Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Tutoring
  • Home
  • Law, Transactions, & Risk Management
  • Commercial Law: Contract, Payments, Security Interests, & Bankruptcy

Priority of Consumers Purchasing from Consumers

What if a Consumer Purchases Goods that are Subject to a Security Interst?

Written by Jason Gordon

Updated at December 22nd, 2020

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Protections for Consumers Buying Collateral from Other Consumers

Buyer in ordinary course protection does not apply to purchases by consumers from consumers (not sellers of goods of the kind).  1-201(9). As such, 9-315(a)(1) states that the security interest continues and 9-320(a) says the buyer takes subject to the security interest.

Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY

9-320(b) may offer protection to the buyer if the security interest is not perfected or automatically perfected under 9-309(a). Under 9-320(b) the buyer takes free of the perfected security interest under the following conditions:

  • The goods are consumer goods in the hands of the seller;
  • The buyer buys without knowledge of the security interest;
  • The buyer buys for value;
  • The buyer buys for his own personal, family, or household purposes; and
  • The secured party has not filed a financing statement covering the goods prior to the purchase.

This is a very limited protection when the secured party does not perfect or relies on the 9-309(a) security interest. Since most sellers of consumer goods depend on 9-309 automatic perfection of a security interest, this can be an effective protection.

Was this article helpful?

Yes
No

Related Articles

  • Chapter 12 Bankruptcy - Explained
  • Priority of Security Interest in Fixtures - Explained
  • Shelter Principle and Negotiable Instruments - Explained
  • Types of Commercial Paper - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand