Revised Article 9.ppt

Protection of Buyers (contd) Buyers of Consumer Goods Buyer takes free of a security interest he is not aware of, if he pays value for the goods, he is buying for his own family or household use, and the secured party has not yet filed a financing statement. Buyers of Chattel Paper, Instruments, and Documents If bought in the ordinary course of her business, and she takes possession, she generally takes free of any security interest. Liens A lien is a security interest created by law (rather than by agreement). Artisan’s lien is a security interest in personal property created when a worker makes some improvements to the property. Mechanic’s lien is created when a worker improves real property. A landlord’s lien is when a landlord gains an interest in the tenant’s personal property after the tenant fails to pay rent. Article 9 does not apply to liens. Priorities Among Creditors A a perfected security interest takes priority over one with an unperfected interest. If neither secured party has perfected, the first interest to attach gets priority. Between perfected security interests, the first to file or perfect wins. A secured party controlling or possessing an instrument, deposit account, investment property and letter-of-credit rights wins over a party that merely filed. Priority Involving a PMSI PMSI in Inventory (goods that the seller is holding for sale or lease in the ordinary course of its business) Takes priority over a conflicting perfected security interest (even one perfected earlier), if two conditions are met: Before filing, the secured party must check for earlier security interests and, if any, must notify that holder concerning the new PMSI. The secured party must then perfect its PMSI before the debtor receives the inventory. Priority Involving a PMSI PMSI in Non-Inventory Collateral A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or