On February 1, Futuristic Electronics Sells and Delivers $10,000 Worth

question 81

Multiple Choice

On February 1, Futuristic Electronics sells and delivers $10,000 worth of computer parts to Martin Business Systems to be paid for on March 1. On February 2, Martin's ceiling leaks requiring immediate repair worth $10,000. Lewis Kuhn, the contractor, refuses to do this work without security, so Martin gives Kuhn a chattel mortgage on the computer parts to get the work done. Unfortunately, Martin goes bankrupt and does not pay Futuristic. Futuristic wants to take the computer parts back, while Kuhn wants to seize them under his chattel mortgage. Which of the following is TRUE?

• A)The chattel mortgage is not enforceable because Martin has not paid for the parts and therefore Futuristic still owns them.
• B)The chattel mortgage is enforceable because ownership (title)passed on delivery of the computer parts to Martin's premises.
• C)The chattel mortgage is not enforceable as it is the wrong security instrument - a general security agreement should have been used.
• D)The chattel mortgage is not enforceable because it was taken subsequent to Futuristic's security interest in the property - i.e. the earlier security takes priority.
• E)The chattel mortgage is not enforceable because Futuristic has an automatic purchase money security interest in the equipment.

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Definitions:

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