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First Principles of Business Law |
| Property law |
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5. Using property as a security |
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5.3.3. Securities involving consumable chattels |
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Apart from the things he wants to buy from Sunil, Albert already has stocks of various materials in his factory. He uses these on a continuing basis to make new kitchen units but replaces them as necessary so that, at any given time, his stocks of materials are worth about $100,000. Considering that Albert continuously uses and then replaces these stocks, could they be effectively used to provide security for the payment of the money he owes Sunil? |
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(a) Yes, such assets can be used to provide an effective security despite the fact that the materials are continuously used up and then replaced. (b) No, because the materials are continuously used up and then replaced, such assets cannot be used to provide an effective security. |
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