Came across this hypothetical problem in a book but I don't really have a clue as to what the answer is. Please lend some assistance if you think you know the answer. The answer can only be ONE sentence in length.
Assume Bank's security agreement with Joe presently states:
"I, Joe, grant Bank a security interest in all my current and after acquired inventory."
Joe operates a furniture store. If customers cannot find what they want on the showroom floor, they can order items through catalogues Joe keeps on the premises. The customer will place the order with Joe. Joe will then purchase the item from a supplier.
On April 1, Joe calls A Corp, a local furniture maker, to order a custom-made sofa. A Corp accepts the order on the phone. An hour later, A Corp e-mails a confirmation of their contract stating all the specifications (size, dimensions, style, materials, cloth, etc.). After receiving A Corp's e-mail confirmation, Joe sends A Corp a check for the purchase price and a copy of the confirmation. A Corp receives the check and confirmation copy on April 4.
Please draft additional language for Bank's security agreement that would give Bank an enforceable security interest as of that time, that is, as of April 4, after A Corp has received Joe's check and confirmation copy.
That's the whole hypo. Basically, how do we include in Bank's security agreement this situation where Joe sends a check but doesn't receive any inventory right away. As of April 4th, Joe has paid for an expensive piece of inventory, but it is not yet in his possession. In fact, the piece of furniture probably hasn't even been built yet. But we somehow want Bank to have an enforceable security interest in inventory that Joe does not technically have yet.
Should we liken this situation to a car dealership type of deal? Is it critical that customers can buy from catalogues on Joe's premises?
Thanks in advance for any insight. I'll probably post this in one other forum on this site as well so I apologize for the repeat.
Assume Bank's security agreement with Joe presently states:
"I, Joe, grant Bank a security interest in all my current and after acquired inventory."
Joe operates a furniture store. If customers cannot find what they want on the showroom floor, they can order items through catalogues Joe keeps on the premises. The customer will place the order with Joe. Joe will then purchase the item from a supplier.
On April 1, Joe calls A Corp, a local furniture maker, to order a custom-made sofa. A Corp accepts the order on the phone. An hour later, A Corp e-mails a confirmation of their contract stating all the specifications (size, dimensions, style, materials, cloth, etc.). After receiving A Corp's e-mail confirmation, Joe sends A Corp a check for the purchase price and a copy of the confirmation. A Corp receives the check and confirmation copy on April 4.
Please draft additional language for Bank's security agreement that would give Bank an enforceable security interest as of that time, that is, as of April 4, after A Corp has received Joe's check and confirmation copy.
That's the whole hypo. Basically, how do we include in Bank's security agreement this situation where Joe sends a check but doesn't receive any inventory right away. As of April 4th, Joe has paid for an expensive piece of inventory, but it is not yet in his possession. In fact, the piece of furniture probably hasn't even been built yet. But we somehow want Bank to have an enforceable security interest in inventory that Joe does not technically have yet.
Should we liken this situation to a car dealership type of deal? Is it critical that customers can buy from catalogues on Joe's premises?
Thanks in advance for any insight. I'll probably post this in one other forum on this site as well so I apologize for the repeat.