Shelter Principle and Buyers of Collateral 2-403

The video tutorial discusses the statutory protection for buyers under the Uniform Commercial Code (UCC), focusing on the role of secured parties and their interest in collateral. It explains the buyer in the ordinary course exemption and its limitations, particularly in cases of subsequent sales. The shelter principle is introduced as a means to protect purchasers by allowing them to inherit the rights of the seller, ensuring priority in certain transactions.

What is the primary purpose of a security interest in collateral?

• To protect the debtor from creditors

• To secure the payment of a debt owed to the secured party

• To ensure the buyer receives the goods

• To eliminate all debts of the debtor

In what situation is a purchaser of collateral not protected?

• When the collateral is sold to a non-consumer

• When the collateral is sold to a secured party

• When the collateral is sold multiple times

• When the collateral is sold to a buyer in the ordinary course

What does the buyer in the ordinary course exemption fail to do?

• Wipe away the security interest completely

• Protect the original buyer

• Provide any protection to the secured party

• Allow the debtor to sell the collateral

How does the shelter principle benefit a purchaser?

• By providing a new security interest for the purchaser

• By eliminating the need for a security interest

• By transferring the seller's debts to the purchaser

• By allowing the purchaser to inherit the seller's rights

What can a seller transfer under the shelter principle?

• Their debts

• Their buyer in the ordinary course status

• Their rights as a buyer in the ordinary course

• Their security interest