Buyer Taking Free From Security Interest Flashcards
Will buyer take free from security interest?
Depends on whether secured lender or seller perfected interest AND what status buyer has under Art. 9
General Rule
If collateral is sold without secured party’s consent.
buyer in good faith will take COLLATERAL FREE FROM UNPERFECTED security interest in collateral
AND
Buyer in good faith will take COLLATERAL SUBJECT TO PERFECTED security interest.
Exception to the General Rule
If BFP bought in the gap between possession and filing BUYER will lose to a secured party who later files within 20 days.
Buyer In Ordinary Course of Business
Only apply when secured party has an interest in debtor’s inventory
Takes free from nonpossessory perfected interest unless knows of interest
Buyer in Ordinary Course of SELLER’s Business
The sale of consumer good or equipment NOT inventory will not defeat secured party’s interest, because seller is not in the business of selling collateral of that kind.
Extraordinary Sales
Not sales to customers in seller’s ordinary course of business but rather DESPERATION SALES/ CREDITOR SALES TO SATISFY DEBT
Buyer of Farm Products
Art. 9 provides that buyers of farm products in ordinary course of business do not take free from security interest.
however, buyer may take free under federal law.
Garage Sale Buyer
If goods are consumer goods in both the buyer’s and seller’s hand, a good faith buyer will take free from UNFILED (AUTOMATICALLY PERFECTED) security interest.
Four Elements for Garage Sale Buyer
goods are consumer goods in seller’s AND buyer’s hands; Buyer is without notice of security interest AND security interest WAS NOT PERFECTED BY FILING.
BIOCOB Elements
Good faith, without knowledge that sale violates rights of another person in goods,AND in ordinary course of business.
