§ 9—103. Purchase-money security interest; application of payments; burden of establishing
(a) In this section:
(1) “Purchase-money collateral” means goods or software that secures a purchase-money
obligation incurred with respect to that collateral.
(2) “Purchase-money obligation” means an obligation of an obligor incurred as all or part
of the price of the collateral or for value given to enable the debtor to acquire
rights in or the use of the collateral if the value is in fact so used.
(b) A security interest in goods is a purchase-money security interest:
(1) to the extent that the goods are purchase-money collateral with respect to that security
interest;
(2) if the security interest is in inventory that is or was purchase-money collateral,
also to the extent that the security interest secures a purchase-money obligation
incurred with respect to other inventory in which the secured party holds or held
a purchase-money security interest; and
(3) also to the extent that the security interest secures a purchase-money obligation
incurred with respect to software in which the secured party holds or held a purchase-money
security interest.
(c) A security interest in software is a purchase-money security interest to the extent
that the security interest also secures a purchase-money obligation incurred with
respect to goods in which the secured party holds or held a purchase-money security
interest if:
(1) the debtor acquired its interest in the software in an integrated transaction in which
it acquired an interest in the goods; and
(2) the debtor acquired its interest in the software for the principal purpose of using
the software in the goods.
(d) The security interest of a consignor in goods that are the subject of a consignment
is a purchase-money security interest in inventory.
(e) In a transaction other than a consumer-goods transaction, if the extent to which a
security interest is a purchase-money security interest depends on the application
of a payment to a particular obligation, the payment must be applied:
(1) in accordance with any reasonable method of application to which the parties agree;
(2) in the absence of the parties’ agreement to a reasonable method, in accordance with
any intention of the obligor manifested at or before the time of payment; or
(3) in the absence of an agreement to a reasonable method and a timely manifestation of
the obligor’s intention, in the following order:
(A) to obligations that are not secured; and
(B) if more than one obligation is secured, to obligations secured by purchase-money security
interests in the order in which those obligations were incurred.
(f) In a transaction other than a consumer-goods transaction, a purchase-money security
interest does not lose its status as such, even if:
(1) the purchase-money collateral also secures an obligation that is not a purchase-money
obligation;
(2) collateral that is not purchase-money collateral also secures the purchase-money obligation;
or
(3) the purchase-money obligation has been renewed, refinanced, consolidated, or restructured.
(g) In a transaction other than a consumer-goods transaction, a secured party claiming
a purchase-money security interest has the burden of establishing the extent to which
the security interest is a purchase-money security interest.
(h) The limitation of the rules in subsections (e), (f), and (g) of this section to transactions
other than consumer-goods transactions is intended to leave to the court the determination
of the proper rules in consumer-goods transactions. The court may not infer from that
limitation the nature of the proper rule in consumer-goods transactions and may continue
to apply established approaches. (Added 1999, No. 106 (Adj. Sess.), § 2, eff. July 1, 2001.)