Buyers of Collateral

Question 1

When does a security interest survive a sale?

Answer 1

A security interest always survives a sale unless an exception is met

Question 2

When will a security interest not survive a sale of collateral?

Answer 2

1. the secured party authorized the sale free of the security interest
2. the purchaser is a buyer in the ordinary course of business
3. consumer-to-consumer transactions

Question 3

What is a buyer in the ordinary course of business?

Answer 3

A buyer in the ordinary course of business is a person who:
1. buys in good faith
2. without knowledge that the sale violates the secured party’s rights in the goods
3. in the ordinary course of business
4. from a person in the business of selling those goods

Question 4

What are consumer-to-consumer transactions?

Answer 4

Consumer-to-consumer transactions are applicable to goods bought for personal, family or household use by someone who uses the goods for that purpose

Question 5

When does a buyer take free of a security interest created by the seller in a consumer-to-consumer transaction?

Answer 5

A buyer takes free of a security interest it:
1. buys for value
2. without knowledge of the security interest
3. before a financing statement is filed

Question 6

When do buyers of chattel paper have priority over a security interest in proceeds of inventory?

Answer 6

A buyer of chattel paper will have priority over a security interest in the proceeds of inventory if:
1. bought in good faith and in the ordinary course of business
2. buyer gave value and took possession or control of the chattel paper
3. the chattel paper does not indicate that its been assigned to another party