While shopping at Arcade World, George Costanza noticed that they had his favorite arcade game, Frogger. George recalled that he was once exceptional at the game and decided that he had to have it. Unfortunately, George had just lost his job and didn’t have enough cash to buy the $1,000 machine. He noticed a sign that said, “Leasing options available!” and asked the store manager about his options. The manager told him that he could lease the machine for $100 per month, with the option to buy the machine at the end of twelve months for $1. George was sure that he wanted to keep the game so he signed the lease agreement, despite a provision which prohibited cancellation prior to the end of the twelve month term.

George made his first eleven $100 payments on time. In the twelfth month, he was in the hospital when his payment was due, so he did not make it on time. While he was still in the hospital, Arcade World sent Newman, a repo man, over to George’s apartment. Newman found out that George was in the hospital and told the landlord that he was George’s cousin and needed to get into his apartment to get some things for George. The landlord believed Newman’s lie and let him into the apartment. When George returned from the hospital, he found his arcade game missing.

Did Arcade World violate Article 9?

1) No. George leased the arcade game from Arcade World and leases are not subject to the provisions of Article 9.

2) No. Arcade World had a security interest in the arcade game and was entitled to take whatever actions were necessary to repossess the game when George missed his payment.

3) Yes. Arcade World called the agreement a lease, when it actually was a security agreement.

4) Yes. The repossession of the arcade game was a breach of peace.