Question #2: Patrick Henry owns a prized Thoroughbred horse named Wind Walker. I
ID: 458700 • Letter: Q
Question
Question #2: Patrick Henry owns a prized Thoroughbred horse named Wind Walker. In need of working capital, he borrowed $10,000.00 from Gracie Allen, who took possession of Wind Walker as security for the loan. The parties to this transaction never signed any written agreement or document detailing the terms of this loan. In the absence of any written agreement, does Gracie have a secured interest in Wild Walker? Discuss in detail why or why not. If you decide that Gracie does have a security interest in Wind Walker, is it a perfected security interest? Why or why not? What should the parties have done to better protect their interests in this transaction? Describe and explain your answers in depth.
Explanation / Answer
A secuirity interest is a type of property created by agreement or operation of law over assets to secure the performance of obligation, usually the payment of debt. It gives the beneficiary of security interest certain preferential rights in disposition of secured assets.
In patrick henry Case, there is absence of written agreement. The word is 'agreement'. The agreements need not be in written, even verbal is also considered to be agreement. But an agreement does not have legal enforceability. Only contracts having enforceability at law. So whether written or Unwritten is doesn't matter. The matter is whether it is a contract or not ?
As per the law a secured creditor takes a security interest to enforce its rights against collateral in case of debtor defaults on obligation, If the debtor goes on bankrupt, a secured creditor takes precedence over unsecured creditors in the distribution.
In this case study nothing mentioned about the default payments.
Gracie can claim the security interest as Patrick didn't failed in repayments.