Also known as: dispositions of collateral · dispose of collateral · disposing of collateral · disposed of collateral · UCC 9-610 · collateral disposition
Written by attorneys · grounded in primary & secondary sources — see below
A transfer by a secured party of collateral after default. The transfer may occur by sale, lease, license, or other means and may be conducted publicly or privately. Every aspect of the disposition, including method, manner, time, place, and terms, must satisfy commercial reasonableness.
Midnight Hospital defaulted on payments for MRI scanners financed by Sky Clinic. Sky Clinic repossessed the scanners and immediately leased them for five years to Imperial Med at a below-market rate without any public notice or appraisals. The absence of competitive bidding and the unfavorable terms rendered the disposition commercially unreasonable under the governing standard.
After default, a secured party sold repossessed construction equipment at a commercially reasonable public auction to Dakota Industries. The sale transferred all of the debtor's rights in the equipment to Dakota Industries and discharged the security interest that had encumbered the collateral.
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A secured party may sell, lease, license, or otherwise dispose of collateral after default. The disposition may occur by public or private proceedings, by one or more contracts, as a unit or in parcels, and at any time and place on any terms, provided the process meets commercial reasonableness.
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A debtor may redeem collateral at any time before the secured party has disposed of it or entered into a contract for its disposition. Execution of a binding lease or sale contract terminates the redemption right even if the actual transfer has not yet occurred.
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A qualifying disposition transfers to the transferee for value all of the debtor's rights in the collateral and discharges the security interest under which the disposition was made. The transferee takes the collateral free of that security interest.
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Lack of marketing, appraisals, or competitive bidding can render a private disposition commercially unreasonable. Courts evaluate all aspects of the disposition, including the method and terms chosen, against commercial standards.
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