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Borrower has two secured obligations to Bank. The first is a $75,000 demand note secured by accounts. The second is a five-year term loan secured by equipment. The term-loan agreement provides that default occurs if Borrower misses a scheduled payment or if Borrower defaults on any other debt owed to Bank. Borrower is current on the term loan. Bank becomes concerned about Borrower's declining sales and sends a letter demanding immediate payment of the demand note by Friday at 5 p.m. Borrower does not pay the demand note by the deadline.
On Monday, Bank declares both loans in default, accelerates the term loan, and states that it may use all Article 9 rights after default. Borrower argues that Bank manufactured a default on the demand note to trigger the cross-default clause and that the term loan was current. Bank argues that a demand note is payable on demand and that nonpayment after demand triggered the cross-default clause.
Discuss whether Borrower defaulted on the demand note and whether that default triggered a default under the term loan.