Article 9 — Secured Transactions · Section 9-317
This section addresses the priority of security interests in collateral.
Source: U.C.C. § 9-317
A security interest is subordinate to the rights of a person who holds an interest in the collateral that is perfected by filing or by possession, but a security interest in the collateral that is secured by a later-created lien may be superior if the earlier security interest is not perfected.
UCC § 9-317 primarily deals with the priority of security interests in collateral. It states that a perfected security interest generally has priority over unperfected interests, but there can be exceptions if the unperfected interest was created later in time.
The legal process by which a secured party protects its interest in collateral against third parties.
The condition under which one claim or interest is ranked below another in priority.
Example 1
A lender has a perfected security interest in a piece of equipment. If a second lender obtains an unperfected interest in the same equipment later, the first lender retains priority.
Example 2
A borrower grants a security interest in inventory to a lender. Later, the borrower pledges the same inventory to another lender without perfecting the new interest. The original lender has priority over the new, unperfected interest.