What Is UCC 9-103

Last updated on September 4, 2023

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The Uniform Commercial Code is a set of laws that govern commercial transactions in the United States. Many articles make up this set, and one of the final areas is Section 9. Here, you will find UCC 9-103 - but what is covered in this area of the document?

UCC 9-103 deals with the Purchase-Money Security Interest, Applications of Payments, and Burden of Establishing. It handles all the regulations, definitions, and stipulations in the section. It works with collateral and the extent to which various people are involved in a transaction.

If you’re curious about UCC 9-103 and want to learn more, you’re in the right place. Whether you’re interested in furthering your studies for law school preparation or are just curious outside of the entire Uniform Commercial Code process, it’s always helpful to know more. Keep reading to dive deeper into this section.

What Is UCC 9-103?

Article 9-103 of the Uniform Commercial Code deals with Purchase-Money Security Interest, Application of Payments, and Burden of Establishing. It dives into the various definitions, stipulations, and regulations to clarify section 103 of Article 9 in the UCC.

Here is the layout of UCC 9-103 according to Cornell University Legal Information Institute:

(a) Definitions

In this section:

(1) "purchase-money collateral" means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and

(2) "purchase-money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.

(b) Purchase-money security interest in goods

A security interest in goods is a purchase-money security interest:

(1) to the extent that the goods are purchase-money collateral with respect to that security interest;

(2) if the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase- money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and

(3) also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.

(c) Purchase-money security interest in software

A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:

(1) the debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and

(2) the debtor acquired its interest in the software for the principal purpose of using the software in the goods.

(d) Consignor's inventory purchase-money security interest

The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.

(e) Application of payment in non-consumer-goods transaction

In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:

(1) in accordance with any reasonable method of application to which the parties agree;

(2) in the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or

(3) in the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:

(A) to obligations that are not secured; and

(B) if more than one obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.

(f) No loss of status of purchase-money security interest in non-consumer-goods transaction

In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:

(1) the purchase-money collateral also secures an obligation that is not a purchase-money obligation;

(2) collateral that is not purchase-money collateral also secures the purchase-money obligation; or

(3) the purchase-money obligation has been renewed, refinanced, consolidated, or restructured.

(g) Burden of proof in non-consumer-goods transaction

In a transaction other than a consumer-goods transaction, a secured party claiming a purchase- money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.

(h) Non-consumer-goods transactions; no inference

The limitation of the rules in subsections (e), (f), and (g) to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.

What Else is Covered in Article 9 of the UCC?

Article 9 of UCC covers the regulation of security interests and the various ways those interests are enforced. These deal with movable or intangible forms of property and the fixtures that come with them.

Article 9 makes clear the processes for settling debts in various forms. It especially handles forms of debt created by any format of credit-debt relationship between individuals.

What Laws Precede and Follow UCC 9-103?

UCC 9-103 comes after UCC 9-102. This section of the UCC Article 9 covers the Index and Index of Definitions. It goes over varying terms used in UCC Article 9 and describes what they mean when used in the document to prevent confusion.

UCC 9-104 comes after UCC 9-103. This section deals with the control of a deposit account as it pertains to various parties in the agreement. It goes over the requirements for control, the debtor’s right to direct deposition, implied duties of the bank, conditions not relevant, and lack of inferences.

Reference Legal Explanations

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