Also known as: financing agencies
Written by attorneys · grounded in primary & secondary sources — see below
A bank, finance company, or other person that in the ordinary course of business makes advances against goods or documents of title or intervenes by arrangement with the seller or buyer to make or collect payment due under a contract for sale. The term also covers a bank or other person that similarly intervenes between persons in the position of seller and buyer with respect to the goods.
Prairie Grain Cooperative sold stored corn to Harvest Mills. FarmState Bank advanced funds to Prairie Grain against negotiable warehouse receipts for the corn and then collected payment directly from Harvest Mills upon each shipment. FarmState Bank qualifies as a financing agency because it made advances against documents of title and intervened to collect payment under the sales contract in the ordinary course of its business.
ExportCo shipped electronics to ImportCo under a sales contract and drew a draft on ImportCo. Coast Bank took the draft for collection without advancing funds or receiving documents of title. Coast Bank qualifies as a financing agency because it intervened in ordinary course merely to collect payment due under the contract for sale.
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A financing agency intervenes to advance funds or collect payment but does not contract to take title to the goods. The buyer is the party that orders and receives the goods and owes the price to satisfy its own purchase obligation.
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No. Merchant status requires dealing in goods of the kind or holding oneself out as having specialized knowledge or skill regarding those goods. A financing agency provides payment services and does not deal in the goods themselves.
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No. The definition focuses on advances against goods or documents of title and intervention in payment collection. Title transfer is not required.
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Yes. The definition expressly includes a person who merely takes a draft for collection whether or not documents of title accompany the draft.
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No. Repeated advances against documents of title tied to the specific goods satisfy the definition even if the bank maintains a broader credit facility with the buyer.
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…317 U. S. 341 (1943). I In 1971 petitioners, husband and wife, contracted to buy a home in Fairfax County, Va. The financing agency required them to secure title insurance; this required a title examination, and only a member of the Virginia State Bar could legally perform that service.[^maj-1] Petitioners therefore…