Commerce Bank (Bank) loaned Bubba $20,000 to remodel his kitchen and Bubba granted Bank a security interest in his car. The Bank employee responsible for handling the Bubba’s loan was tired from cooking a huge Thanksgiving dinner the prior day, and he forgot to apply to have the Bank’s security interest noted on the car’s certificate of title. Bubba’s monthly payments on the loan were due on the 1st of every month and the loan agreement provided that, in the event of default, the Bank could accelerate the balance of Bubba’s loan payments.
For the first three months after the loan was made, Bubba made timely payments. However, for the next six months, Bubba did not make his payments until more than 10 days after the due date. Bank accepted these late payments in silence. It is now the 2nd of the current month and Bubba hasn’t paid his monthly payment yet. Bank wants to repossess Bubba’s car unless Bubba can pay the entire remaining balance due on the loan.
1. Bank cannot repossess Bubba’s car because it never perfected its security interest.
2. Bank waived its right to payment because of its course of performance in accepting late payments.
3. Bank waived its ability to demand strict compliance with the terms of its loan contract, and cannot repossess the car without first giving Bubba notice of its intention to insist upon strict compliance with the loan contract in the future.
4. Bank can never accelerate payments on loans.