Uniform Commercial Code Protections Affecting Vendor Claims: Purchase Money Security Interests And Reclamation

Dealing with a financially distressed customer requires both vigilance and creativity.  Vigilance is critical because closely monitoring a customer's payment history and overall financial situation will signal whether a vendor should take additional actions to protect itself.  Creativity comes into play in deciding what sort of protections are possible and appropriate in a given situation.  This is all especially important if the U.S. economy takes a downturn and financial distress becomes more common for more companies.  The Uniform Commercial Code (the UCC) provides certain creditor protections that can dramatically change a vendor's chances at full recovery.  Purchase money security interests (PMSIs) can allow a lender to jump ahead of a vendor's otherwise first priority lien rights.  In addition, reclamation of goods may allow a vendor to curtail its exposure.