The Uniform Commercial Code is the "most important piece of business legislation ever prepared in the United States .... " "Article 9 is the most novel and probably the most important article in the Code." "The greatest change under the Code will probably come about in due time because of the so-called 'floating lien' "made possible in part by the Code's proceeds provision, section 9-306. The proceeds provision represents an innovation significant to both debtors and creditors. For example, in order to carry on his business, the borrower who avails himself of inventory financing often desires some right to dispose of goods when they are ready for sale. In many states, however, prior to the Code, a chattel mortgage was fraudulent as a matter of law unless all proceeds resulting from the exercise of the power of sale were applied to reducing the mortgage debt. Similarly, in many states, prior to the Code, failure to "police" the borrower resulted in lender's loss of the lien. Section 9-306 changes these pre-Code rules, and more. Despite its importance, section 9-306 has received little attention from either the courts or legal commentators. This article will explore three major problem areas under the Code proceeds provision.

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