UCC 9 315 (Overview: Secured Party’s Rights on Disposition of Collateral)

What is UCC 9 315?

What’s the rule under UCC with regards to the sale of collateral?

How are the secured party’s rights affected?

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Let me explain to you what Section 9-315 of UCC entails!

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What Is UCC 9 315

UCC 9 315 refers to Section 9 315 of the Uniform Commercial Code titled “Secured Party’s Rights on Disposition of Collateral and In Proceeds”.

In this article, I will look at the general rule outlined under 9 315 UCC with regards to a secured party’s rights in collateral and the collateral proceeds in the event of a disposition.

Let me give you an overview.

UCC 9 315 Overview

Section 9-315 of the Uniform Commercial Code is composed of five paragraphs, namely:

• UCC 9-315(a): Disposition of collateral: Continuation of security interest or agricultural lien; proceeds
• UCC 9-315(b): When commingled proceeds identifiable 
• UCC 9-315(c): Perfection of security interest in proceeds
• UCC 9-315(d): Continuation of perfection
• UCC 9-315(e): When perfected security interest in proceeds becomes unperfected 

Let’s look at each of these paragraphs.

UCC 9-315(a): Disposition of Collateral

The general rule under Section 9-315(a) of UCC is that security interests (or agricultural liens) continue in collateral no matter if the property is sold, leased, licensed, exchanged, or disposed of by its owner.

In addition to that, the security interest will attach itself to the identifiable proceeds of the collateral as well.

The exception to this rule is if a secured party agrees to allow the property owner to dispose of the collateral free of the security interest or agricultural lien.

UCC 9-315(b): Commingled Proceeds Identifiable 

Under Section 9-315 UCC, proceeds that are commingled with other property are considered to be identifiable proceeds if they are goods as provided by Section 9-336.

On the other hand, if the proceeds are not goods and are commingled with other property, they are identifiable proceeds if the secured party can identify or trace the proceeds.

UCC 9-315(c): Perfection of Security Interest in Proceeds

The rule outlined in paragraph (c) of Section 315 9 states that when a security interest is perfected in the collateral, then the security interest is also perfected in the proceeds as well.

UCC 9-315(d): Continuation of Perfection

Further to Section 9-315 UCC, a perfected security interest in proceeds will become unperfected on the 21st day after the security interest attaches to the proceeds unless:

• A financing statement is filed that covers the original collateral
• The proceeds are collateral in which security interest may be perfected by filing a financing statement with the office it was filed
• The proceeds are not purchased with cash proceeds 
• The proceeds are identifiable cash proceeds 
• The security interest in the proceeds is perfected when the security interest attaches to the proceeds or within 20 days after that 

UCC 9-315(e): Perfected Security Interest In Proceeds Becomes Unperfected 

Section 315/9 states that when a financing statement is filed covering the original collateral, a security interest in proceeds becomes unperfected at the later of:

• When the effectiveness of the financing statement lapses under Section 9-515 UCC
• When the effectiveness of the financing statement is terminated under Section 9-513 UCC
• 21 days after the security interest attaches to the proceeds 

UCC 9-315 Takeaways 

So there you have it folks!

What is Section 9 315 of UCC all about?

UCC 9 315 deals with a party’s right in the disposition of collateral and in its proceeds.

Generally, security interest or agricultural lien will continue to remain on the collateral regardless of the collateral being sold, exchanged, licensed, or disposed of in any way (with certain exceptions outlined in Section 2-403(2) UCC).

In addition to that, the security interest on collateral will also attach itself to the proceeds of the collateral.

Section 9-315 also deals with instances when proceeds are commingled with other property, the perfection of security interest in the proceeds, the continuation of the security interest perfection, and when the security interest becomes unperfected.

I hope that I was able to provide you with the essentials for you to understand provision 9-315 UCC.

Bear in mind that if you have any legal issues or need legal advice, you must consult a qualified attorney as this article is intended to be of general use and consumption.

Good luck!

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Now, let’s look at a summary of our findings.

Understanding UCC 9 315

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