Also known as: buyer in the ordinary course of business · buyer in ordinary course of business · buyers in ordinary course of business · BOCOB · ordinary course buyer
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 in the business of selling goods of that kind. The purchase must comport with the seller's usual or customary practices and the buyer must take possession of the goods. Such a buyer takes 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 equipment at the gym, paid a modest discount price, 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 Atlas Leasing.
RigServe Inc. routinely sold surplus compressors directly at well sites as part of its oilfield services business. Lone Star Drilling inspected four units, paid a commercially reasonable price, and hauled them away at once with no knowledge that the sale violated Prairie Bank's rights. Lone Star therefore took the compressors free of the bank's perfected security interest.
Select any source to read its text and confirm it supports the definition.
No. The definition requires good faith, lack of actual knowledge that the sale violates another's rights, purchase from a seller in the business of selling goods of that kind, and conformity with ordinary practices. It imposes no duty to search filings.
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Yes. The definition expressly permits purchase for cash, by exchange of property, or on secured or unsecured credit, provided the other elements are met and the buyer takes possession.
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Only actual knowledge that the particular sale violates the rights of another person in the goods. General awareness of financing practices or the possibility of liens does not suffice.
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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 customary surplus-disposal practices within its overall operations.
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