Does the 1-800-GOT-JUNK? General Security Agreement specify any requirements for the 'form satisfactory' to the Secured Party regarding notes, chattel paper, or other property?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
3.1
The Debtor shall have no right to sell, lease or dispose of any of the Collateral except for a sale in the ordinary course of business upon customary sales terms for value received and then only upon the express condition that on or before delivery to a third party the Debtor shall secure full settlement of the entire purchase price for the Collateral so sold in cash, notes, chattel paper or other property in form satisfactory to the Secured Party.
Until the Debtor shall have made settlement with the Secured Party of the full amount due to the Secured Party with respect to all such Collateral sold or disposed of by the Debtor, the Debtor shall aggregate such cash, notes, chattel paper or other property and hold the same in trust for the Secured Party and the Secured Party shall have a security interest therein.
The Debtor shall be entitled to transfer such notes or chattel paper free of such trust if at or prior to the time of such transfer the payment due from the Debtor to the Secured Party shall be assured to the satisfaction of the Secured Party.
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
According to 1-800-GOT-JUNK?'s 2025 Franchise Disclosure Document, the General Security Agreement addresses the form of payment that is acceptable to the Secured Party (1-800-GOT-JUNK? LLC) when a franchisee disposes of collateral in the ordinary course of business. Specifically, if a franchisee sells, leases, or disposes of any collateral, they must secure full settlement of the purchase price in cash, notes, chattel paper, or other property, and this settlement must be in a form that is satisfactory to 1-800-GOT-JUNK?.
This means that if a 1-800-GOT-JUNK? franchisee sells an item covered by the security agreement, the method of payment they accept must meet 1-800-GOT-JUNK?'s approval. The franchisee is obligated to hold any cash, notes, chattel paper, or other property received from such sales in trust for 1-800-GOT-JUNK? until they have settled the full amount due to 1-800-GOT-JUNK? regarding the collateral that was sold or disposed of.
The franchisee can transfer notes or chattel paper free of this trust if, before or at the time of transfer, the payment due to 1-800-GOT-JUNK? is assured to 1-800-GOT-JUNK?'s satisfaction. This provision protects 1-800-GOT-JUNK?'s security interest in the collateral and ensures that the franchisor receives the appropriate payment when collateral is sold by the franchisee.