Problem
Jim Gibbs purchased a used truck and delivered it to Vernie King for needed repairs. After one month, Gibbs was notified that the truck was repaired. The total cost of the repairs was more than Gibbs could afford. King agreed to lend Gibbs $1, 250 as a partial payment for the repairs. Gibbs orally agreed to give King a security interest in the truck in return for the loan. However, no written security agreement was prepared or signed. Gibbs took possession of the truck and later defaulted on his repayment of the $1, 250. King sought to repossess the truck as a creditor. Gibbs argued that King did not have a security in this truck. Can a creditor be interest secured on the bases of an oral security agreement if the debtor has possession of the collateral? Explain.