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The UCC, or Uniform Commercial Code, deals with commercial transactions across the United States with the intent of unification. There are several articles within the UCC, including Article 9. One portion of Article 9 is UCC 9-322 - but what does this section cover? What does it talk about for commercial transaction participants?
UCC 9-322 covers Priorities Among Conflicting Security Interests In And Agricultural Liens On Same Collateral. It deals with general rules surrounding priority, the time of perfection during the transaction, first-to-file priority rules, and other valuable information.
If you’re interested in learning more about UCC 9-322, you’re in the right place. Whether you’re an individual who is passionate about law or someone involved in a United States commercial transaction, it’s a good idea to know more about the UCC. Read on to learn about UCC 9-322, from its definition to critical terms.
What is UCC 9-322?
UCC 9-322 deals with Priorities Among Conflicting Security Interests In And Agricultural Liens On Same Collateral. It’s a valuable part of the Uniform Commercial Code’s Article 9.
Here is the official definition of UCC 9-322, according to Cornell Law School Legal Information Institute:
(a) .General priority rules..
Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:
(1) Conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection.
(2) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.
(3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.
(b) .Time of perfection: proceeds and supporting obligations..
For the purposes of subsection (a)(1):
(1) the time of filing or perfection as to a security interest in collateral is also the time of filing or perfection as to a security interest in proceeds; and
(2) the time of filing or perfection as to a security interest in collateral supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting obligation.
(c) .Special priority rules: proceeds and supporting obligations..
Except as otherwise provided in subsection (f), a security interest in collateral which qualifies for priority over a conflicting security interest under Section 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a conflicting security interest in:
(1) any supporting obligation for the collateral; and
(2) proceeds of the collateral if:
(A) the security interest in proceeds is perfected;
(B) the proceeds are cash proceeds or of the same type as the collateral; and
(C) in the case of proceeds that are proceeds of proceeds, all intervening proceeds are cash proceeds, proceeds of the same type as the collateral, or an account relating to the collateral.
(d) .First-to-file priority rule for certain collateral..
Subject to subsection (e) and except as otherwise provided in subsection (f), if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, or letter-of-credit rights is perfected by a method other than filing, conflicting perfected security interests in proceeds of the collateral rank according to priority in time of filing.
(e) .Applicability of subsection (d)..
Subsection (d) applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, or letter-of-credit rights.
(f) .Limitations on subsections (a) through (e)..
Subsections (a) through (e) are subject to:
(1) subsection (g) and the other provisions of this part;
(2) Section 4-210 with respect to a security interest of a collecting bank;
(3) Section 5-118 with respect to a security interest of an issuer or nominated person; and
(4) Section 9-110 with respect to a security interest arising under Article 2 or 2A.
(g) .Priority under agricultural lien statute..
A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.
UCC 9-322 Explained
UCC 9-322 works with priorities when dealing with security interests in agricultural liens that appear on the same collateral. It shows priority and goes over the rules and explanations surrounding the listed priorities for these situations.
This section also works with special priority rules, limitations on subsections, and other details. It works in tandem with laws in UCC Article 9 to make everything much clearer for debtors and lenders involved in commercial transactions in the United States of America.
Why Is UCC 9-322 In the UCC?
UCC 9-322 is in the Uniform Commercial Code to clarify what happens in the case of conflicting priorities. It sets the record straight to ensure clear boundaries and stipulations.
Without UCC 9-322, there would be confusion in specific instances in the UCC. UCC 9-322 is just as vital as every other portion of Article 9.
Critical Terms In UCC 9-322
As with any law, many terms and phrases are outlined in UCC 9-322. Several stand out as the most often used and, therefore, valuable to a complete understanding of this UCC section towards the end of the document.
Let’s talk about a few of the most vital terms in UCC 9-322. A solid understanding of these items will help you better understand what you are reading in the UCC 9-322 and how it pertains to your situation in a commercial transaction.
In the Uniform Commercial Code, security interest means an interest in a tangible item or fixtures that provide security of a payment or performance of any obligation in a deal. Security interest can include many items, from a promissory note to chattel paper.
A security interest allows the creditor to repossess the product if the debtor defaults on the loan and cannot pay. As long as the creditor manages to perfect the security and stake their claim ahead of other lenders, they get the item and, therefore, the value with it if the debtor falls through on their promise.
Another term in Uniform Commercial Code 9-322 is agricultural lien. This phrase means that a lien goes on a farm product in a deal, declaring the right of the creditor to take control if things go south.
Items that might gain an agricultural lien include the following:
- Livestock, such as cows or sheep
- Farm equipment, such as tractors or plows
These are most common.
Agricultural liens are yet another form of security. They are necessary to help the debtor gain access to the money they need at the moment and to provide security to the individual providing the funds for farmers to do the things they must for their endeavors.
In the UCC, perfection occurs when the lender takes the steps necessary to ensure they legally have first rights to the security of the individual repaying them defaults on their loans. Typically, this process involves them heading to a local office to fill out proper paperwork to establish their stance.
Once perfection occurs under the UCC, the first creditor to establish it gets first rights. Everyone else after the first must get in line, losing their ability to gather the security interest if the debtor fails to follow through on their payments. It’s a valuable tool for everyone involved in the transaction.
What Laws Come Before and After UCC 9-322?
As with other laws in UCC Article 9, there are laws before and after UCC 9-322. These help provide context to the contents of the law.
UCC 9-321 appears before UCC 9-322. This section works with Licensee of General Intangible and Lessee of Goods In Ordinary Course of Business.
UCC 9-323 comes after UCC 9-322. This section deals with Future Advances, which covers when priority is based on the time of the advance, lien creditor, and more.
These laws are a critical portion of the Uniform Commercial Code and Article 9. They provide excellent context for what is covered in UCC 9-322.
What Else Is Covered In Article 9?
Article 9 of the Uniform Commercial Code covers security interests, from the regulation of these items to the enforcement of various interests. Article 9 deals with security interests as they pertain to movable or intangible property and fixtures. It’s at the very end of the Uniform Commercial Code.
There is a wide variety of items covered in Article 9. It deals with possessory liens, the legal right of ownership, and what happens if the debtor falls through on their payments. Article 9 is critical for the protection of the debtor, creditor, and every security interest and security involved in commercial transactions across state lines.
Reference Legal Explanations
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"What is UCC 9-322". Legal Explanations. Accessed on December 10, 2023. https://legal-explanations.com/blog/what-is-ucc-9-322/.
"What is UCC 9-322". Legal Explanations, https://legal-explanations.com/blog/what-is-ucc-9-322/. Accessed 10 December, 2023
What is UCC 9-322. Legal Explanations. Retrieved from https://legal-explanations.com/blog/what-is-ucc-9-322/.