First Principles of Business Law

5. Using property as a security

5.3.1. Chattel securities

We now turn to consider how property rights in a debtor's chattels can be used to guarantee that a creditor will be paid what is due.

Suppose that Albert needs to purchase a large amount of consumable supplies (wood and various fittings) from Sunil, a supplier of such materials.

The price of these things altogether will be $100,000, with payment due 90 days after delivery.

Albert will have already used up some of these supplies, and sold the things made with them, by the time payment is due.

Sunil has asked Albert what security he can provide in case payment of what he owes is not made when due.

With these facts in mind, consider the questions on the next pages.