Article 9 — Secured Transactions · Section 9-504
This section outlines the rights of secured parties when disposing of collateral after default, including the obligation to conduct a commercially reasonable sale.
Source: U.C.C. § 9-504
After default, a secured party may dispose of collateral in accordance with this section. Disposition may be by public or private sale, and in either case, the disposition must be commercially reasonable. The secured party must notify the debtor and any secondary obligors of the time and place of any public sale or, if the sale is private, the time after which it will be made.
UCC § 9-504 deals with what happens to a debtor's collateral when they default on an obligation. It allows the secured party to sell the collateral in a way that is commercially reasonable and requires them to notify the debtor about the sale.
Property that is subject to a security interest.
A lender or other party that has a security interest in collateral.
A standard that requires the sale of collateral to be conducted in a manner consistent with what would occur between willing parties, acting in good faith.
Example 1
A bank has a security interest in a car owned by a borrower. After the borrower defaults on the loan, the bank sells the car at an auction, providing notice to the borrower of the sale in advance.
Example 2
A business defaults on a loan secured by its inventory. The lender conducts a private sale of the inventory to a third party, ensuring that the sale is conducted in a manner that reflects current market value and provides prior notice to the business.