The Bank of Fashion has a security interest in Dolce and Gabbana’s inventory. In light of their recent controversial ads, however, Dolce and Gabbana have been losing a steady stream of customers, as well as celebrity endorsements and contracts, thus resulting in the fashion duo being unable to make the minimum monthly payment due on its line of credit. After three months of missed payments, the Bank sent notice to Dolce and Gabbana, informing them that the entire balance of their line of credit was immediately due and payable, and that unless they repaid the total debt ($350,000) within one month, the Bank of Fashion would repossess Dolce and Gabbana's inventory.
Horrified, Dolce and Gabbana swallowed their pride and asked their uncle Louis Vuitton for help. Uncle Vuitton was able to provide Dolce and Gabbana with enough cash to make the three monthly payments they had missed, which they did. Which statement is most clearly correct?
1. Bank may reject Dolce and Gabbana’s payments and repossess the inventory.
2. Bank will accept Dolce and Gabbana’s payments and proceed as if this never happened (still honoring the loan contract), as long as the Bank is guaranteed front row seats to next year’s Fashion Week in Paris.
3. Bank may accept Dolce and Gabbana’s payments, apply them to the accelerated debt, and still repossess the inventory.
4. Bank cannot demand full payment of the line of credit without first giving Dolce and Gabbana notice and a right to cure.