| | | excludes from its operation buyers of "farm products"(defined in | | Section 9-102 [Maine cite section 9-1102]) from a person engaged | | in farming operations. The buyer in ordinary course of business | | is defined as one who buys goods "in good faith, without | | knowledge that the sale violates the rights of another person and | | in the ordinary course." Subsection (a) [Maine cite subsection | | (1)] provides that such a buyer takes free of a security | | interest, even though perfected, and even though the buyer knows | | the security interest exists. Reading the definition together | | with the rule of law results in the buyer's taking free if the | | buyer merely knows that a security interest covers the goods but | | taking subject if the buyer knows, in addition, that the sale | | violates a term in an agreement with the secured party. |
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| | | As did former Section 9-307(1), subsection (a) [Maine cite | | subsection (1)] applies only to security interests created by the | | seller of the goods to the buyer in ordinary course. However, | | under certain circumstances a buyer in ordinary course who buys | | goods that were encumbered with a security interest created by a | | person other than the seller may take free of the security | | interest, as Example 2 explains. See also Comment 6, below. |
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| | | Example 1: Manufacturer, who is in the business of | | manufacturing appliances, owns manufacturing equipment subject to | | a perfected security interest in favor of Lender. Manufacturer | | sells the equipment to Dealer, who is in the business of buying | | and selling used equipment. Buyer buys the equipment from | | Dealer. Even if Buyer qualifies as a buyer in the ordinary | | course of business, Buyer does not take free of Lender's security | | interest under subsection (a) [Maine cite subsection (1)], | | because Dealer did not create the security interest; Manufacturer | | did. |
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| | | Example 2: Manufacturer, who is in the business of | | manufacturing appliances, owns manufacturing equipment subject to | | a perfected security interest in favor of Lender. Manufacturer | | sells the equipment to Dealer, who is in the business of buying | | and selling used equipment. Lender learns of the sale but does | | nothing to assert its security interest. Buyer buys the | | equipment from Dealer. Inasmuch as Lender's acquiescence | | constitutes an "entrusting" of the goods to Dealer within the | | meaning of Section 2-403(3) Buyer takes free of Lender's security | | interest under Section 2-403(2) if Buyer qualifies as a buyer in | | ordinary course of business. |
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| | | 4. Buyers of Farm Products. This section does not enable a | | buyer of farm products to take free of a security interest | | created by the seller, even if the buyer is a buyer in ordinary | | course of business. However, a buyer of farm products may take |
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