Suggested Time to Complete: 36 minutes
Jan’s Restaurant – Difficult
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This question should be answered using three IRAC structures. Please include all relevant key words in your answer.
Jan decides to open a restaurant and needs to take out three loans. First, Jan takes out a loan of $10,000 from Lender A. She signs a written contract in which she agrees to put up her grand piano as collateral for the loan, but is still waiting to receive any money or other response from Lender A. Second, Jan takes out a loan of $40,000 from Lender B. She signs a written contract in which she agrees to put up “collateral” in exchange for the loan. The next day, Jan informs Lender B over a phone call that she is using her sailboat, which is worth $40,000, as the collateral. Lender B agrees over the phone and sends the money to Jan. Third, Jan takes out a loan of $15,000 from Lender C. She signs a written contract in which she agrees to put up her work car, which is owned by her employer, as collateral. Lender C gives the money to Jan. A few months later, Jan’s restaurant fails. She stops making her required payments on all three loans. Can the lenders take possession of Jan’s grand piano, sailboat, or work car?
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To answer this question, you should think about and discuss what is necessary for a security interest to be enforceable, and apply those rules to the grand piano, the sailboat, and the work car.
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