Also known as: buyer in ordinary course · buyer in ordinary course of business · buyers in ordinary course of business · BIOC
Written by attorneys · grounded in primary & secondary sources — see below
A purchaser of goods who buys 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 seller's business, and the buyer must take possession or have a right to recover the goods. A buyer meeting these criteria takes the goods free of a security interest created by the seller even if the interest is perfected.
Iron Peak Gym regularly sold used strength machines to schools and teams as part of its operations. Metro Strikers FC inspected the machines at the gym, paid a discounted price on standard terms, and took immediate possession without actual knowledge that the sale violated any lender rights. The club therefore acquired the machines free of the perfected security interest held by the finance company that had financed Iron Peak's equipment.
Apex Therapeutics offered surplus lab refrigerators to regional pharmacies at fixed prices while closing a facility. Northside Compounding Pharmacy inspected the units, bought on sixty-day open account, and took immediate possession with no knowledge that any financing arrangement would be breached. Northside therefore qualified as a buyer in ordinary course and took the refrigerators free of the lender's perfected security interest.
Select any source to read its text and confirm it supports the definition.
No. The definition requires good faith and lack of actual knowledge that the sale violates another's rights, not a duty to search filings. A buyer may qualify even when a perfected security interest exists.
Supporting sources
Yes, provided the sale otherwise comports with the seller's usual or customary practices in the kind of business and the buyer acts in good faith without actual knowledge of a rights violation. Closure alone does not automatically disqualify the transaction.
Supporting sources
Yes. The seller must be a person in the business of selling goods of that kind, and the transaction must align with the seller's usual or customary practices. Occasional or incidental sales by a party whose core business is something else will not support buyer-in-ordinary-course status.
Supporting sources
No. Buyers in ordinary course may purchase for cash, by exchange of property, or on secured or unsecured credit, and a commercially reasonable price supports rather than defeats good faith.
Supporting sources