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Rule 3

Rule 3. If a cut off exception applies then T gets clear title even if SP has a perfected SI and whether or not SP has authorised the dealing. S 46 Mainly as consumer protection provision.

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Rule 3

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  1. Rule 3 If a cut off exception applies then T gets clear title even if SP has a perfected SI and whether or not SP has authorised the dealing

  2. S 46 Mainly as consumer protection provision. G is a furniture retailer. SP has a perfected SI in its inventory. Authorisation in the security agreement permits G to sell in the ordinary course of business. SP serves a notice on G withdrawing authority G sells an armchair ton T, a retail customer. Does T get clear title?

  3. If Rule 3 applied the answer is no. SP is perfected and has not authoried the dealing. But s 46 displaces the rule provided that T did not know that the sale was in breach the Security agreement. T should not be at risk of unpublished restrictions on the right to sell.

  4. Buyer G is a furniture retailer and SP1 has an SI in G’s inventory. G gives SP2 a security interest in one of its armchairs If SP2 is a purchaser (includes a SP) he wins. Hence use of term buyer which does not include a secured party s 42 Priority dispute between SP1 And SP2 is resolved by the priority rules in s 55(4) – first in time wins

  5. If T is a retail customer and rents a computer from G, s 46 also applies because it includes a lessee.

  6. Interest given by the seller Interest given by the seller or lessee G is lawyer. SP has a perfected SI in his office furniture and equipment G sells the furnture and equipment to a secondhand dealer X. X resells it to T. X takes subject to SP’s SI S 46 doesn’t apply because not in the OCB of G’s business. T bought from X but SI give by G.

  7. Motor car If G a lawyer and SP has a perfected SI in G’s car. G sells car to T. T needs to search by VIN and/or ABN of business If no SI reveled by he search from the time commencing at the start of the day before and the time of payment, T takes free of SP’s SI. Also if VIN incorrect or error in G’s ABN.

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