Adam Monarch is quite well off. He is selling one of his unincorporated farms and all its equipment to young Carl Gardner. Carl has very little cash but lots of potential for being a good farmer. Adam is willing to finance the sale under the easiest of terms, yet he wants to retain the best security possible. For security, Adam will accept a combination first mortgage and
A) chattel mortgage.
B) second mortgage.
C) pledging of equipment.
D) conditional sale contract.
E) floating charges.

Question

Quizplus · Accepted Answer

A chattel mortgage allows Adam to retain a security interest in the equipment being sold to Carl. This ensures that if Carl defaults on the loan, Adam can take possession of the equipment and sell it to recover his losses. A first mortgage on the land also gives Adam a priority claim on the property if there are any other creditors. This combination of security measures provides Adam with the best protection for his investment.

Adam Monarch Is Quite Well Off