explains why these do not create similar problems.