Also known as: buyer in ordinary course · buyers in the ordinary course · buyer in the ordinary course of business · ordinary course buyer
Written by attorneys · grounded in primary & secondary sources — see below
A person that 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 sale 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. The buyer must take possession of the goods or have a right to recover them from the seller under Article 2.
Select any source to read its text and confirm it supports the definition.
NovaTech Electronics bought forty high-end laptops for cash from CodeWave Consulting, a software firm that regularly resold its demo units each quarter through the same informal process. NovaTech took immediate possession and had no knowledge of any lender's security interest in the laptops. Because the purchase met every element of the definition, NovaTech took the laptops free of the bank's perfected security interest.
Luxe Loft bought forty designer handbags on unsecured credit from Metro Merch after inspecting samples at a temporary mall kiosk used exclusively for retailer appointments. Metro Merch regularly wholesaled handbags to retailers, and Luxe Loft took immediate possession with no knowledge that the sale violated Bella Brand's retained title. Because the transaction followed Metro Merch's ordinary practices and satisfied every statutory element, Luxe Loft qualified as a buyer in the ordinary course.
No. The definition expressly permits a buyer to purchase for cash, by exchange of other property, or on secured or unsecured credit. Payment method is not an element that determines status.
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No. A seller qualifies if it is in the business of selling goods of that kind, even if the sales occur as a sideline or through nontraditional channels such as a kiosk or well site, provided the transaction comports with the seller's usual or customary practices.
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No. The definition requires only good faith and lack of actual knowledge that the sale violates another's rights. There is no duty to conduct a filing search, and a perfected security interest does not itself defeat buyer-in-ordinary-course status.
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Yes, provided the sale still comports with the seller's usual or customary practices and the buyer acts in good faith without actual knowledge that the sale violates another's rights. Financial distress or facility closure does not automatically place the transaction outside the ordinary course.
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