When does a secured party lose priority over a purchaser in good faith?

A secured party loses priority over a purchaser in good faith when the purchaser provides new value and takes possession, as this reflects a transaction reliant on the good faith of the buyer. Under the Uniform Commercial Code (UCC), a purchaser of collateral who acts in good faith, without knowledge of the security interest, can obtain superior rights to the collateral if they provide value and take possession. This is particularly relevant in situations where the security interest has not been perfected.

When a purchaser takes possession of collateral, it indicates a commitment to the transaction, further solidifying their good-faith status. This priority can often eclipse the rights of a secured party, especially if the secured party did not properly perfect their interest according to the relevant statutory requirements.

While it is true that ignorance of a security interest is a factor in determining good faith, merely being unaware does not grant automatic priority unless coupled with new value and possession. Additionally, the delinquency of the secured party in perfecting their interest is a separate issue that can affect priority but does not embody the essence of good faith transactions where the purchaser is actively involved in the transfer of value and physical possession. Moving the collateral to another state can complicate matters of perfection and priority but does not directly impact the good faith