Priority: Secured Parties vs. Buyers

Question 1

Buyer vs. Perfected SI

Answer 1

Unless the secured party authorizes the sale free and clear of its SI, a BUYER TAKES SUBJECT TO SI

Exceptions:

(1) Buyer in the Ordinary Course of Business
(2) Garage Sale Exception

Question 2

Exception: Buyer in the Ordinary Course of Business (BIOCB)

Answer 2

BIOCB takes free of SI if:

(1) Buys GOODS;
(2) In ORDINARY COURSE of merchant’s business;
(3) in GOOD FAITH; and
(4) WITHOUT KNOWLEDGE that sale violates another’s rights in the goods

Question 3

Exception: Garage Sale Exception

Answer 3

Buyer of consumer goods will take free of SI if:

(1) Buys CONSUMER GOODS for value;
(2) For own PERSONAL, FAMILY, OR HOUSEHOLD USE;
(3) From a CONSUMER SELLER; and
(4) WITHOUT KNOWLEDGE of the SI

Question 4

Buyer vs. Unperfected SI

Answer 4

Unless the secured party authorizes the sale free and clear of its SI, a BUYER TAKES SUBJECT TO SI

Question 5

Exception to Buyer vs. Unperfected SI

Answer 5

Buyer will take free of unperfected SI if buyer:

(1) Gives VALUE;
(2) Receives DELIVERY of the collateral; and
(3) WITHOUT KNOWLEDGE of preexisting interest