Written by attorneys · grounded in primary & secondary sources — see below
A market in which standardized prices for fungible property are established through broad public trading and are publicly known. Disposition of collateral in the usual manner on such a market or at the price current there at the time of disposition satisfies the requirement of commercial reasonableness.
Sources & Authorities
How it applies
Common Examples
2
Municipal Bond Liquidation
The Metro Development Authority held a security interest in Apex Transit Builders municipal bond portfolio. After default the Authority directed a dealer to sell the bonds through the standard nationwide electronic municipal bond trading system. Apex challenged the method as commercially unreasonable because dealer-to-dealer placements sometimes produced higher prices. The Authority's use of the usual trading procedures on that system established commercial reasonableness.
Commodity Futures Sale
Atlas Capital held a perfected security interest in the manufacturer's portfolio of exchange-traded commodity futures. After default Atlas instructed a broker to liquidate the contracts with ordinary market orders on the standard commodities exchange where those futures regularly trade. The manufacturer objected that the sale occurred during thin trading hours. Selling at the price current on that exchange at the time of disposition satisfied commercial reasonableness.
Put it into practice
Test Yourself
9
Practice Questions5
· 7 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Hornbooks
Course Outlines
Study Supplements
Dictionaries
Common questions
Frequently Asked
3
What features make a trading system a recognized market?+
A recognized market is one in which prices are set by broad trading and are publicly known, such as a standard electronic trading system widely used for municipal bonds or an organized commodities exchange. The market must involve fungible goods that produce standardized, publicly observable prices.
Supporting sources
Does selling on a recognized market automatically make the disposition commercially reasonable?+
Yes. UCC section 9-627(b) provides that a disposition is commercially reasonable if made in the usual manner on any recognized market or at the price current in any recognized market at the time of the disposition. Either method supplies an independent safe harbor.
Supporting sources
Can a secured party still be challenged for choosing a recognized market when another method might have produced a higher price?+
No. The statute expressly states that the fact a greater amount could have been obtained by a different method or at a different time is not by itself sufficient to show the disposition was commercially unreasonable.
Supporting sources
Secured TransactionsDefault (§ 9-601, et seq.) · Rights and remedies on default (§§ 9-601 through 9-606)UBEFoundational