Also known as:buyer in ordinary course of business · buyers in ordinary course · BIOC
Written by attorneys · grounded in primary & secondary sources — see below
A person who buys goods in good faith without knowledge that the sale violates the rights of another person in the goods and in the ordinary course from a person other than a pawnbroker in the business of selling goods of that kind. The purchase must comport with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices and the buyer must take possession of the goods or have a right to recover them from the seller under Article 2. Such a buyer takes the goods free of a security interest created by the seller even if the security interest is perfected and the buyer knows of its existence.
Sources & Authorities· 8 primary sources
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Uniform Acts
Course Outlines
Study Supplements
How it applies
Common Examples
2
Equipment Purchase From Oilfield Services Firm
Lone Star Drilling LLC inspected and bought four used compressors from RigServe Inc. at a well site for a commercially reasonable price and immediately took possession. RigServe regularly sold surplus compressors in this manner even though it was behind on payments to its lender Prairie Bank which held a perfected security interest in the equipment. Lone Star had no actual knowledge that the sale violated the bank's rights. Lone Star therefore qualifies as a buyer in ordinary course and keeps the compressors free of the security interest.
Wholesale Handbag Purchase From Kiosk
Luxe Loft a boutique clothing store inspected samples and bought forty designer handbags on unsecured credit from Metro Merch at a mall kiosk where the wholesaler was temporarily selling to retailers by appointment. Metro Merch regularly wholesaled handbags of that kind and Luxe Loft took immediate possession without knowledge that the goods were held on consignment from Bella Brand. The transaction followed Metro Merch's customary wholesale practices. Luxe Loft therefore qualifies as a buyer in ordinary course and takes the handbags free of Bella Brand's interest.
Common questions
Frequently Asked
4
What elements must a buyer satisfy to qualify as a buyer in ordinary course of business?+
The buyer must purchase goods in good faith without actual knowledge that the sale violates another's rights in the goods from a person other than a pawnbroker in the business of selling goods of that kind. The sale must also comport with the seller's usual or customary practices and the buyer must take possession or have a right to recover the goods under Article 2. Bulk transfers and acquisitions in satisfaction of debt are excluded.
Supporting sources
Does a buyer in ordinary course take free of a perfected security interest even if the buyer knows the interest exists?
Yes. The buyer takes the goods free of a security interest created by the seller even if the security interest is perfected and the buyer knows of its existence provided the buyer lacks knowledge that the particular sale violates the secured party's rights.
Supporting sources
Must a buyer search public records to qualify as a buyer in ordinary course?+
No. The definition requires only good faith and lack of actual knowledge that the sale violates another's rights. There is no duty to search filings and a buyer may qualify even when a perfected security interest exists in the background.
Supporting sources
Can a buyer qualify as a buyer in ordinary course when purchasing on credit rather than for cash?+
Yes. The definition expressly permits a buyer in ordinary course to buy for cash by exchange of other property or on secured or unsecured credit.
Supporting sources
Secured TransactionsGeneral UCC principles · General definitions and principles of interpretation (§ 1-201, et seq.)UBEFoundational