What is UCC 9-313

Last updated on September 27, 2023

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The Uniform Commercial Code, or UCC, is a governing set of laws meant to help debtors and lenders in commercial transactions across state lines in the United States. There are many laws in the UCC. One is UCC 9-313. What does this portion of the UCC cover? What role does it play in the overall clarity and success of the UCC?

UCC 9-313 deals with When Possession By Or Delivery To Secured Party Perfects Security Interest Without Filing. It covers various situations where a security interest doesn’t have to be filed to be perfected, such as possession or options covered by a certificate of title. It discusses multiple situations.

If you’re interested in learning more about Uniform Commercial Code 9-313, you’ve come to the right place. Whether you’re a curious student or involved in a deal using the UCC, it’s helpful to be aware of various portions of this conglomerate of laws. Read on to learn more about UCC 9-313, what it is, critical terms to understand, and other valuable information.

What is UCC 9-313?

UCC 9-313 is a particular section of Article 9 in the UCC. It deals with When Possession By Or Delivery To Secured Party Perfects Security Interest Without Filing.

Here is the official definition of UCC 9-313, according to the Cornell Law School Legal Information Institute:

(a) .Perfection by possession or delivery..

Except as otherwise provided in subsection (b), a secured party may perfect a security interest in negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under Section 8-301.

(b) .Goods covered by certificate of title..

With respect to goods covered by a certificate of title issued by this State, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in Section 9-316(d).

(c) .Collateral in possession of person other than debtor..

With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business, when:

(1) the person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party's benefit; or

(2) the person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party's benefit.

(d) .Time of perfection by possession; continuation of perfection..

If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.

(e) .Time of perfection by delivery; continuation of perfection..

A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under Section 8-301 and remains perfected by delivery until the debtor obtains possession of the security certificate.

(f) .Acknowledgment not required..

A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.

(g) .Effectiveness of acknowledgment; no duties or confirmation..

If a person acknowledges that it holds possession for the secured party's benefit:

(1) the acknowledgment is effective under subsection (c) or Section 8-301(a), even if the acknowledgment violates the rights of a debtor; and

(2) unless the person otherwise agrees or law other than this article otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.

(h) .Secured party's delivery to person other than debtor..

A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:

(1) to hold possession of the collateral for the secured party's benefit; or

(2) to redeliver the collateral to the secured party.

(i) .Effect of delivery under subsection (h); no duties or confirmation..

A secured party does not relinquish possession, even if a delivery under subsection (h) violates the rights of a debtor. A person to which collateral is delivered under subsection (h) does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this article otherwise provides.

UCC 9-313 Simplified

UCC 9-313 exists to explain the various situations in which possession or delivery to a secured part might incur perfection of the security interest without filing. It covers various scenarios, dealing with everything from time of perfection by delivery to the collateral in possession of a person other than the debtor.

The point of UCC 9-313 is to build on what has already been established in the rest of Article 9. It’s a valuable and clarifying stepping stone for those who will participate in commercial transactions involving the UCC.

Critical Terms Addressed In UCC 9-313

Law is full of vital words. Whether you’re reading the UCC to study for law school or are interested in participating in commercial transactions across state lines in the United States, you’re sure to run into crucial diction that makes or breaks the definition. Several crucial words appear in UCC 9-313.

Let’s talk about a few of the critical terms located in UCC 9-313. It’s a good idea to have a firm grasp of what you are reading, and the easiest way to feel confident is to understand the definitions within the pages. These two terms stand out as the most critical in this section of the Universal Commercial Code.

Secured Party

In the Uniform Commercial Code, a secured party means anyone who earns favor for a security interest based on a security agreement. This item may exist, whether or not there is any outstanding obligation to be secured.

A secured party is first in line if things fall through with the borrower. If they default on their loans, the secured individual gets the first shot at the item.

Perfected Security Interest

A perfected security interest works in tandem with the above secured party. Perfection in a security interest occurs when the lender registers the collateral with the proper sources. By completing this process, they are placing themselves first in line for the security interest set forth.

Perfecting a security interest is a notice to other potential lenders who might want the collateral. It’s a way for these individuals to claim what is theirs and to tell other lenders to keep their distance from the prize.

Why Is UCC 9-313 In the UCC?

UCC 9-313 is in the UCC to clarify the perfection of security interests. It goes over various situations, from goods covered by a certificate of title to the effectiveness of acknowledgment with no duties or confirmation.

As with the other laws in Article 9 and beyond, UCC 9-313 exists to build on what exists and fill in the gaps as necessary. It’s helpful for lenders and debtors alike.

What Is An Example of UCC 9-313?

If a debtor and a borrower are working on a commercial transaction across state lines, the UCC will provide further clarity on the situation. Maybe the debtor’s tractor is up for collateral. If that’s the case, the lender would want to perfect the interest.

UCC 9-313 clarifies the completion of that process without filing. It covers active moments where it’s okay to do so and exceptions to the rule.

What Sections Appear Before and After UCC 9-313?

As with other portions of the UCC, there are laws before and after UCC 9-313 in Article 9. These offer further clarity to the context in which UCC 9-313 is valuable.

The law before UCC 9-313 deals with the Perfection of Security Interests In Chattel Paper, Deposit Accounts, Documents, Goods Covered By Documents, Instruments, Investment Property, Letter-of-Credit Rights, And Money; Perfection By Permissive Filing; Temporary Perfection Wit. It’s an extensive clarification of perfection in these situations.

The law after UCC 9-313 deals with Perfection By Control. It reveals more about specific situations where perfection of control might come into play, including moments with investment property and the timing of the act.

What Does UCC Article 9 Detail?

Overall, Article 9 of the Uniform Commercial Code deals with secured transactions. It also works with creating and enforcing various debts among individuals involved.

Another valuable job of Article 9 is to create procedures. These procedures involve dealing with and settling bonds, among other items.

Reference Legal Explanations

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