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Secured & Unsecured Debt and Contract Obligations

The law firm is in the process of purchasing a number of new company desktop computers, printers, notebook computers and servers. Your firm is planning to borrow money from a bank to complete the transaction. The IT manager who is in charge of the transaction does not understand what type of contract the company is entering into with the bank, or what most of the legal terminology means. Your supervising partner wants you to prepare an outline to assist the IT Manager.

Specifically, your supervising partner wants you to explain secured and unsecured debt and what occurs if the firm defaults on the agreements to purchase the technology equipment.

Solution Preview

As this is a law firm, an established business, the selection of a secured or unsecured loan would be based on the size of the loan. In essences, a secured loan is a loan that is secured or held by something, typically property. For example, a mortgage and a car loan would be secured loans. The mortgage is secured by the home and land and the car loan is secured by the car. So if you default on either of those, ...

Solution Summary

Using the case of a law firm, this solution provides the learner with an understanding of the differences between secured and usecured debt along with the associated contractual obligations.