Question

a) Briefly explain what a security over physical chattels is and give two examples that describe situations of where it could be applied

b) You are a consumer business consultant with TEC Bank. You are approached by a young person who requires a loan to purchase a vehicle that is presently available at a very good discounted price. The person is a carpenter apprentice employed for two years with a well established company in the building industry. He will become 18 years old within the next two months and indicates that both his parents are willing to act as guarantors for his loan. Will it be a good transaction for the bank if the loan is granted to the young person based on the guarantees of the parents? Please provide reasons for your answer

Answer 1

1. The common law definition of chattel is any property that is not land or physical items belonging to that land. Today, chattel is defined as any item of personal property and that can be moved. Examples of chattel, as defined in common law, include furniture, clothes hanging in the closet, and cattle on a farm. When someone moves out of his home, the items he takes with him are chattel. To explore this concept, consider the following chattel definition

1. Items of personal property that are moveable
2. Physical property other than land, buildings, or things annexed or attached to the land
3. A slave

Chattel refers to any physical property that can be moved, as the property is neither a parcel of land, nor an item that is attached to a parcel of land, such as a home, or a tree that grows in the yard. Chattel is anything that a person might take with him if he needs to move to another location, like toiletries, appliances, or furniture (“personal property”). The word “chattel” comes from the Middle English word for “cattle,” which, during feudal times, were the most valuable property someone could own, aside from his land.

Chattel mortgages are loans that are used to buy cars and other items, such as commercial equipment. A chattel mortgage consists of the chattel (the car) and the mortgage (the loan that must be paid back). When the car is purchased, it becomes the property of either the person or company purchasing it.

When a chattel mortgage is taken out for a car or equipment purchase, the lender uses the item purchased as collateral, helping to ensure that the lender can recover its money, even if the buyer defaults on the loan. If, for some reason, the purchaser fails to make the payments on the chattel mortgage, the lender has the right to take the car or equipment back, or repossess it. This is why a chattel mortgage is considered a “mortgage,” because just like a house, the purchaser can lose his property if he fails to pay.

2. I will allow him to buy a vehicle & provide loan to that boy because the same is also covered under the guarantee of their parents who is case of failer will be liable for payment and the major thing is that the loan is against vehicle which means the new vehicle which is going to purchase will be mortgagee to the bank against loan which will secure the loan amount so here in this case two security will be provided one is mortgagee of vehicle & another is guarantee of their parents