Aubry purchased some appliances from Gateway Appliances on credit, giving Gatewa

Question

Aubry purchased some appliances from Gateway Appliances on credit, giving Gateway a security interest in the appliances. The appliances were for Aubry's household use. Aubry then had a garage sale and sold the appliances to Tam. Tam bought the appliances for her rental property. Aubry left town, owing money on the appliances. If Gateway can trace the appliances to Tam, can Gateway repossess the appliances? A. No. B. Yes. C. Only if Gateway Appliances contacts the World Trade Organization. D. Only if Aubrey files bankruptcy.

Explanation / Answer

B Yes

Since the appliances were purchased on credit with a security interest given to Gateway, they had a preferential right over the property in the event of sale. This right allows the lender to repossess the property in case of a default. The lender holds a superior position even as compared to Tam who bought the appliances in good faith and so they can be repossessed.

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