Business Law 2 Group Problem

BULGL 319

Chapter 43 Group Problems

1. On May 19, 2015, Richard Silch purchased a camcorder at Sears by charging it to his Sears charge account. Printed on the face of the sales ticket given to Silch at that time was the following:

This credit purchase is subject to the terms of my Sears Charge Agreement which is incorporated herein by reference and identified by the above account number. I grant Sears a security interest or lien in this merchandise, until paid in full.

Silch’s signature appeared immediately below that language on the sales ticket. The ticket also contained the brand name of the camcorder and a serial number for the camcorder.

Silch subsequently filed a Chapter 7 Bankruptcy proceeding, and Sears sought to recover the camcorder from Silch, claiming that it had a valid security interest in the camcorder. Silch contended that the sales ticket did not constitute a valid security agreement.

What is your decision? Did Sears have a valid security agreement (Attachment) with regard to the camcorder? (Do an IRAD analysis here.)

1. Grimes purchased a new Dodge car from Hornish Motors, a franchised Dodge dealer. The sale was made in the ordinary course of Hornish Motors’ business. Grimes paid Hornish Motors the purchase price of the car in cash at the time of the sale, and received a clear Title to the vehicle.

Hornish Motors had borrowed money from 1st Bank and had given it a perfected security interest in its inventory, including the car that Grimes bought. After Grimes purchased the car, Hornish Motors defaulted on its loan to 1st Bank, and the bank then tried to recover the car from Grimes.

Was the car Grimes bought from Hornish Motors still subject to 1st Bank’s security interest? Explain your answer in the IRAD format.

1. Benson traded in her old car on a new Mazda, and financed the balance of $15,000 through Mazda American Credit, which took a security interest in the vehicle by placing its name on the vehicle’s Certificate of Title.

Several months later the car was involved in an accident; Benson took it to the AutoFine repair shop, which did $6500 worth of repairs on the vehicle.

Unfortunately for Benson, she had allowed her insurance coverage to lapse, and was unable to pay the repair bill. AutoFine claimed a Mechanics lien against the car, and put the car up for sale in a commercially reasonable manner.

At sale, the car was sold for $10,000. How is that $10,000 divided up between Mazda American Credit (there is still a balance of $13,500 owed to Mazda) and AutoFine?

1. Norma Wade purchased a Ford F-10 pickup and gave Ford Motor Credit a security interest in it to secure her payment of the $35,000 purchase price. When Wade fell behind on her monthly payments, Ford Motor Credit sent an employee of the “Repo” Unit” to repossess the car.

The employee located the car in Wade’s driveway, unlocked the door, and got in. He then heard a noise, looked up, and saw Norma Wade standing in her doorway. She screamed at him to get out of the truck and explain what he was doing. When the employee told Wade that he was there to repossess the truck, she screamed that she was current in her payments, that he had no right to take the truck, and that he had better leave before she would “get my gun, which I ain’t afraid to use!”

Rather than waiting around to see what happened, the employee started the truck, slammed it into reverse, and, with tires squealing and smoking, drove away.

Wade subsequently brought a lawsuit against Ford Credit seeking actual and punitive damages, claiming that the truck had been wrongfully repossessed.

What do think – does Ford have anything to worry about here?

Explain your answer.