Article 9 — Secured Transactions · Section 9-323
An overview of UCC § 9-323, which addresses the rights of a secured party against a buyer of collateral.
Source: U.C.C. § 9-323
A buyer of goods takes free of a security interest if the buyer gives value and receives delivery of the goods without knowledge of the security interest and before it is perfected.
UCC § 9-323 provides that when a buyer purchases goods from a seller and takes possession, they are not subject to the seller's existing security interest in those goods, provided they did not know about the security interest and the interest was not perfected at the time of the purchase. This section protects good-faith purchasers from unforeseen claims against the goods they acquire.
A buyer is an individual or entity that purchases goods in exchange for value.
A security interest is a legal claim or lien on collateral that secures payment or performance of an obligation.
Perfection is the process of making a security interest enforceable against third parties.
Example 1
A consumer buys a car from a dealership that is subject to a lien from a bank. If the consumer pays in full and takes possession without knowledge of the lien, they take the car free of the bank's interest.
Example 2
A company buys machinery from a supplier who has a perfected security interest in the machinery. If the company does not know about the interest and takes delivery, it may not be liable for the supplier's interest unless the security interest is perfected.