Also known as: buyer in the ordinary course of business · buyers in ordinary course of business · buyer in ordinary course · BIOCOB · ordinary-course buyer
Written by attorneys — see sources 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 in the business of selling goods of that kind. The buyer must take possession of the goods or hold a right to recover them from the seller. Such a buyer takes the goods free of a security interest created by the seller even if the interest is perfected.
NovaTech Electronics purchased forty laptops from CodeWave Consulting, a software firm that regularly resold its demo units each quarter. NovaTech paid cash, took immediate possession, and had no knowledge of any lender claims. The bank holding a perfected security interest in CodeWave's equipment later sought to reclaim the laptops from NovaTech.
Northside Compounding Pharmacy bought three lab refrigerators from Apex Therapeutics on sixty-day open account terms. Northside took immediate possession and lacked any knowledge of financing claims. Apex regularly disposed of surplus lab equipment to regional pharmacies during branch closures.
Metro Strikers FC purchased strength-training machines from Iron Peak Gym after inspecting the units on site. The club paid a modest discount price, took possession, and had no actual knowledge that the sale violated any lender rights. Iron Peak regularly sold older machines to schools and teams as part of its facility upgrades.
Georgia O'Keeffe, a renowned artist, had three paintings stolen from An American Place gallery in New York in March 1946. The gallery was operated by her husband Alfred Stieglitz. The paintings subject to this action are "Seaweed" and "Cliffs," with a third painting "Fragments" also missing. O'Keeffe did not report the theft to the police or advertise the loss, though she discussed it with associates. Stieglitz died in the summer of 1946. In 1947 O'Keeffe retained Doris Bry to help settle the estate. Bry urged reporting the loss, but O'Keeffe declined. In 1972, O'Keeffe authorized Bry to report the theft to the Art Dealers Association of America, Inc., which maintains a registry of stolen paintings. In September 1975, O'Keeffe learned that the paintings were in the Andrew Crispo Gallery in New York on consignment from Bernard Danenberg Galleries. On February 11, 1976, O'Keeffe discovered that Ulrich A. Frank had sold the paintings to Barry Snyder for $35,000. She demanded their return, but Snyder refused. O'Keeffe filed her complaint for replevin in March 1976 against Snyder, who impleaded Frank as a third-party defendant. The trial court granted summary judgment to Snyder on the ground that the action was barred by the six-year statute of limitations. The Appellate Division reversed and entered judgment for O'Keeffe. The Supreme Court of New Jersey granted certification to consider the issues. Frank traces his possession of the paintings to his father, Dr. Frank, who died in 1968, claiming to have seen them in his father's apartment as early as 1941-1943. Snyder purchased the paintings from Frank in 1975. There are factual disputes regarding the circumstances of the paintings' disappearance and acquisition.
View caseNo. The definition requires only good faith and the absence of actual knowledge that the sale violates another's rights. A buyer may qualify even when a perfected security interest exists.
Supporting sources
Yes. The definition expressly permits purchases for cash, by exchange of property, or on secured or unsecured credit.
Supporting sources
No. The seller need only be in the business of selling goods of that kind, which can include a manufacturer or service firm that regularly disposes of surplus inventory in its ordinary practices.
Supporting sources
No. Payment of a commercially reasonable price supports good faith, but the key inquiry remains whether the buyer lacked actual knowledge that the sale violated another's rights.
Supporting sources
…to a merchant who deals in that kind of goods gives the merchant the power to transfer all the rights of the entruster to a buyer in the ordinary course of business. N.J.S.A. 12A:2-403(2). In a transaction under that statute, a merchant may vest good title in the buyer as against the original owner. See Anderson, supra , § 2-403:17 et seq. The…