Question

Read the following hypothetical and prepare a 500 word minimum written response to the questions. Your response must include the relevant legal principles that are the basis for your answer:

Jerry Eller purchases a laptop computer for $995 from the local Preferable Purchase electronics store. He charges the $995 amount on Preferable Purchase “instant credit,” and the store has guaranteed him no finance charges if he pays the $995 amount within one year from the date of purchase.

Jerry purchased the computer for use in his business, Eller’s Civil War Battlefield Tours, Inc. On any given week, Eller uses the laptop approximately 20 hours for the purposes of Eller’s Civil War Battlefield Tours, Inc., and 10 hours to play the onlinevideo game “Gloom” (his favorite hobby.) One year passes, and Jerry does not pay any of the credit balance. After repeated attempts by Preferable Purchase’s Credit Department to collect on the debt, Jerry still refuses to pay.

Does Preferable Purchase have a perfected security interest in the laptop computer? If not, why not? If so, what advantage(s) does that afford Preferable Purchase?

Answer 1

Does Preferable Purchase have a perfected security interest in the laptop computer? If not, why not? If so, what advantage(s) does that afford Preferable Purchase?

Yes, Preferable Purchase (referred to as "PP" in the remainder of the answer) has:

1. First of all created a"Purchase Money" Security Interest as the customer Jerry has bought the good on credit from PP. The customer has thus used the borrowed funds to buy the good, hence the security is formed in favor of PP.
2. Perfected the security interest through 'Automatic Perfection" that takes place when a retailer sells the good to a consumer.

Hence, Preferable Purchase have a perfected security interest in the laptop computer.

PP is in advantageous position because it can sue Jerry for the entire outstanding amount. It can bring Jerry in the court that may order the complete recovery of money from Jerry.