Priority of a Buyer in the Ordinary Course of Business

Oct 13, 2025 by talynt.org 97 views

A Buyer in the Ordinary Course of Business: Understanding Priority in Goods

In the realm of commercial law, the concept of priority in goods is crucial for businesses and individuals involved in the sale and purchase of goods. The Uniform Commercial Code (UCC) governs the sale of goods in the United States, and one of its key provisions is the priority of buyers in the ordinary course of business. In this article, we will delve into the concept of a buyer in the ordinary course of business and how it affects priority in goods, even if a previously perfected security interest exists.

What is a Buyer in the Ordinary Course of Business?

A buyer in the ordinary course of business is a person who purchases goods in the regular course of business, without knowledge that the goods are subject to a security interest. This concept is defined in the UCC as follows:

"A person buys goods in the ordinary course of business if the goods are bought:

(1) in the ordinary course of business from a person who in the ordinary course of business sold such goods to a buyer in the ordinary course of business, or

(2) by a person who in the ordinary course of business sold such goods to a buyer in the ordinary course of business, or

(3) by a person who in the ordinary course of business sold such goods to a buyer in the ordinary course of business, or

(4) by a person who in the ordinary course of business sold such goods to a buyer in the ordinary course of business."

Priority of a Buyer in the Ordinary Course of Business

A buyer in the ordinary course of business has priority over a previously perfected security interest in the goods. This means that if a buyer purchases goods in the ordinary course of business, without knowledge that the goods are subject to a security interest, they will have priority over the security interest.

Example: Suppose a manufacturer sells goods to a retailer, who then sells the goods to a consumer. If the manufacturer had a security interest in the goods, the consumer would still have priority over the security interest, as they are a buyer in the ordinary course of business.

Why Does a Buyer in the Ordinary Course of Business Have Priority?

The UCC provides that a buyer in the ordinary course of business has priority over a previously perfected security interest because they are not aware of the security interest. This is a key distinction, as a buyer in the ordinary course of business is not a party to the security agreement and therefore has no knowledge of the security interest.

Consequences of a Buyer in the Ordinary Course of Business Having Priority

The priority of a buyer in the ordinary course of business has significant consequences for businesses and individuals involved in the sale and purchase of goods. If a buyer in the ordinary course of business has priority over a previously perfected security interest, the secured party (the party with the security interest) will be unable to enforce their security interest against the buyer.

How Does a Buyer in the Ordinary Course of Business Affect a Secured Party?

A secured party who has a previously perfected security interest in goods may be affected by a buyer in the ordinary course of business in several ways:

Loss of Priority: As mentioned earlier, a buyer in the ordinary course of business has priority over a previously perfected security interest. This means that the secured party will be unable to enforce their security interest against the buyer.
Risk of Loss: If a buyer in the ordinary course of business purchases goods that are subject to a security interest, the secured party may be at risk of losing their security interest.
Need for Additional Security: To protect their security interest, a secured party may need to take additional steps, such as perfecting their security interest in the goods.

In conclusion, a buyer in the ordinary course of business has priority over a previously perfected security interest in goods. This concept is crucial for businesses and individuals involved in the sale and purchase of goods, as it affects the priority of buyers and the rights of secured parties. Understanding the concept of a buyer in the ordinary course of business and its implications is essential for anyone involved in commercial transactions.

What is a buyer in the ordinary course of business? A buyer in the ordinary course of business is a person who purchases goods in the regular course of business, without knowledge that the goods are subject to a security interest.
Why does a buyer in the ordinary course of business have priority? A buyer in the ordinary course of business has priority because they are not aware of the security interest. This is a key distinction, as a buyer in the ordinary course of business is not a party to the security agreement and therefore has no knowledge of the security interest.
What are the consequences of a buyer in the ordinary course of business having priority? The priority of a buyer in the ordinary course of business has significant consequences for businesses and individuals involved in the sale and purchase of goods. If a buyer in the ordinary course of business has priority over a previously perfected security interest, the secured party will be unable to enforce their security interest against the buyer.

Uniform Commercial Code (UCC)
Article 9 of the UCC: Secured Transactions
Case law and court decisions interpreting the UCC and Article 9.
A Buyer in the Ordinary Course of Business: Q&A

In our previous article, we discussed the concept of a buyer in the ordinary course of business and how it affects priority in goods, even if a previously perfected security interest exists. In this article, we will provide a Q&A section to help clarify any questions or concerns you may have about this topic.

Q: What is a buyer in the ordinary course of business?

A: A buyer in the ordinary course of business is a person who purchases goods in the regular course of business, without knowledge that the goods are subject to a security interest.

Q: Why does a buyer in the ordinary course of business have priority?

A: A buyer in the ordinary course of business has priority because they are not aware of the security interest. This is a key distinction, as a buyer in the ordinary course of business is not a party to the security agreement and therefore has no knowledge of the security interest.

Q: What are the consequences of a buyer in the ordinary course of business having priority?

A: The priority of a buyer in the ordinary course of business has significant consequences for businesses and individuals involved in the sale and purchase of goods. If a buyer in the ordinary course of business has priority over a previously perfected security interest, the secured party will be unable to enforce their security interest against the buyer.

Q: How does a buyer in the ordinary course of business affect a secured party?

A: A secured party who has a previously perfected security interest in goods may be affected by a buyer in the ordinary course of business in several ways:

Loss of Priority: As mentioned earlier, a buyer in the ordinary course of business has priority over a previously perfected security interest. This means that the secured party will be unable to enforce their security interest against the buyer.
Risk of Loss: If a buyer in the ordinary course of business purchases goods that are subject to a security interest, the secured party may be at risk of losing their security interest.
Need for Additional Security: To protect their security interest, a secured party may need to take additional steps, such as perfecting their security interest in the goods.

Q: What are some examples of a buyer in the ordinary course of business?

A: Some examples of a buyer in the ordinary course of business include:

A retailer purchasing goods from a manufacturer
A consumer purchasing goods from a retailer
A wholesaler purchasing goods from a distributor

Q: How can a secured party protect their security interest?

A: A secured party can protect their security interest by:

Perfecting their security interest: This involves taking steps to ensure that their security interest is perfected, such as filing a financing statement with the relevant authorities.
Notifying the buyer: If a secured party knows that a buyer is purchasing goods that are subject to a security interest, they should notify the buyer of the security interest.
Taking additional steps: Depending on the circumstances, a secured party may need to take additional steps to protect their security interest, such as perfecting their security interest in the goods.

What is a buyer in the ordinary course of business? A buyer in the ordinary course of business is a person who purchases goods in the regular course of business, without knowledge that the goods are subject to a security interest.
Why does a buyer in the ordinary course of business have priority? A buyer in the ordinary course of business has priority because they are not aware of the security interest. This is a key distinction, as a buyer in the ordinary course of business is not a party to the security agreement and therefore has no knowledge of the security interest.
What are the consequences of a buyer in the ordinary course of business having priority? The priority of a buyer in the ordinary course of business has significant consequences for businesses and individuals involved in the sale and purchase of goods. If a buyer in the ordinary course of business has priority over a previously perfected security interest, the secured party will be unable to enforce their security interest against the buyer.

Uniform Commercial Code (UCC)
Article 9 of the UCC: Secured Transactions
Case law and court decisions interpreting the UCC and Article 9.