Article 9's Incorporation Strategy and Novel, New Markets for Collateral: A Theory of Non-Adoption

Article 9 of the Uniform Commercial Code establishes a commercial reasonableness standard requiring secured creditors to maximize collateral sale prices during foreclosure. Despite online auction platforms like eBay enabling efficient property sales for a decade, Article 9 secured creditors have been slow to adopt these channels. Korybut proposes a non-adoption theory explaining why secured parties fail to incorporate novel, efficient markets for selling repossessed collateral. The theory posits that wealth-maximizing secured creditors suffer from legal, business, and empirical data uncertainties when identifying, assessing, and using new markets. For riskier markets with higher perceived uncertainty, secured parties theoretically may never adopt them despite greater efficiency. Korybut argues that the slow adoption of online auctions reflects rational economic behavior in the face of uncertainty rather than market failure. The article explores how legal doctrine and commercial practice interact, examining why secured creditors continue using conventional, traditional markets despite potentially more efficient alternatives being available.

Topics: Corporate Law · Contracts

Keywords: Article 9 · secured creditors · collateral sales · commercial reasonableness · online auctions · foreclosure · Uniform Commercial Code