eBay Auctions of Repossessed Motor VehiclesA Template for ...

* Professor of Law, Louis D. Brandeis School of Law, University of Louisville. I thank MichaelTroutman, a third year law student at Louis D. Brandeis School of Law for the many hours he spentobserving eBay Motors auctions and compiling data I used in this article. Contact Mike if you wantto buy a vehicle on eBay Motors, he has watched many auctions.

1. eBay first dedicated an area of their internet site to automotive sales in August 1999. Press Release,eBay Inc., eBay and AutoTrader.com Create Internet’s Largest Auction-Style Marketplace for UsedCars, http://investor.ebay.com/releasedetail.cfm?ReleaseID=22615 (Mar. 7, 2000) (last visited Feb.10, 2007). However, it was not until April 24, 2000, that eBay Motors was launched at the domain,http://www.ebaymotors.com. Press Release, eBay, Inc., eBay Motors and Autotrader.Com AnnounceTop Ten List of Used Cars, http://investor.ebay.com/news/releasedetail.cfm?ReleaseID=37538 (April24, 2001) (last visited Feb. 10, 2007).

2. See, e.g., U.C.C. §§ 9–102(a) (7)(b), (31), (39), (69) (the sections defining “authenticate,” “electronicchattel paper,” “financing statement,” and “record,” respectively); 9–101, cmt. 4h; 9–102, cmt. 9(2005). The definitions of “communicate” and “send” in sections 9–102(a)(18) and (74) respectively,link with “record” and thus also contemplate electronic transactions. U.C.C. §§ 9–102(a)(18) and (74)(2005). Unless otherwise indicated, all citations to the Uniform Commercial Code are to the 2005edition.

3. I observed sales of motor vehicles on eBay Motors internet Web site for two, approximately six-week,periods in 2006: June 19 to July 31, and October 26 to December 3. I observed only sales thatindicated the vehicles were repossessed. There were 160 such sales during that period. Eighty-foursales indicated clearly the seller was a secured party (data on file with author).

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EBAY AUCTIONS OF REPOSSESSED MOTORVEHICLES)A TEMPLATE FOR COMMERCIALREASONABLENESS UNDER REVISED ARTICLE 9 Richard H. Nowka*

I. INTRODUCTION

Suppose you are a secured creditor with a perfected security interest ina debtor’s 2005 Dodge Stratus. The debtor has defaulted, you haverepossessed the vehicle and you are planning for its sale. You contemplateusing eBay Motors, the internet auto auction component of eBay, to sell thevehicle.1 Does Revised Article 9 of the Uniform Commercial Code validatesuch an auction? Not explicitly. It says no more about the validity of aninternet auction disposition of collateral than did the previous versions ofArticle 9)all are silent. It appears the drafters of Revised Article 9 did notanticipate internet auctions as a means of selling repossessed collateral,although they show their awareness of electronic transactions in other sectionsof Revised Article 9.2 Of course there is nothing in Revised Article 9 thatindicates such sales would not be valid. Notwithstanding the lack of directstatutory authorization, secured creditors are using eBay Motors to dispose ofmotor vehicle collateral after the debtor has defaulted.3 It is not a surprising

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4. In August 2006, eBay Motors announced it sold its two millionth passenger vehicle in the UnitedStates, just six years after the Web site began operation. Press Release, eBay Inc., Two MillionthPassenger Vehicle Sold on eBay Motors, http://investor.ebay.com/releasedetail.cfm?ReleaseID=206868 (Aug. 8, 2006) (last visited Dec. 13, 2006). eBay Motors touts itself as the “Internet’s largestmarketplace for buying and selling all things automotive.” Id. It also states it has ten million shoppersevery month and sells a vehicle every 60 seconds. eBay Motors Why It Works,http://pages.motors.ebay.com/services/whysell.html (last visited Dec. 20, 2006). eBay Motorscharges a $40 Insertion Fee and a $50 Transaction Service Fee. eBay Motor Fees,http://pages.ebay.com/help/sell/motorfees.html (last visited Feb. 10, 2007).

5. The commercially reasonable standard is at section 9–610(b), and the notification standard is atsection 9–611(b). U.C.C. §§ 9–610(b); 9–611(b).

6. U.C.C. § 1–103(a)(1), cmt. 1.7. U.C.C. § 1–103(a)(1).8. I limit my analysis to motor vehicle collateral. My observations of eBay disposition sales were

limited to sales of motor vehicles on eBay Motors. However, I believe that the procedure I proposein this article would provide sufficient notice and be commercially reasonable for eBay auctions ofother types of collateral.

9. See, e.g., Matter of Britt, 78 B.R. 514 (Bankr. S.D. Ohio 1987) discussed infra p. 320.

development given the popularity of eBay among buyers, and the simplicityof selling on eBay.4

The issue surrounding an eBay Motors auction is whether it will satisfyArticle 9’s standards for disposing of collateral: notification and commercialreasonableness.5 I believe that there is nothing inherent in an eBay Motorsauction of a repossessed vehicle that prevents it from satisfying Article 9’srequirements. Furthermore, the UCC drafters intended for the Code to beflexible in light of unforeseen commercial practices:

The Uniform Commercial Code is drawn to provide flexibility so that,since it is intended to be a semi-permanent and infrequently-amendedpiece of legislation, it will provide its own machinery for expansionof commercial practices. It is intended to make it possible for the lawembodied in the Uniform Commercial Code to be applied by thecourts in the light of unforeseen and new circumstances and practices.6

Section 1–103 codifies this policy: “[The Uniform Commercial Code] must beliberally construed and applied to promote its underlying purposes andpolicies” which include “to simplify, clarify, and modernize the law governingcommercial transactions . . . .”7 Validating an eBay Motors auction of arepossessed motor vehicle fits that policy.

I have two objectives for this article. One is to present sample forms asecured party can use to help ensure that an eBay Motors auction of arepossessed vehicle satisfies Article 9’s standards for a disposition ofcollateral. My second objective is to discuss why an eBay auction complieswith those standards.8 I cannot, however, guarantee that a court will concurwith my opinions. A secured party could do everything right, yet a courtmight not validate an eBay Motors auction.9 An eBay auction is still emerging

2007] eBay Auctions 283

10. U.C.C. §§ 9–610(b); 9–611(b).11. U.C.C. § 9–610(b).12. “Part 5 of Article 9 [default] . . . opts for a loosely organized, informal, anything-goes type of

foreclosure pattern, subject to ultimate judicial supervision and control which is explicitly providedfor.” 2 GRANT GILMORE, SECURITY INTERESTS IN PERSONAL PROPERTY § 43.1, at 1183 (1965).Professor Gilmore was the primary drafter of the first official Article 9)the 1962 Official Text.BARKLEY CLARK & BARBARA CLARK, THE LAW OF SECURED TRANSACTIONS UNDER THE UNIFORMCOMMERCIAL CODE, §1.01[2][c] at 1–6 (rev. ed. 2006). The commercially reasonable standard ofRevised Article 9 is virtually the same as the standard of former Article 9, U.C.C. § 9–504(3) (1995).See infra note 170 for a comparison of those statutes.

13. See, e.g., R & J of Tenn. v. Blankenship-Melton Real Estate, Inc., 166 S.W.3d 195, 206 (Tenn. Ct.App. 2004); Westgate State Bank v. Clark 642 P.2d 961, 970–72 (Kan. 1982) ; Michael Korybut,Searching for Commercial Reasonableness Under the Revised Article 9, 87 IOWA L. REV. 1383(2002); William Mark Rudow, Determining the Commercial Reasonableness of the Sale ofRepossessed Collateral, 19 UCC L.J. 139 (1986); Richard C. Tinney, What Is “CommerciallyReasonable” Disposition of Collateral Required by U.C.C. § 9–503(3), 7 ALR4TH 308.

14. Courts routinely hold that the question of whether a disposition is commercially reasonable is aquestion of fact. See, e.g., Union Nat. Bank of Wichita v. Schmitz, 853 P.2d 1180 (Kan. App. 1993);Gulf Homes, Inc. v. Goubeau, 602 P.2d 810 (Ariz. 1979); Hall v. Owen County State Bank, 370N.E.2d 460 (Ind. App. 1977).

15. An eBay seller can set a “reserve” price; the minimum price at which the seller will sell the vehicle.eBay Reserve Price, http://pages.ebay.com/help/sell/reserve.html (last visited Dec. 28, 2006). Sellerscan also opt to sell for a fixed price, select an “ad format” to locate interested buyers, or choose the“best offer” format, which allows sellers to consider the best offer without an obligation to sell theitem at that price. eBay Selecting a Selling Format, http://pages.ebay.com/help/sell/formats.html (lastvisited Oct. 30, 2006).

as a means of disposing of repossessed collateral and who can say whether acourt will embrace it as commercially reasonable. I present a process that Iwould uphold were I the arbiter of the issue.

As I noted above, the Article 9 standards for every disposition ofrepossessed collateral are that every aspect of the disposition must becommercially reasonable, and the secured party must give reasonablenotification of the disposition.10 Article 9 adopts the commercially reasonablerequirement without elaboration by declaring that “[e]very aspect of adisposition of collateral, including the method, manner, time, place, and otherterms, must be commercially reasonable.”11 The drafters intentionally left thecommercially reasonable standard undefined.12 Case law and commentaryprovide much guidance on the question.13 Because of the general nature of therequirement, the question of whether a sale is commercially reasonable isdecided ultimately by the trier of fact.14

Many “aspects” of the disposition of a motor vehicle are automatically andirrevocably set by the secured party’s choice to use eBay Motors as the meansof disposition. The decision to sell through an eBay Motors auction sets themethod, manner and place of the disposition. The sales price of a vehicleauctioned on eBay Motors is determined typically by the highest bid.15

However, an important aspect of commercial reasonableness not set by that


16. Although the “time” of the disposition must be commercially reasonable, it has not presented alitigated issue in the case law for sales of motor vehicles. Used cars are sold every day and thus theredoes not seem to be a time for such a sale that would not be commercially reasonable.

17. The advertisement form is reproduced infra p. 307.18. U.C.C. § 9–611(b) (2005). Article 9 does not require the secured party to notify other secured parties

or lienholders when the collateral is consumer goods. U.C.C. § 9–611(c)(3). Consumer goods are“goods used or bought for use primarily for personal, family, or household purposes.” U.C.C. §9–102(a)(23).

19. See U.C.C. §§ 9–613 and 614. Section 9–613 establishes the required contents for a transaction otherthan a consumer-goods transaction, while section 9–614 does the same for a consumer-goodstransaction. A consumer-goods transaction occurs when an individual incurs an obligation primarilyfor personal, family, or household purposes, and a security interest in consumer goods secures theobligation. U.C.C. § 9–102(a)(24).

20. U.C.C. § 9–613, cmt. 2. The parties to the security interest could agree that a sufficient notificationrequires additional information. Id. Section 9–603 authorizes the parties to agree on the criterion forfulfillment of the duties of a secured party. U.C.C. § 9–603.

21. U.C.C. § 9–612(b). Article 9 grants no safe harbor for the timeliness of notice in consumertransactions. However, it seems unlikely a court would find ten-days notice unreasonable in theabsence of a legislative or judicial rule requiring otherwise. See cases cited in note 140, and CLARK& CLARK, supra note 12, § 4.08[7][c] at 4–218.

22. Notification forms are reproduced infra pp. 292 and 295.

choice is advertising the disposition.16 In Part III of this article I discusscommercially reasonable advertising in an eBay Motors auction and presenta form for an advertisement for an eBay Motors auction.17

Article 9’s notification requirement is that the secured party must send “areasonable authenticated notification of disposition” to the debtor, anysecondary obligor, and, as specified by Article 9, other secured parties orlienholders.18 Unlike the openness of the commercially reasonablerequirement, Article 9 lists the contents of a reasonable notification and alsoprovides a “safe harbor” notification form that the secured party can properlycomplete to ensure that the notification document provides sufficientinformation.19 The Official Comment to section 9–613 states that anotification that includes the information in section 9–613(1) is “sufficient asa matter of law.”20 Moreover, Article 9 also includes a “safe harbor” for thetime of the notification for all security interests that are not “consumertransactions.” A notification sent after default and at least ten days before thedisposition time is sent within a reasonable time.21 Utilizing Article 9’s “safeharbors,” a secured party can fulfill the “reasonable authenticated notification”standard by modifying the Article 9 forms to fit a disposition of the collateralin an eBay Motors auction. In Part II of this article I present and discussnotification forms for a secured party to use when it elects to dispose of thevehicle using an eBay Motors auction.22

Parts IV and V discuss the commercially reasonable standard generally inthe context of an eBay auction. Part IV proposes that a secured party and adebtor enter an agreement that sets the standards for the secured party’s


23. U.C.C. § 9–603(a).24. The agreement form is reproduced infra p. 317.25. See U.C.C. §§ 9–613(5) and 9–614(3). Section 9–613 establishes the notification requirements for

all secured transactions other than consumer-goods transactions. Section 9–614 governs notificationin consumer-goods transactions. A consumer-goods transaction occurs when an individual incurs anobligation for personal, family or household purposes, and a security interest in consumer goodssecures the obligation. U.C.C. § 9–102(a)(24). Consumer goods are goods “used or bought for useprimarily for personal, family, or household purposes. U.C.C. § 9–102(a)(23).

26. The persons who must be notified are listed in U.C.C. § 9–611(c), and include the debtor, secondaryobligor, and, if the collateral is other than consumer goods, secured parties, lienholders and otherclaimants as specified by the section.

compliance with Article 9’s commercially reasonable and notificationrequirements for a disposition of collateral when a secured party uses an eBayMotors auction. Article 9 explicitly authorizes this type of agreement.23

Additionally, I proffer a proposed form contract for such an agreement.24

Finally, Part V discusses my opinion that there is no inherent defect in an eBayMotors auction that prevents it from satisfying the standards of Article 9 fora disposition of a repossessed motor vehicle.

II. THE NOTIFICATION “SAFE HARBOR”

As I noted in the introduction, Article 9 furnishes a “safe harbor” form fornotification of the disposition of collateral.25 A secured party who properlycompletes the form has created a reasonable authenticated notification. Ofcourse the secured party must send the notification to the proper persons tofully comply with the notification requirement.26 With slight modification, theArticle 9 safe harbor form can be used to fulfill the notification requirementof section 9–611(b) when the disposition is through an eBay Motors auction.

The safe harbor notification form for dispositions under security interestsother than consumer-goods transactions is found in section 9–613(5). Theform provides for the insertion of all the information section 9–613(1) requiresfor a sufficient notification of disposition of collateral: a description of debtorand secured party; a description of the collateral to be disposed of; adeclaration of the method of the disposition and the applicable time and placethereof; and a statement that the debtor is entitled to an accounting of theunpaid indebtedness and any charge for the accounting. Section 9–613(5)declares: “The following form of notification and the form appearing inSection 9–614(3) [consumer-goods transaction form], when completed, eachprovides sufficient information:


27. U.C.C. § 9–611(b) (emphasis added).28. U.C.C. § 9–102(a)(7). The meaning of “authenticate” also includes “to sign.” Id. “’Signed’ includes

using any symbol executed or adopted with present intention to adopt or accept a writing.” U.C.C.§ 1–201(b)(37).

NOTIFICATION OF DISPOSITION OF COLLATERAL

To: [Name of debtor, obligor, or other person to which the notification is sent]

From: [Name, address, and telephone number of secured party]

Name of Debtor(s): [Include only if debtor(s) are not an addressee]

[For a public disposition:]We will sell [or lease or license, as applicable] the [describe collateral] [to thehighest qualified bidder] in public as follows:

Day and Date:Time:Place:

[For a private disposition:]We will sell [or lease or license, as applicable] the [describe collateral]privately sometime after [day and date] .

You are entitled to an accounting of the unpaid indebtedness secured by theproperty that we intend to sell [or lease or license, as applicable] [for a chargeof $]. You may request an accounting by calling us at [telephone number]. [End of Form]

Although the notification requirement of section 9–611(b) is “a reasonableauthenticated notification,” the form does not require the signature of thesecured party.27 That is because under Article 9, “authenticate” has a broadermeaning than “sign.” “Authenticate” includes “to execute or otherwise adopta symbol, or encrypt or similarly process a record in whole or in part, with thepresent intent of the authenticating person to identify the person and adopt oraccept a record.”28 The "safe harbor" form satisfies the “authenticate”requirement because the secured party includes its name, address and


29. A secured party who authenticates the notification with its signature at the bottom of the form doesnot block the safe harbor. Section 9–613(3)(A) authorizes inclusion of information not specified bythe notification requirements. U.C.C. § 9–613(3)(A).

30. U.C.C. § 9–613(1)(E). The form notification provides for compliance with either type of disposition.U.C.C. § 9–613(5).

31. U.C.C. § 9–610(c)(1). The secured party can purchase the collateral at a private disposition only ifthe collateral is of a kind sold on a recognized market, e.g., a stock exchange market, or the subjectof widely distributed standard price quotations. U.C.C. § 9–610(c)(2). Motor vehicle auctions do notsatisfy this standard so it seems very unlikely courts would hold that an eBay auction would satisfythe standard. UCC § 9–610, cmt. 9. See e.g., Community Management Ass’n of Colorado Springs,Inc. v. Tusley 505 P.2d 1314, 1315 (Colo. Ct. App. 1973) (repossessed automobiles are ot collateralof a type sold on a recognized market within the meaning of 9–594(3)); Nelson v. Monarch Inv. Planof Henderson, Inc., 452 S.W.2d 375 (Ky. 1970) (we do not have such a recognized market forrepossessed automobiles as a class); Carter v. Rayburn Ford Sales, Inc. 451 S.W.2d 199, 202–03(Ark. 1970) rev’d on other grounds, First State Bank of Morrilton v. Hallett, 722 S.W.2d 555, (Ark.1987) (the NADA book is merely a guide to the price of a vehicle of that year, make and model inan average condition); but see, L. C. Arthur Trucking Inc. v. Evans, 13 UCC Rep. Serv.2d 623, 625(Va. Cir. Ct. 1990) (because of the volume of tractor trailer truck traffic apparent from commonobservation, we presume there must be a recognized market where these vehicles are bought andsold).

32. eBay does not permit sellers to bid on their own items. eBay also prohibits family members,roommates and employees of sellers from bidding on a seller’s item, even if their sole intent is topurchase the item. While sellers may have more than one account with eBay, “there must never beany interaction between the accounts in the areas of bidding or feedback”. eBay Rules and Policies:Shill Bidding, http://pages.ebay.com/help/policies/seller-shill-bidding.html (follow “Additional Information”hyperlink) (emphasis in original) (last visited Aug. 17, 2006).

telephone number with the intent to identify itself and adopt the notificationas its own.29

A. Public or Private Disposition

Because the "safe harbor" notification form includes different informationdepending on whether the sale is public or private, a secured party mustdecide, before it completes the notification form, whether an eBay Motorsauction is a public or private disposition. A notification of a public sale mustinclude the time and place of the sale, while the private sale notification muststate the time after which the private sale will occur.30 The public/privatedetermination has other meaningful ramifications. One is that Article 9authorizes a secured party to purchase the collateral if the disposition ispublic.31 However, eBay prohibits the seller from bidding in its own auction,thus the public/private distinction is irrelevant regarding the right topurchase.32 A second consequence of the public/private determination is theeffect on the validity of the notification when the secured party sendsnotification of one method of sale, but actually sells via a different method.For example, suppose a secured party sends notification of a private sale of


33. See, e.g., Ford Motor Credit Company v. Solway, 825 F.2d 1213, 1217–18 (7th Cir. 1987) (creditor’snotice, which described a private sale, was insufficient when disposition was by public auction); Gen.Elec. Credit Auto Lease, Inc. v. Paty, 776 S.W.2d 829, 830–31 (Ark. Ct. App. 1989) (creditor’sallegation that auction was private and dealer-only, as described in the notice, was without supportingevidence – the court found the auction public, and creditor’s deficiency action therefore failed).

34. U.C.C. § 9–611(b).35. Section 9–626(a) establishes the rebuttable presumption rule. It operates when a debtor contests a

secured party’s compliance with Article 9, and the secured party is unable to prove compliance.U.C.C. § 9–626 (a)(1). The rule presumes that the disposition of the collateral would have yieldedproceeds equal to the sum of the secured debt, the expenses incurred by the secured party, and thesecured party’s attorney fees had the secured party complied with Article 9’s requirements. U.C.C.§ 9–626(a)(3) and (4) The secured party can rebut the presumption by proving the proceeds of sucha disposition would be less than those amounts. U.C.C. § 9–626(a)(4). The rule does not operate inconsumer transactions. U.C.C. § 9–626(b).

36. U.C.C. § 9–610, cmt. 7.37. See 9 RONALD A. ANDERSON, UNIFORM COMMERCIAL CODE § 9–504:367, at 648 and § 9–610:7 at

936 (3d ed. 1999 rev.); Beard v. Ford Motor Credit Co., 850 S.W.2d 23, 27–28 (Ark. Ct. App.1993);Bank of Am. v. Lallana, 960 P.2d 1133, 1139 (Cal. 1998).

38. See Lloyd’s Plan, Inc. v. Brown, 268 N.W.2d 192 (Iowa 1978); John Deery Motors, Inc. v.Steinbronn, 383 N.W.2d 553 (Iowa 1986); Beard, 850 S.W.2d at 23.

collateral but in fact sells the collateral in a public sale. Courts have beennearly uniform in finding the notification insufficient in the cases where asecured party gives notification of a public sale but sells via a private sale, andvice versa.33 An insufficient notification means that the secured party did notconduct the disposition in accordance with the provisions of Article 9.34 Thatfailure can put the secured party’s recovery of a deficiency at risk because ofArticle 9’s “rebuttable presumption rule.”35 Because of the importance of thepublic/private determination I consider whether an eBay auction is a public orprivate disposition before I analyze the modifications to the form that arenecessary for an eBay Motors auction.

Article 9 does not define what the terms public or private mean. TheOfficial Comment provides some enlightenment.

Although the term is not defined, as used in this Article, a "publicdisposition" is one at which the price is determined after the publichas had a meaningful opportunity for competitive bidding."Meaningful opportunity" is meant to imply that some form ofadvertisement or public notice must precede the sale (or otherdisposition) and that the public must have access to the sale(disposition).36

Pursuant to this comment the essence of a public disposition is the public’sopportunity to participate.37 Courts considering the issue have focused on thepremise that a public disposition means the public is invited to attend and bidand is informed when and where the sale is to be held.38 Surely “public” mustconnote “unrestricted” in the sense that the disposition is not limited to a


39. Numerous courts and commentators agree. See, e.g., Beard, 850 S.W.2d 23; Garden National Bankof Garden City v. Cada, 738 P.2d 429 (1987); John Deery Motors, 383 N.W.2d 553. Note that thesecases are interpreting section 9–504 of old Article 9. It authorized public or private dispositions ofcollateral, and, like Revised Article 9, included no definition of those terms. See also CLARK &CLARK, supra note 12 at, § 4.08[2] at 4–190; 9 RONALD A. ANDERSON, UNIFORM COMMERCIAL CODE§ 9–504:367, at 648 and § 9–610:7 at 936 (3d ed. 1999 rev.). One of the definitions of “public” in theMerriam-Webster Online Dictionary is: “accessible to or shared by all members of the community.”Merriam-Webster Online Dictionary, http://www.m-w.com/dictionary/public (last visited July 25,2006).

40. See, e.g., Beard, 850 S.W.2d 23; Garden National Bank, 738 P.2d 429; John Deery Motors, 383N.W.2d 553; In re Estate of Sagmiller, 615 N.W.2d 567.

41. Online browsing at work has become so common with Kentucky state employees that the governorof Kentucky blocked certain internet sites from state employees. Tom Lofton, State Treasurer FightsBlockage of Internet Sites, LOUISVILLE COURIER-J., June 24, 2006 at B1.

42. eBay does not permit sellers or family members, roommates and employees of sellers to bid on aseller’s item, “even if their sole intent is to purchase the item.” eBay Rules and Policies: ShillBidding, http://pages.ebay.com/help/policies/seller-shill-bidding.html (last visited Aug. 17, 2006).

43. Registration requires the user to enter their name, street address and telephone number. eBayRegistering for the First Time, http://pages.ebay.com/help/newtoebay/durreg_ov.html (last visitedFeb. 17, 2007). Users may also opt to register as a business. eBay Registering as a Business,http://pages.ebay.com/help/newtoebay/bizreg.html (last visited Feb. 17, 2007).

44. eBay Your User Agreement, http://pages.ebay.com/help/policies/user-agreement.html (last visitedOct. 30, 2006).

45. See Lloyd’s Plan, 268 N.W.2d 192; John Deery Motors, 383 N.W.2d 553; Beard, 850 S.W.2d 23.

specified group or groups.39 Agreeing with that contention are the many courtsthat have held “dealer only” auctions are private sales.40

An eBay Motors auction should be deemed a public disposition for severalreasons. First, the public is invited to peruse the vehicles for sale on eBayMotors. A person need only have access to the internet to browse the items forsale. Access to the internet can be gained at most public libraries for free, atinternet cafes for a nominal cost, and for many people from their home oroffice computer.41 There is neither a fee nor registration required for a personto view the items for sale on eBay. Thus, much like a physical auction, anyonecan attend, inspect the item, and watch the bidding.

Second, bidding is not restricted to specified members of the public;anyone can bid on eBay.42 However, in order to bid, a person must registerwith eBay.43 Registration simply requires the user to complete a form whichallows the user to create a username and password. Of course the user mustaccept the terms of eBay’s user agreement.44 There is no cost to register. Nordoes a user pay a fee to bid or buy.

Third, the characteristics of an eBay Motors auction comport with caselaw definitions of a public sale. Courts note that the premise of a public saleis that it is accessible to all members of the community.45 An eBay Motorsauction is accessible to all. The fact that a person must have access to theinternet in order to “attend” the auction does not legitimatize an argument thatan eBay Motors auction is restricted to a certain group. These reasons


46. U.C.C. § 9–613(1)(C). Note that section 9–610(b), which adopts the commercially reasonablerequirement, lists “public or private proceedings” among the types of authorized dispositions providedeither is commercially reasonable. U.C.C. § 9–610(b). That could be construed as not requiring achoice of public or private, but rather as a reiteration that it is the commercial reasonableness of thedisposition that is relevant, not the type.

47. U.C.C. § 9–613(1)(E).48. One treatise agrees: “On the other hand, it should not be fatal if the notice does not expressly label

the sale as public or private, as long as it indicates the precise time of a true public auction, or the timeafter which the collateral will be disposed of at a private sale.” CLARK & CLARK, supra note 12 at,§ 4.08[2] at 4–190–91.

49. See Davis v. Huntsville Prod. Credit Ass’n, 481 So. 2d 1103, 1107 (Ala. 1985) (“Furthermore, thenotice must identify whether the sale is public or private, in addition to meeting the time and placerequirements; the law will not put the debtor in the perilous position of interpreting a vague notice.”)

50. U.C.C. § 9–613(1)(E).

persuade me that an eBay Motors auction should be classified as a publicdisposition.

I could argue that Article 9 does not require explicitly that a securedparty designate the sale as public or private and accordingly the public/privateclassification problem disappears. The section 9–613(1)(C) requirement fora sufficient notification is that it “states the intended method of disposition.”46

The section does not require that a secured party designate the sale as publicor private. Accordingly, the following notification would be sufficient becauseit states the method of sale without labeling it public or private: “The securedparty will sell the 2005 Dodge Stratus to the highest bidder in an eBay Motorsauction to be held from August 1 to August 8.” Furthermore, it states the timeand place of the sale (eBay Motors, August 1 to August 8), or the time afterwhich the collateral will be sold (highest bidder on August 8) which shouldsatisfy the requirements pertaining to “the time and place of a publicdisposition or the time after which any other disposition is to be made.”47 Mypoint is that because there is no rule of Article 9 that requires a secured partyto designate the disposition either public or private, a notification that clearlyindicates the method of disposition should be sufficient.48 Of course it’s easyfor me to make this argument because my client’s deficiency recovery is notin jeopardy. Caution dictates that a secured party designates the sale eitherpublic or private to facilitate compliance with the notification requirements ofArticle 9.49

B. Form and Notification Requirements for a Public Disposition

Determining that an eBay auction is a public sale establishes that thenotification requirements are those applicable to a public sale. The notificationmust contain the time and place of the disposition.50 To comply with theserequirements a secured party should begin with the “safe harbor” notification


51. U.C.C. § 9–613(5). Ostensibly the “safe harbor” form adds to the information required by section9–613(1)(E) (time and place) by adding “day and date.” However, the Official Comment states thatthe “reference to “time of disposition means . . . not only the hour of the day but also the date.”U.C.C. § 9–613, cmt. 2. In any event, the “safe harbor” requirements are what a secured party wantsto satisfy because the "safe harbor" form “provides sufficient information,” so a secured party shouldcomplete the form even if it seems to vary from the listed requirements. U.C.C. § 9–613(5).

52. eBay offers a variety of ways which sellers can list their items. The most common method of listingis the online auction, which offers sellers the choice to list their vehicle for 3, 5, 7 or 10 days (someauctions can be set to last one day, but not vehicle auctions). Sellers can also opt to sell for a fixedprice, select an “ad format” to locate interested buyers, or choose the “best offer” format, whichallows sellers to consider the best offer without an obligation to sell the item at that price. eBaySelecting a Selling Format, http://pages.ebay.com/help/sell/formats.html (last visited Oct. 30, 2006).

53. Of 160 auctions I observed in researching this article, 125 were seven day auctions (data on file withauthor).

54. See “Uniform Resource Locator” at Wikipedia, http://en.wikipedia.org/wiki/URL (last visited July1, 2006).

55. Once at the eBay Motors page, the user can browse all vehicles for sale by clicking on the “Buy” link.That gives access to thousands of vehicles. More beneficial to the user is to search for a particularvehicle or to search under the terms “repo” or “bank repo” which show the user repossessed vehicles

form reproduced in section 9–913(5). The form satisfies the time-and-placerequirements by listing the “Day and Date,” “Time,” and “Place.”51

A secured party holding an eBay Motors auction can choose the lengthof the auction from three, five, seven or ten days.52 The majority of auctionsI observed on eBay Motors lasted for seven days.53 Accordingly, it is unlikelya secured party would properly complete the “safe harbor” form if it merelylisted the day, date and time of the opening day of the eBay Motors auction.The notification must include the dates and times of the entire auction. Forexample, if the secured party chooses a seven-day auction to begin on March1 at ten o’clock in the morning the notification should state:

Day and Date: Wednesday, November 1, 2006 to Wednesday,November 8, 2006. Time: November 1, 2006, 10:00 a.m. toNovember 8, 2006, 10:00 a.m.

Listing the entire time of the auction is certainly not a difficult task. Thesecured party simply determines the length, starting time, and ending time ofthe auction and enters the complete information on the form.

The only other requirement of the "safe harbor" notification for an eBayMotors auction that differs from the ordinary auction is the “place” of the sale.The place of the sale is an internet site. Fortunately, even internet sites havean address)a Web address. Technically, the Web address is a URL, oruniform resource locator. The URL is a grouping of characters conforming toa standardized format.54 The URL for eBay Motors ishttp://www.motors.ebay.com/. A person with access to the internet simplytypes in those characters in the address box of the user’s internet browser andthe eBay Motors auction site will load.55 I would advise a secured party to use


offered for sale. Frequently the seller of such vehicles is the secured party. Of 160 auctions Iobserved in 2006, the secured party was the seller in 84 auctions.

56. Perhaps a notification that uses the basic eBay URL (http://www.ebay.com/) rather than eBay Motors’URL would satisfy the "safe harbor" for “Place,” because the auction is taking place at a specific siteon eBay’s comprehensive Web site. However, a secured party should not take the risk that a courtmight find that address insufficient when it is a simple matter to include the eBay Motors URL.

57. A seller can customize the eBay entry for its vehicle with colored bans, highlighting, etc. eBay offersa number of upgrades and customizations sellers can opt to purchase to aid in promoting their listing.The upgrades and customizations generally appear in search results to make the listing stand out fromother auctions. Most of these upgrades are available for a flat fee, and include highlighting, bordersand bold text, subtitles, and picture galleries. eBay Promoting Your Item with Listing Upgrades,http://pages.ebay.com/help/sell/promoting_ov.html (last visited Oct. 30, 2006).

the eBay Motors URL in its notification. It is the most specific address a sellercan use for the “Place” of the sale.56 Note that a seller cannot send notificationof the address of the specific Web page on eBay Motors where its vehicle willappear because eBay constructs its Web pages.57 Accordingly, the “Place” boxon the "safe harbor" form should be as follows:

Place: http://www.motors.ebay.com/

The above changes to the "safe harbor" form are the only changes thesecured party need make. The revised form for an eBay sale, designated bythe secured party as a public sale, appears below. I have underlined thechanges I made that vary the section 9–613 form:

NOTIFICATION OF DISPOSITION OF COLLATERAL

To: [Name of debtor, obligor, or other person to which the notification is sent]

From: [Name, address, and telephone number of secured party]

Name of Debtor(s): [Include only if debtor(s) are not an addressee]

We will sell the [describe collateral] [to the highest qualified bidder] in publicas follows:

Day and Date: [Include day and date for entire length of auction] [e.g.,Wednesday, November 1, 2006 to Wednesday, November 8, 2006.]Time: [Include time of entire length of auction] [e.g., November 1, 2006,10:00 a.m. to November 8, 2006, 10:00 a.m.]Place: http://www.motors.ebay.com/


58. U.C.C. § 9–613(3)(a).59. If a secured party concludes that an eBay Motors auction of a motor vehicle is a private sale, the

secured party can comply with the "safe harbor" requirements by substituting the following provisionfor the public sale paragraph:

[For a private disposition:]We will sell the [describe collateral] privately at an auction on eBay Motors, locatedat http://www.motors.ebay.com/, beginning on [insert date and time] [e.g.,November 1, 2006, at 10:00 a.m.] and ending on [insert date and time] [e.g.,November 8, 2006, at 10:00 a.m.]

60. A consumer-goods transaction occurs when an individual incurs an obligation for personal, familyor household purposes, and a security interest in consumer goods secures the obligation. U.C.C. §9–102(a)(24). Consumer goods are goods “used or bought for use primarily for personal, family, orhousehold purposes.” U.C.C. § 9–102(a)(23).

You are entitled to an accounting of the unpaid indebtedness secured by theproperty that we intend to sell [or lease or license, as applicable] [for a chargeof $]. You may request an accounting by calling us at [telephone number].[End of Form]

My modifications to the Article 9 "safe harbor" form should not preventit from serving as a “safe harbor.” The variations from a typical auctionnotification are two. First, the day, date, and time span several days and timesrather than a single day and time. Second, the place is a Web address ratherthan a street address. Obviously, the changes are minimal. In fact, one couldreasonably conclude that the modifications do not change the form at all, butmerely provide the information that is necessary to properly complete the formwhen the sale is an eBay Motors auction. Moreover, section 9–613 validatesthe contents of a notification that includes additional information if thenotification provides “substantially” the information section 9–613(1)requires.58 The eBay Motors auction notification form with “additionalinformation” provides “substantially,” if not entirely, the section 9–613(1)information. It includes all the information the section requires and indicatesan expanded day and date, time, and place.59

C. Form and Notification Requirements for a Consumer-Goods SecurityInterest

The preceding paragraphs pertain to notification of dispositions of motorvehicles under security interests that are not consumer-goods transactions.60

When the secured party uses eBay Motors to sell a motor vehicle that iscollateral in a consumer-goods transaction, section 9–614 establishes therequirements and the "safe harbor" form. Section 9–614 incorporates all thesection 9–613(1) information, and adds information relating to liability for a


61. “A notification of disposition must provide . . . the information specified in Section 9–613(1).”U.C.C. § 9–614(1)(A).

62. U.C.C. § 9–614(3) (emphasis added).63. The Official Comment to § 9–613 notes that “time” means the date and hour of day, but is silent as

to “day.” U.C.C. § 9–613, cmt. 2.64. That would be contrary to the general definition of “date.” See Merriam-Webster Online Dictionary,

http://www.m-w.com/cgi-bin/dictionary/date (last visited July 25, 2006).65. U.C.C. § 9–614(4) (emphasis added).

deficiency, contact information and the right to redeem the collateral.61

Section 9–614 makes what seems to be an inconsequential change fromsection 9–613 to the "safe harbor" form requirements for time and place.Where the form in section 9–613 uses “Day and Date,” “Time,” and “Place,”section 9–614 uses “Date,” “Time,” and “Place.”62 The Official Comment tothe section is silent regarding the change.63 Omitting the requirement of “Day”seems more likely an oversight of the drafters. One would think the drafterswould want more information on the consumer notification, not less. Perhapsthe drafters assume “Date” means “Day and Date.”64 However, I would notadvise a secured party to include the day. The "safe harbor" form does notrequire it. Including it provides another opportunity for the secured party tomake a mistake, e.g., use the wrong day. And the “minor error” subsection ofsection 9–614, while its purpose is to save a notification with errors, operates“unless the error is seriously misleading,” thus raising the question of whethera mistake in the “day” is seriously misleading. It sounds slightly obsessive toadvise a secured party to leave out the day, but my rationale is when thedrafters give a "safe harbor," I sail into it using their coordinates.

Section 9–614(4), like section 9–613(3), validates the inclusion ofadditional information on the "safe harbor" form. However, its authorizationdiffers slightly from section 9–613: “A notification in the form of paragraph(3) is sufficient, even if additional information appears at the end of theform.”65 Apparently, a secured party can be protected if it adds information tothe "safe harbor" form as long as it adds the information at the end of the form.The information a secured party adds to the "safe harbor" form when the saleis an eBay Motors auction “appears” in the middle of the form not “at the endof the form.” Nevertheless, that information should not block a secured partyfrom the protection of the "safe harbor,” because the secured party is not trulyadding information to the form. Rather, the secured party is properlycompleting the form to provide accurate information for an eBay Motorsauction. Thus, the protection of section 9–614(4) is not engaged because thereis no “additional information.”


A modified "safe harbor" form for a consumer transaction follows. Mymodifications are underlined. The modifications are minor and should notprevent the form from serving as a “safe harbor.”

[Name and address of secured party][Date]

NOTICE OF OUR PLAN TO SELL PROPERTY

[Name and address of any obligor who is also a debtor]Subject: [Identification of Transaction]We have your [describe collateral], because you broke promises in ouragreement.We will sell [describe collateral] at public sale. The sale will be held asfollows:

Date: [Include dates of entire length of auction] [e.g., November 1, 2006 toNovember 8, 2006.]Time: [Include time of entire length of auction] [e.g., November 1, 2006,10:00 a.m. to November 8, 2006, 10:00 a.m.]Place: http://www.motors.ebay.com/

You may attend the sale and bring bidders if you want.

The money that we get from the sale (after paying our costs) will reduce theamount you owe. If we get less money than you owe you [will or will not, asapplicable] still owe us the difference. If we get more money than you owe,you will get the extra money, unless we must pay it to someone else.

You can get the property back at any time before we sell it by paying us thefull amount you owe (not just the past due payments), including our expenses.To learn the exact amount you must pay, call us at [telephone number].

If you want us to explain to you in writing how we have figured the amountthat you owe us, you may call us at [telephone number] [or write us at [securedparty's address]] and request a written explanation. [We will charge you $ forthe explanation if we sent you another written explanation of the amount youowe us within the last six months.]


66. If a secured party concludes that an eBay Motors auction of a motor vehicle is a private sale, thesecured party can comply with the "safe harbor" requirements by substituting the following provisionfor the public sale paragraph:

We will sell the [describe collateral] privately at an auction on eBay Motors, locatedat http://www.motors.ebay.com/, beginning on [insert date and time] [e.g.,November 1, 2006, at 10:00 a.m.] and ending on [insert date and time] [e.g.,November 8, 2006, at 10:00 a.m.].

67. See, e.g., R & J of Tenn., Inc. v. Blankenship-Melton Real Estate, Inc., 166 S.W.3d 195, 209 (Tenn.Ct. App. 2004); The Bank Josephine v. Conn, 599 S.W.2d 773, 775 (Ky. Ct. App. 1980). Part II ofthis article discusses why an eBay Motors auction is a public disposition.

68. The pertinent subsections of Article 9, sections 9–610(a) & (b), do not list advertising as arequirement of a commercially reasonable disposition. One could assert that advertising is acomponent of the “manner” of disposition. U.C.C. § 9–610(b).

69. U.C.C. § 9–610, cmt. 7.70. Id.

If you need more information about the sale call us at [telephone number] [orwrite us at [secured party's address]].

We are sending this notice to the following other people who have an interestin [describe collateral] or who owe money under your agreement:

[Names of all other debtors and obligors, if any].66

III. ADVERTISING THE SALE AS A COMPONENT OF ACOMMERCIALLY REASONABLE SALE

Without question, advertising is required for a commerciallyreasonable public disposition of collateral.67 Accordingly, theadvertising must be commercially reasonable. The issue is what typeof advertising will help a secured party produce a commerciallyreasonable sale. I first examine the components of a sufficientadvertisement and then offer a form advertisement to be used for adisposition of collateral on eBay Motors.

Article 9 does not explicitly make advertising the disposition arequirement of a commercially reasonable sale.68 However, the OfficialComment establishes advertising as a component of a commerciallyreasonable public disposition although, like the section, it does notdeclare advertising a “requirement.” The comment defines “a publicdisposition” as “one at which the price is determined after the publichas had a meaningful opportunity for competitive bidding.”69 It notesfurther that: “[m]eaningful opportunity’ is meant to imply that someform of advertisement or public notice must precede the sale . . . .”70

Accordingly, advertising functions to inform potential bidders of the


71. R & J of Tenn., 166 S.W.3d at 209. See also Lister v. Lee-Swofford Inv., L.L.P., 195 S.W.3d 746,752 (Tx. Ct. App. 2006) (Court notes advertising as a commercially reasonable factor and mayinvolve advertising in trade publications.); The Bank Josephine, 599 S.W.2d at 775 (Court finds salecommercially unreasonable where secured party failed to introduce evidence how the sale was noticedor advertised to the public.). Barkley Clark states that “[O]ne of the most important elements ofcommercial reasonableness is the duty to surround the sale with publicity sufficient to attract a ‘livelyconcourse of bidders’”. CLARK & CLARK, supra note 12 at § 4.08[5] at 4–198; Tinney, supra note13, at 369 (“Actions taken by a secured party to publicize an intended sale of repossessed collateralhave been recognized . . . as important factors to be considered . . . in determining whether the securedparty complied with the requirement of U.C.C. § 9–504(3) that all aspects of the sale be commerciallyreasonable.”); Korybut, supra note 13, at 1394 (“In their commercial reasonableness review underformer Article 9, courts typically assessed a variety of aspects in determining a sale’s commercialreasonableness, including . . . the nature of advertising . . . .”).

72. R & J of Tenn., 166 S.W.3d at 209. See also, Ford Motor Credit Co. v. Price, 163 Cal. App.3d 745(Cal. Ct. App. 1985); Foster v. Knutson, 527 P.2d 1108, 1114 (Wa. 1974).

73. CLARK & CLARK, supra note 12 at § 4.08[5] at 4–198. Courts have repeated the phrase. SeeWestgate State Bank v. Clark, 642 P2d 961, 970 (Kan. 1982). The phrase “lively concourse ofbidders” seems to have originated from Professor Grant Gilmore in his 1965 treatise. His insight asto the possibility of attracting such bidders bears repeating here.

At a “public sale” it may be hoped, there will be that lively concourse of bidderswhich will protect the secured party from his own weakness and drive the price upto those Himalayan peaks of fair value and true worth. It may be hoped but the hopewill almost certainly be disappointed. The concourse of bidders at the typicalforeclosure sale, be it ever so “public,” is apt to be about as lively as a group ofmourners at a funeral.

2 GILMORE, supra note 12 at, § 44.6 at 1242.74. The public/private determination is discussed at supra p. 287.75. A commercially reasonable advertisement should identify the time and place of the disposition and

describe the collateral. See, e.g., First Bank of S.D. v. Harberer Dairy & Farm Equip., Inc., 412N.W.2d 866 (S.D. 1987).

76. See U.C.C. §§ 9–613(1) and 9–614(1).

sale in order to bring about vigorous bidding. Courts andcommentators also have included advertising as a factor of acommercially reasonable sale.71 A Tennessee court, reviewing thecommercial reasonableness of a public sale stated “advertising of somesort should be conducted in order to increase competitive bidding andmaximize proceeds.”72 Barkley Clark, in his treatise on securedtransactions, declares that advertising must be designed to “attract a‘lively concourse of bidders.’”73 Accordingly, a secured party whoelects to sell a vehicle at an eBay Motors auction, a public sale, shouldadvertise the sale to achieve a commercially reasonable disposition.74

If the goal is to produce competitive bidding the advertising mustbe designed to inform the relevant public of what is being sold andwhen and where it is being sold.75 A secured party supplies that sameinformation to the debtor when it sends the notification of sale. Thatnotification includes a description of the collateral and the place andtime of the auction.76 The secured party should simply reproduce thatinformation in its advertising of the disposition.


77. Many eBay Motors auctions held by secured parties included multiple pictures of the vehicle withtheir eBay entry (data on file with author).

78. Most secured party sellers on eBay Motors listed a place where an interested person could inspect thevehicle (data on file with author).

79. See Connex Press, Inc. v. Int’l Airmotive, Inc., 436 F. Supp. 51, 57. (D.C.D.C. 1977) (declaringsecured party’s failure to show executive jet as a factor contributing to commercialunreasonableness); Gulf Homes, Inc. v. Goubeaux, 602 P.2d 810, 814 (Ariz. 1979) (citing fact thatinspection of collateral was 125 miles from location of sale contributed to commercially unreasonablesale of a mobile home). Barkley Clark includes availability of collateral for inspection in his list offactors of a commercially reasonable disposition. CLARK & CLARK, supra note 12 at § 4.08[5][d] at4–200.

80. An eBay Motors auction is actually international since anyone with access to the internet can browseand bid. However, it is more likely the bidders will be located in North America because the buyeris responsible for transporting the vehicle from the secured party’s location to wherever the buyerwants it. eBay Motors sites exist in Australia, Canada, France, Germany, Italy and the UnitedKingdom. eBay Motors, http://www.motors.ebay.com/ (last visited Jan. 15, 2007).

81. One type of national advertising is the advertising done by eBay. See infra p. 303.

The advertisement should also indicate when and where the vehicleis available for inspection. In the situation of an internet auction, it islikely there will be few persons wanting to inspect the vehiclephysically because many potential bidders will not be located near thecollateral.77 However, the burden on the secured party of allowinginspection is slight: it can simply make the vehicle available on aspecified day at the current location of the vehicle.78 Courts have noteda secured party’s failure to offer inspection as a factor in finding a salecommercially unreasonable.79 Accordingly, even in an eBay Motorsauction, a secured party should make the collateral available forinspection. The goal is to achieve a commercially reasonable sale andallowing inspection is an easy step to help attain it.

A. Local or National Advertising

A more difficult issue to resolve is whether advertisement of the saleshould be national or local. An eBay Motors auction is national in scope.80

Does that require the secured party to advertise nationally? Although I thinkthere are logical arguments for both sides of the issue, my opinion is thatnational advertising is not required for a commercially reasonable eBayMotors auction. The goal for a secured party should be to hold a commerciallyreasonable sale. Although, as I discuss below, I do not think that most nationaladvertising aids in that quest, it does not hinder a commercially reasonabledisposition, and thus if it is a reasonable expense, I would advise a securedparty to advertise nationally.81


82. “Collateral that is common, widely used, and relatively inexpensive, such as an automobile, can beadvertised locally to the general public.” CHRISTINE A. FERRIS & BENNETT H. GOLDSTEIN,DISPOSITION OF REPOSSESSED COLLATERAL UNDER THE UNIFORM COMMERCIAL CODE § 6.10, at 172(1990).

83. NewsLink is an internet service that provides online links to various newspapers. NewsLink,http://newslink.org/--news.html (last visited July 5, 2006). The fact that the six newspapers cited haveonline editions does not, in my opinion, make it more likely they would attract national bidders.

84. The Audit Bureau of Circulations reports the following “Largest Reported Circulation” numbers: TheUSA Today, 2,528,437; The Wall Street Journal, 2,058,342; The New York Times, 1,683,855; TheLos Angeles Times, 1,231,318; The Washington Post, 960,684. Audit Bureau of Circulations, Top200 Newspapers by Largest Reported Circulation, http://www.accessabc.com/reader/top150.htm (lastvisited July 5, 2006).

85. Although I have no statistics on the cost of radio and television advertising, it seems reasonable tobelieve that such advertising is expensive, especially when viewed in comparison with the value ofrepossessed motor vehicles. In eBay Motors auctions held by secured creditors I observed, the KelleyBlue Book “trade-in” values for the vehicles ranged from a low of $500 to a high of $12,250. Seeinfra note 190 for a discussion of Kelley Blue Book “trade-in” values. The $12,250 value issomewhat misleading because the next highest value was $5930 (data on file with author).

If the goal of advertising is to supply competitive bidding, then theadvertising required for a commercially reasonable disposition should bedesigned to attain the goal. National advertising should not be requiredbecause I do not believe it would be effective in reaching potential bidders.The potential bidders in an eBay Motors vehicle auction are aninhomogeneous group: persons with access to the internet who would beinterested in purchasing a used vehicle. A motor vehicle is common,inexpensive, collateral that is used by a wide variety and extremely largenumber of persons.82 The same description applies to persons who use theinternet. What cost-effective national media will reach such a group?NewsLink, a Web service, lists only six national newspapers: The ChristianScience Monitor; The Los Angeles Times; The New York Times; The USAToday; The Washington Post; and The Washington Times; and I would addthe Wall Street Journal to the list.83 Although such papers undoubtedly arewidely read, it is unlikely that many readers of those papers are looking foronline auctions of used vehicles, and hence advertising an eBay Motorsauction in them is unlikely to help attract a lively concourse of bidders.84 Onthe other hand, almost any person who reads such a publication is a potentialbuyer of a used car. Thus, one could assert that such advertising reaches thetarget audience. Nevertheless, if such advertising does not help to attractbidders it should not be indispensable for a commercially reasonabledisposition.

Electronic media advertising, such as radio, television and the internet,would undoubtedly reach many potential bidders, but, in the case of radio andtelevision, is most likely cost prohibitive in comparison to the value of thecollateral.85 Internet advertising, however, is national advertising that


86. See Michael Korybut, ONLINE AUCTIONS OF REPOSSESSED COLLATERAL UNDER ARTICLE 9, 31Rutgers L. J. 29, 86–99 (1999) for a discussion of the problems of Web site advertising. He notespotential problems with identifying the relevant public and reaching the relevant public.

87. AutoTrader.com, http://sell.autotrader.com/consumer/sellyourcar/controller.jsp?zipcode=40207&action=nav_used_car_classifieds&LNX=SPGOOGFYCBRAND&rdpage=atc&from_page=syc_bridge (last visited Dec. 18, 2006). Cars.com athttp://siy.cars.com/siy/zipEntry.jsp(last visited Feb.10, 2007). CarsExtra.com at http://paa.services.traderonline.com/paa/seo/0/version/module/autoextra(last visited Dec. 18, 2006).

88. I did not peruse the used cars offered for sale for hours or days at a time. But I saw no listings thatindicated the car was for auction on eBay.

seemingly would fulfill the requirement of commercial reasonableness in thatit produces competitive bidding, and is also cost effective.86 Advertising onthe Web has the potential to reach interested potential bidders because theadvertising can be placed on internet sites that interested buyers might visit.I viewed three Web auto sellers of used vehicles: AutoTrader.com,AutoExtra.com, and Cars.com. Each site allows a one-time seller or a dealerseller to list vehicles for sale using a description of the vehicle and listing aselling price. Advertising a vehicle for sale on such sites isinexpensive)ranging from $9.99 to $20 for a basic, two-week ad.87 The effectof advertisements on those sites is akin to a classified ad in a newspaper: theseller lists a vehicle for sale and an interested buyer contacts the seller directly.Although each Web site would seem to allow a seller to list its vehicle andindicate the vehicle is being auctioned on eBay, I found no seller whoadvertised a vehicle it was selling via an eBay Motors auction.88 Although itis possible to advertise an eBay Motors auction using Web auto sales sites, thattype of use does not conform to the typical use or purpose of those sites. Thusit is questionable whether Web advertising would attract potential bidders. Ifelectronic media national advertising does not fulfill the objective ofadvertising, it should not be required for a commercially reasonabledisposition.

Assuming that national advertising is not required, this does not resolvethe question of whether a secured party who advertises nationally only hasacted in a commercially reasonable manner. Because the auction is nationalin scope, national advertising seems as though it would satisfy the requirementthat advertising be commercially reasonable. Of course that assumes thesecured party chooses national advertising that reaches potential bidders andprovides the relevant information about the collateral and time and place of theeBay Motors auction. As noted previously, however, it might be difficult forsuch advertising to attract potential bidders. Unless it does so, nationaladvertising alone is not sufficient. Most national advertising simply does notseem likely to reach persons who are potential bidders for repossessed motor


89. In the sales I observed, the seller delivered the vehicle to the buyer at the seller’s place of business.Many sellers indicated they would arrange for shipment of the vehicle to the buyer at the buyer’sexpense (data on file with author).

90. See, e.g., Lister, 195 S.W.3d 746; Massey-Ferguson Credit Corp. v. Bond, 335 S.E.2d 454 (Ga. Ct.App. 1985); Cantrade Private Bank Lausanne, Ltd, v. Torresy, 876 F.Supp. 564 (SDNY 1995). Butsee, Ford & Vlahos v. ITT Commercial Finance Corp., 885 P.2d 877 (Cal. 1994) (local advertisingwas not commercially reasonable for a sale of a multimillion dollar aircraft).

91. U.C.C. § 9–615(a)(1).92. See, e.g., Ford Motor Credit Co. v. Mathis, 660 So.2d 1273, 1277 (Miss.1995) (holding disposition

of debtor's automobile at dealers-only auction was not per se commercially unreasonable); GardenNat'l Bank, 738 P.2d at 432 (concluding sale of collateral at automobile auction in which participation

vehicles. National advertising is advisable as a complement to localadvertising, but not as the sole type of advertising.

If national advertising is not required, that leaves local advertising as thealternative. When the sale is an eBay Motors auction, the location where toplace the local advertising may be difficult to pinpoint. However, there is alocation of the vehicle. The vehicle will be sold on eBay Motors, but deliveredat its location; thus one could assert that the location of the sale is the same asthe location of the vehicle, even though an eBay auction is virtual, and biddersmight be dispersed across the nation.89 It is logical to advertise the sale in apaper of general circulation in the area in which the vehicle is located. Courtsand commentators have cited favorably local advertising in finding a sale tobe commercially reasonable.90 Of course none of those sales involved an eBayMotors auction, but courts are familiar with the view that local advertising issufficient and thus should be amenable to finding it sufficient in an eBayMotors auction.

The best strategy could be to advertise both locally in the area where thevehicle is located and nationally. That protects the secured party in case theadjudicator decides neither alone is sufficient. Although dual advertisingincreases the expenses a secured party incurs in selling the collateral, thesecured party recoups its reasonable expenses from the sale proceeds beforeapplying the proceeds to the secured debt.91 The goal is to have acommercially reasonable sale, and the secured party should consideradvertising locally and nationally if both help attain the goal.

B. eBay Advertising

A current practice in some private, “dealers-only,” auctions of motorvehicles is for the secured party to delegate the responsibility for advertisingthe sale to the auctioneer. If this practice was followed in an eBay Motorsauction, eBay would advertise the auction. Courts routinely hold that dealers-only auctions are commercially reasonable dispositions.92 Having the


was limited to dealers was a private sale and commercially reasonable); Ford Motor Credit Co. v.Russell, 519 N.W.2d 460, 465–66 (Minn. Ct. App. 1994) (holding sale of collateral at auction forwholesale dealers was presumed to be commercially reasonable).

93. Ford Motor Credit Co. v. Mathis, 660 So.2d 1273, 1274 (Miss.1995) (auctioneer sends 3500 mail outsof sale, makes 300 phone calls, and 75 in-person contacts); Huntington Nat. Bank v. Elkins, 559N.E.2d 456 (Ohio 1990) (auctioneer advertised the time and place of the vehicle's sale in localnewspaper and mailed approximately 1,200 fliers announcing the sale); Wright v. Wells Fargo AutoFin., Inc., 59 U.C.C. Rep Serv 2d 8 (Iowa Dist. 2005) (auctioneer advertised the vehicle in accordancewith its ordinary business practices).

94. In conversations I had with employees of three secured sellers, all indicated they do not advertise theauction beyond what occurs on the eBay listing page for the vehicle. Interviews with Brad Piller,First State Bank, in Mendota, Ill. (June 19, 2006); John Monteiro, CarNow Acceptance Company,in Dartmouth, Mass. (June 19, 2006); and Tess Burkhardt, Peoples Credit Co. of Oregon, in Portland,Ore. (June 20, 2006) (data on file with author) [hereinafter Interviews].

95. eBay, http://www.ebay.com/ (last visited Feb. 17, 2007). 96. eBay Motors, http://www.motors.ebay.com/ (last visited Feb. 17, 2007).

auctioneer advertise the auction has not impeded a finding of commercialreasonableness.93 The important factor of commercial reasonableness is thatthe sale is advertised to potential bidders to produce competitive bidding. Ifthe advertising is designed to reach that audience, it should be commerciallyreasonable regardless who provides it. The secured party would satisfy therequirement of commercially reasonable advertising if eBay’s efforts regardingcontent and broadcast of the advertisement were commercially reasonable.However, for the reasons discussed below, I doubt that the advertising eBaydoes presently is commercially reasonable. Thus, I would advise a securedparty not to delegate responsibility for advertising an eBay Motors auction ofa repossessed motor vehicle to eBay.94

eBay’s advertising consists presently of many different types. First is theadvertising it does on its Web site home page. Accessing the eBay home pageintroduces the user to eBay’s “top-sellers,” “featured items,” and the “it”item.95 The home page also lists the various categories of items offered,including motor vehicles, and eBay’s specialty sites, including eBay Motors.That is the only advertising of vehicles eBay does on its home page. In myvisits to eBay’s home page I have never seen a motor vehicle listed in theseheadline items. One could assert such advertising is commercially reasonablebecause the potential bidders for the collateral are a large and diverse group,and this advertising reaches that group because some of them will access eBay.However, one problem is that only persons who visit the site receive theinformation. More problematical is that the eBay home page gives noinformation regarding the motor vehicle to be auctioned, and provides nodetails of the specific auction. Consequently, that advertising is not likely tobe commercially reasonable.

Second is the advertising eBay does on its eBay Motors home page.96 Itlists categories of vehicles by make, by “Theme,” e.g., “Corvettes,” by


97. Id. (Specific vehicle listings are accessed by searching for a particular make, model or year of vehicleor by searching generally using search terms such as, “bank repo” or “repo.”)

98. The fee at this time is $19.95. eBay Motors Fees, http://pages.ebay.com/help/sell/motorfees.html(follow “eBay Motors Listing Upgrade Fees” hyperlink) (last visited Dec. 19, 2006). This upgradelists the motor vehicle as a featured item on a rotating basis on eBay Motors home page that allowsthe user to access the vehicle auction by clicking on the item. The number of times an item appearsand the place it appears is determined by the timing of the listing and the number of other featuredi t e m s . e B a y L i s t i n g U p g r a d e ) G a l l e r y F e a t u r e d E x a m p l e ,http://pages.ebay.com/help/sell/gallery_featured.html (last visited Dec. 19, 2006).

99. e B a y 2 0 0 5 A n n u a l R e p o r t , p . 5 6 , a v a i l a b l e a thttp://files.shareholder.com/downloads/ebay/75360119x0x43771/6D8B8042–3A58–4050–BF9F–52D1F5BE5F06/AnnualReport2005.pdf.

100. “Please know that eBay is an online marketplace. So basically all eBay Motors advertisements aredone online on all the eBay sites. eBay does not advertise its auctions on national media.” Emailfrom eBay (Dec. 29, 2006) (o n file with author).

101. eBay Chatter Newletter, “Whatever ‘it’ is, you can get it on eBay,” http://pages.ebay.com/community/chatter/2006January/insideebay.html (last visited Jan. 15, 2007). This advertising also appeared indaytime television and national print media. Id.

102. Google is found at http://www.google.com/. Google touts itself as “the world's largest search engine)an easy-to-use free service that usually returns relevant results in a fraction of a second.” GoogleCompany Overview, http://www.google.com/intl/en/corporate/index.html (last visited Jan. 15, 2007).

“Featured Items,” and a make-and-model vehicle “Finder.”97 At this time thereis no category of “repo” auctions. However, a seller is able to list its motorvehicle as a “Featured Item” by paying a fee to upgrade its listing.98 eBayMotors home page advertising suffers the same defects as those of the eBayhome page: lack of notice to potential bidders, and lack of specific informationabout the auction. However, a seller who chooses to upgrade its listing to a“Featured Item” does provide explicit notice of its motor vehicle auction.

Third is eBay’s national advertising. eBay advertises its services in print,in television advertisements (both domestic and international), on radio, and,of course, via the internet.99 But in response to my email question regardingeBay Motors advertising, eBay stated it does not advertise eBay Motorsauctions on national media.100 In October 2005, eBay embarked on acontinuing, prime-time network television advertising campaign: “Whatever‘it’ is you can get it on eBay.”101 This advertising would surely reach potentialbidders since many bidders undoubtedly watch television. But similar withother eBay advertising, it does not indicate the specifics of a particular auction,motor vehicle or otherwise, and, at least from ads I observed, does not indicatemotor vehicles as part of “it.” Accordingly, the only commercially reasonableaspect of such advertising is that it reaches potential bidders.

Fourth is the advertising from a link to eBay found using an internet searchengine. For example, if a computer user types “used car auctions” into theinternet search engine “Google,” eBay is one of the links that appears.102 Suchadvertising has none of the aspects of commercial reasonableness other thanreaching the potential bidder.


103. Tracking Favorites with My eBay, http://pages.ebay.com/help/myebay/track-favorites.html (lastvisited Dec. 19, 2006).

104. Id.105. Contacting eBay Members, http://pages.ebay.com/help/tp/contacting-members.html, (last visited Dec.

18, 2006).106. Id. For example, sellers can request contact information for all bidders in an active transaction and

the winning bidder in a successful, closed transaction.

Fifth is the specific advertising by eBay that targets individual bidders whohave elected to receive notice of specified auctions. A registered user of eBaycan elect to have eBay send the user an email message providing notificationof auctions held by the user’s “favorite sellers” and auctions meeting criteriafor the user’s “favorite searches.” Registered users can select and save favoritesellers: sellers who sell items on which the user wants to bid.103 Similarly, auser can save favorite searches: auctions of items that conform to categoriesor search terms selected by the user.104 A user who selects those options willreceive an email from eBay whenever a favorite seller lists a new item forauction and whenever any seller lists an item for auction that conforms to thesearch terms. For example, a user who finds a seller who sells repossessedvehicles can elect to designate that seller as a “favorite seller,” and receive anemail for every new listing by that seller. Likewise, a user can designate a“favorite search” using the search terms, “bank repo,” and receive an emailany time an auction using the terms “bank repo” is listed. This type ofadvertising would seem to qualify as commercially reasonable. It notifies aninterested potential bidder of the item to be auctioned and provides a link tothe web page where the item is described and the auction is occurring. Thus,the potential bidder has all the information pertaining to the sale)time, placeand description of the item. A deficiency of this type of advertising is that itis limited to bidders who have affirmatively registered with eBay, elected tosave their preferences for sellers and types of sales, and further elected to haveeBay email them with new listings. Accordingly, many potential bidders willnot receive notice of the auction. However, those who do receive notice maybe motivated bidders. Unfortunately, at this time eBay does not permit a sellerto target the registered users who have expressed their preferences for sellersor searches. eBay does not release information about registered users tosellers.105 A seller can obtain contact information only about eBay users whoare involved in the seller’s current or recent transactions, i.e., a person biddingon the item.106

Finally, there is the advertising of the vehicle to be auctioned found on theeBay Motors Web page listing. One of the benefits of an eBay Motors auctionis that the eBay entry describing the goods offered for sale can include picturesof the collateral, extensive detail about the collateral, and the terms of sale. In


107. Interviews, supra note 94. It will be interesting to see if a court holds such advertising “commerciallyreasonable” if it is the only advertising done by a secured party seller on eBay Motors.

108. See Korybut, supra note 86, at 93.109. U.C.C. § 9–610(d). Old Article 9 subjected a default sale to the “Article on Sales” and thus any

applicable warranty arising under an Article 2 sale would apply to a default sale. U.C.C. § 9–504(1)(1995). However, with respect to a warranty of title, section 2–312(2) and Official Comment 5thereto raise the argument that the seller in a default sale gave no warranty of title. U.C.C. § 2–312(2)(2001). The revisions to Article 9 included an amendment to section 2–312, cmt. 5, which explicitlyapplied the warranty to Article 9 disposition sales, unless the secured party disclaimed the remedy.See Timothy R. Zinnecker, The Default Provisions of Revised Article 9 of the Uniform CommercialCode: Part 1, 54 BUS. LAW. 1113, 1158–59 (1999).

110. Section 9–610(e) authorizes a disclaimer by any method that would be effective had the sale beenvoluntary or by communicating to the purchaser a record of the sale contract that includes thedisclaimer. U.C.C. § 9–610(e). Besides including disclaimer language in the advertisement, a

conversations I had with employees of three secured sellers using eBayMotors, all indicated they do not advertise the auction beyond what occurs onthe eBay listing page of the vehicle.107 The information disseminated in thistype of advertising is rich with detail about the collateral and sale. But itreaches only those persons who access the vehicle listing on the eBay MotorsWeb page. Accordingly, such advertising does not reach potential biddersbeyond those who visit eBay, and seemingly would not alone be commerciallyreasonable.

The foregoing discussion convinces me that advertising performed byeBay is not similar to that done by the auction company that provides specificadvertisement about the auction in a dealers-only auction. Additionally, Iquestion whether eBay advertising has the potential to produce the competitivebidding that is the goal of advertising. Another deficiency may be simply thatdisposing of repossessed motor vehicles on eBay is too new a practice for acourt to hold advertising performed solely by eBay commerciallyreasonable.108 Accordingly, I think that advertising of the disposition by eBayalone would not fulfill the commercially reasonable requirement. The fact thatthe public has general knowledge about eBay and its operation as a publicauction does not validate eBay’s advertising as commercially reasonable.

C. Disclaiming Warranties

Before I reproduce my form advertisement, I want to discuss the reason Iinclude a warranty disclaimer in it. Revised Article 9 attaches impliedwarranties of title, possession, and quiet enjoyment in a default sale to thesame extent that such warranties arise in a voluntary disposition.109 A securedparty need not linger long on the aspects of the warranty because Article 9authorizes a secured party to disclaim the warranty and a secured party willprobably do so.110 One method of disclaiming is to convey through “specific


secured party should utilize the power to disclaim warranties in the record memorializing the parties’contract. A sale where the warranty is not disclaimed might result in a higher sales price because thebuyer is indemnified against the claim of a senior secured party whose security interest is notterminated by the disposition sale. See U.C.C. §§ 9–617(a); 9–610, cmt. 5. Professor Zinneckerraises the question of whether a disclaimer might be held commercially unreasonable. See Zinnecker,supra note 110 at 1159 (1999). See also, Robyn L. Meadows, Warranties of Title, Foreclosure Sales,and the Proposed Revision of U.C.C. §9–504: Has the Pendulum Swung Too Far?, 65 FORDHAM L.REV. 2419, 2444–49 (1997).

111. U.C.C. § 9–610(e); U.C.C. § 2–312(2) (2001).112. U.C.C .§ 9–610(e)(2).113. See U.C.C. §§ 2–314; 2–315 (2001). It is unlikely the implied warranty of fitness for a particular

purpose would arise because the circumstances surrounding a typical eBay Motors auction do notsatisfy the reliance requirements for such warranty.

114. See U.C.C. § 9–610, cmt. 11.115. U.C.C. § 2–314(1) (2001). 116. “Merchant” is defined in section 2–104(1). "’Merchant’ means a person who deals in goods of the

kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to thepractices or goods involved in the transaction or to whom such knowledge or skill may be attributedby his employment of an agent or broker or other intermediary who by his occupation holds himselfout as having such knowledge or skill.” U.C.C. § 2–104(1) (2001).

language . . . which give[s] the buyer reason to know that the person sellingdoes not claim title in himself or that he is purporting to sell only such right ortitle as he or a third person may have.”111 The words of my advertisementshould suffice because it states that the secured party makes no warrantyrelating to title, possession or quiet enjoyment of the vehicle and also states thesecured party makes no claim that it has title to the vehicle. Although thedisclaimer provisions of Article 9 and Article 2 do not expressly require thedisclaimer be conspicuous, my form makes the disclaimer conspicuous byusing all capital letters. There is no reason a secured party should take thechance that a court might require the disclaimer to be conspicuous regardlessof whether Article 9 expressly requires it. In addition, the secured partyshould include the disclaimer language in any record memorializing thecontract of sale.112

A default sale might give rise also to implied warranties of quality:merchantability and fitness for a particular purpose.113 Although the warrantyof title expressly applies to default sales, a warranty of quality will arise in adefault sale only when the sale has the incidents required for an impliedwarranty under Article 2.114 The Article 2 implied warranty of merchantabilityarises when the seller is a merchant of the type of goods sold.115 Although theArticle 2 definition of merchant is broad, most financial-entity type sellers ofrepossessed collateral are not merchants of the type of goods sold and thus theimplied warranty of merchantability would not arise.116 However, the warrantycould arise in the situation where the secured party is an automobile dealer and


117. The implied warranty of merchantability arises in a contract of sale if the seller is a merchant of goodsof the kind involved in the sale. U.C.C. § 2–314(1) (2001).

118. Most of the eBay sales I watched were sales without reserve. Of course the secured party can choosewhether to set a reserve. eBay Reserve Price, http://pages.ebay.com/help/sell/reserve.html (lastvisited Dec. 28, 2006).

119. The secured party can choose whatever payment terms are acceptable to it. The disposition eBaysales I watched had payment terms including credit card, certified check, cash, and money order (dataon file with author).

120. The secured party can choose whether to require a deposit. Most eBay auctions I observed had termsthat required a deposit. If the secured party requires a deposit, the typical method the buyer makesthe deposit is through PayPal. PayPal is a service designed to facilitate online payments betweenbuyers and sellers. PayPal was founded in 1998; eBay acquired PayPal in 2002. PayPal allows usersto send and receive payments through their email address. PayPal is free for buyers; sellers arecharged nominal fees and percentages of the total sale on sliding scale. PayPal About Us,http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/about-outside (last visited Aug. 17, 2006); seealso , Press Release, eBay, Inc. , eBay Completes PayPal Acquisi t ion,http://investor.ebay.com/releasedetail.cfm?ReleaseID=91641&FYear=2002 (Oct. 3, 2002) (lastvisited Aug. 17, 2006).

121. The secured party chooses the time by which the buyer must pay the balance. In the auctions Iobserved the typical time for payment was five to seven days (data on file with author).

selling its repossessed motor vehicle collateral.117 Because a court might implya warranty of quality, I have included a disclaimer of any warranty of quality.

D. Advertisement Form

My form for an advertisement of an eBay Motors auction is as follows.The footnotes contained in it are mine.

NOTICE OF SECURED PARTY SALE

Notice is hereby given that [name of secured party] intends to sell atpublic sale the following vehicle: [describe collateral using year, make, modeland VIN number]. The sale will be an internet auction held on eBay Motorsat http://www.motors.ebay.com/, and will begin on [include day, date and timefor beginning of auction] and end on [include day, date and time for ending ofauction]. Interested buyers should access eBay Motors athttp://www.motors.ebay.com/ and search using the year, make and model ofthe vehicle. The vehicle will be sold to the highest bidder [with or withoutreserve].118 Terms of the sale are [include terms of sale, e.g., cash]119 with adeposit120 of [include amount] and the balance due within [include time].121

The buyer is responsible for all expenses for delivery of the vehicle from itscurrent location at [include location of vehicle] and the vehicle can be seenprior to the sale at that location at the following time(s) [include time when


122. The secured party can choose whether to allow inspection of the vehicle. Although an eBay auctionmay create little demand for inspection, the secured party should offer the opportunity as part of thestrategy to achieve a commercially reasonable sale. See supra pp. 297–98.

123. The advertisement will appear prior to the start of the auction. However, the debtor has the right toredeem the collateral prior to its disposition per section 9–623 (“A redemption may occur at any timebefore a secured party . . . has disposed of collateral or entered into a contract for its disposition underSection 9–610”). U.C.C. § 9–623. Therefore, the secured party should provide notice of its right towithdraw the vehicle from the auction in case the debtor redeems the collateral. Redemption rightscan be exercised by any secondary obligor and other secured party or lienholder. U.C.C. § 9–623(a).

vehicle can be inspected].122 [include name of secured party] reserves the rightto withdraw the vehicle from sale at any time prior to the completion.123

[Include name of secured party] SELLS THIS VEHICLE AS IS, WHERE ISAND WITH ALL FAULTS. [Include name of secured party] MAKES NOWARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,REGARDING THE VEHICLE, INCLUDING THE WARRANTY OFMERCHANTABILITY. [Include name of secured party] HASREPOSSESSED THIS VEHICLE FROM ITS OWNER AND DOES NOTCLAIM OR WARRANT IT HAS TITLE TO THE VEHICLE. [Include nameof secured party] MAKES NO WARRANTY RELATING TO TITLE,POSSESSION OR QUIET ENJOYMENT OF THE VEHICLE.

If you have any questions contact [name, address, and telephone number ofsecured party or its representative] or visit eBay Motors athttp://www.motors.ebay.com/ and search using the year, make and model ofthe vehicle.

I believe the above advertisement, circulated nationally, locally, and on theeBay Motors listing, is commercially reasonable because it provides sufficientinformation of the particulars of sale to the public who might be reasonablyexpected to be interested in the collateral. It should facilitate a commerciallyreasonable sale.

IV. AN AGREEMENT OF THE PARTIES THAT AN EBAYDISPOSITION AND NOTIFICATION SATISFY ARTICLE 9’S

REQUIREMENTS

As I have discussed throughout this article, a secured party sellingthe collateral must satisfy Article 9’s requirements that the sale becommercially reasonable and that the secured party send reasonablenotification of the sale. Whether a secured party complies with its


124. See, e.g., In re Estate of Sagmiller, 615 N.W.2d 567, 571 (N.D. 2000); Union Nat’l Bank of Wichitav. Schmitz, 853 P.2d 1180, 1184 (Kan. Ct. App. 1993); Daniell v. Citizens Bank, 754 S.W.2d 407,410 (Tex. Ct. App. 1988); Gulf Homes, Inc. v. Goubeau, 602 P.2d 810, 812 (Ariz. 1979); Hall v.Owen County State Bank, 370 N.E.2d 460, 461 (Ind. Ct. App. 1977).

125. The “safe harbor” notification forms found in sections 9–613(5) and 614(3) are one step towardcomplying with the Article 9 requirements. U.C.C. §§ 9–613(5); 9–614(3).

126. U.C.C. § 9–603(a).127. Id. Former Article 9 contained a similar provision. “[T]he parties may by agreement determine the

standards by which the fulfillment of these rights and duties is to be measured if such standards arenot manifestly unreasonable.” U.C.C. § 9–501(3) (1995). Among these “duties” are the requirementsof disposition after default. U.C.C. § 9–501(3)(b) (1995).

128. U.C.C. § 9–602(7).129. Article 9, however, authorizes the debtor to waive its right to notification of the disposition by an

agreement entered into and authenticated after default. U.C.C. § 9–624(a).130. U.C.C. § 9–603. 131. See, e.g., Ford Motor Credit Co. v. Solway, 825 F.2d 1213, 1216 (7th Cir. 1987); Wombles Charters,

Inc. v. Orix Credit Alliance, Inc., 39 U.C.C. Rep.Serv.2d 599 (S.D.N.Y. 1999). Courts also haveapproved agreements that designate the time of sending notification of the sale to the debtor. See,e.g., Aetna Fin. Co. v. Culpepper, 320 S.E.2d 228, 232–33 (Ga. Ct. App. 1984) (finding ten daysnotice reasonable); Wippert v. Blackfeet Tribe of Blackfeet Indian Reservation, 695 P.2d 461, 465(Mont. 1985) (finding five days notice not “manifestly unreasonable,” but secured party failed to givenotification).

duties is a question of fact.124 However, Article 9 provides a securedparty with a tool to help ensure it achieves a commercially reasonablesale and send a reasonable notification.125 That tool is Article 9’sauthorization of an agreement made by the parties that determines thestandards that measure fulfillment of those duties. If the parties enteran agreement regarding standards, and the standards they adopt are“not manifestly unreasonable,” it will foreclose an attack by the debtorthat the secured party did not comply with its Article 9 duties.126

Section 9–603 provides that the parties to a security agreement “maydetermine by agreement the standards measuring the fulfillment of the. . . duties of a secured party . . . if the standards are not manifestlyunreasonable.”127 It tempers the rule of section 9–602 that theobligations of the secured party relating to disposition of the collateralcannot be varied or waived.128 Section 9–602 invalidates a debtor’sagreement to waive the duty of secured party to sell the collateral in acommercially reasonable manner.129 Section 9–603, however, validatesan agreement that establishes “standards” to determine whether the saleis commercially reasonable.130

The “standards” adopted by the parties in agreements courts haveapproved relate to the time of sending notification to the debtor and theparticulars of the sale.131 For example, in a case decided under RevisedArticle 9, the court rejected a challenge to the commercial


132. Orix Fin. Serv., Inc. v. Thunder Ridge Energy, Inc., 2006 WL 587483, 15 (S.D.N.Y. 2006).133. Ford Motor Credit Co. v. Solway, 825 F.2d 1213, 1215 (7th Cir. 1987). See supra note 127 for the

text of U.C.C. § 9–501(3) (1995).134. But see Walker v. Grant County Sav. & Loan Ass'n, 803 S.W.2d 913, 916 (Ark.1991)(holding that

the only reasonable interpretation of “agreement” in section 9–501(3) is an agreement in writing).“Record” can be written or electronic. U.C.C. § 9–102(a)(69).

135. Beardmore v. Am. Summit Fin. Holdings, LLC, 47 U.C.C. Rep. Serv. 2d 708, 719–20 (D.Minn.2002). The terms approved related to place, date, time, and notice to the public of a public sale. Id.at 711.

reasonableness of a sale where the debtors had agreed that a sale wouldbe deemed commercially reasonable:

[I]f notice thereof is mailed to them at least ten (10) days before suchsale and advertised in at least one newspaper of general circulation inthe area of the sale at least twice prior to the date of sale upon termsof 25% cash down and the balance within 24 hours and further agreethat any private sale shall be deemed commercially reasonable ifnotice thereof is mailed to them at least 14 days before the sale datestated therein and credit given for the price stated.132

In a case relying on former Article 9, the Seventh Circuit Court of Appealscited section 9–501(3), the predecessor of section 9–603, in validating anagreement that provided:

Dealer further agrees that if Ford Credit shall solicit bids from threeor more other dealers in the type of property repossessed by FordCredit hereunder, any sale by Ford Credit of such property in bulk orin parcels to the bidder submitting the highest cash bid therefore alsoshall be deemed to be a commercially reasonable means of disposingof the same.133

Section 9–603 does not adopt any standards of fulfillment; it allows theparties to establish standards that are not manifestly unreasonable. Thus, theparties may set any reasonable standards of notification and disposition onwhich they agree. The section does not require that the agreement take theformat of a record, so an oral agreement arguably suffices.134 However, asecured party striving to establish reasonable standards for sale should not riskthe potential problems of proof associated with establishing standards throughan oral agreement. Caution and forethought prescribe a written agreement.Section 9–603 impliedly authorizes a post-default agreement because it doesnot establish a temporal requirement for the agreement. A Minnesota federaldistrict court approved a post-default agreement wherein the debtoracknowledged the terms of a proposed sale “as commercially reasonable” inexchange for the secured party’s agreement to postpone the default sale.135

Although the holding of the court is consistent with section 9–603, I would


136. U.C.C. §§ 9–613(5); 9–614(3). The “safe harbors” are discussed supra pp. 295–96.137. U.C.C. § 9–612(b).138. Id. A consumer transaction is one where “an individual incurs an obligation primarily for personal,

family, or household purposes” and a security interest in collateral held or acquired for personal,family, or household purposes secured the obligation. U.C.C. § 9–102(a)(26).

139. U.C.C. § 9–603(a).140. See, e.g., Contois Motor Co. v. Saltz, 253 N.W.2d 290 (Neb. 1977) (holding that notice stating that

repossessed automobile would be sold at private auction after ten days from date of notice wasreasonable notice; no agreement regarding reasonableness of notification); Garmon v. First Nat’lBank of Atlanta, 323 S.E.2d 712 (Ga. Ct. App.1984) (notice that collateral would be sold 10 daysafter notification was sufficient in consumer transaction, where no agreement provided for reasonablenotice); and Daniel v. Ford Motor Credit Co., 612 So.2d 483 (Ala. Civ. App. 1992) (holding that tendays was sufficient notice prior to private disposition in consumer transaction; no agreement as tosufficiency of notice of disposition sale).

advise establishing standards in the security agreement. Standards set in thesecurity agreement do not create issues of consideration or modification thatcould arise with a post-default agreement, and should be less likely to createissues of unconscionability and good faith. Accordingly, the agreementestablishing standards should be embodied in the security agreement.

A. Notification Standards

The agreement should set standards for the notification of disposition foran eBay Motors auction. The notification standards should include provisionspertaining to time and method of the notification. The parties need not agreeon the standards for the content of the notification because the content of thenotification should track the “safe harbor” forms of sections 9–613 and9–614.136 Regarding the time of the notification, I advise that the agreementshould not deviate from the "safe harbor" granted by section 9–612: sent afterdefault and at least ten days before the earliest time of the disposition.137

Recall that the "safe harbor" applies only to security transactions other thanconsumer transactions.138 Neither Article 9 nor its Official Comments provideany insight into what is a reasonable time in a consumer transaction. That isall the more reason to obtain agreement from the debtor as to what time isreasonable. Recall that the Article 9 requirement for agreement on standardsis that they are “not manifestly unreasonable.”139 Thus, if the notification timeis not manifestly unreasonable, it will foreclose an attack by the debtor as tothe reasonableness of time. Courts have routinely approved ten days or lessnotification in consumer transaction cases decided under former Article 9.140

So although the parties’ agreement that ten days notification is reasonable isundoubtedly valid in non-consumer security interests, it should also be validin consumer transactions.


141. U.C.C. § 1–201(b)(36)(A).142. Wells Fargo Bank v. Carter, 511 F.2d 1203 (5th Cir. 1975) (holding notification requirement not

satisfied when secured party who knew debtor’s whereabouts made no effort to notify after mailednotification returned unclaimed); Commerce Bank of St. Louis, N.A. v. Dooling, 875 S.W.2d 943(Mo. Ct. App. 1994) (holding notification not sufficient when secured party who knew debtor’s placeof employment made no effort to contact debtor after mailed notification returned unclaimed); Fid.Fin. Serv., Inc. v. Stewart, 608 So.2d 1111 (Miss. 1992) (holding secured party had duty to makesecond effort to notify when it knew debtor had not received notification); and Friendly Fin. Corp.v. Bovee, 702 A.2d 1225 (Del. 1997) (holding secured party could not rely on notification sent tosatisfy requirement because it learned before sale that debtor had not received notification).

143. U.C.C. § 9–611, cmt. 6.144. The cases I read that adopted the second try rule did not indicate that the parties had agreed as to the

address. See supra note 142.145. See, e.g., Springfield Chrysler–Plymouth, Inc. v. Harmon, 858 S.W.2d 240 (Mo. Ct. App. 1993)

(holding notification reasonable since secured party sent notification to address embodied in parties’agreement although notification letter returned unclaimed); Underwood v. First Ala. Bank ofHuntsville, 453 So. 2d 742 (Ala. Civ. App. 1983) (finding reasonable notice sent because securedparty mailed notification to address specified in parties’ agreement although returned unclaimed);First Nat’l Bank & Trust Co. of Lincoln v. Hermann, 286 N.W.2d 750 (Neb. 1980) (holding mailingof notification sufficient although letter returned unclaimed and secured party knew where debtor wasemployed); and Lacy v. Gen. Fin. Corp., 651 F.2d 1026 (5th Cir. 1981) (holding notificationsufficient although letter returned undelivered).

My agreement adopts the U.S. Postal Service as the standard for themethod of sending the notification. Sending the notification through the U.S.Postal Service should satisfy the requirement of section 9–611(b) that thesecured party “send” a notification. “Send” is defined inter alia as “to depositin the mail . . . with postage . . . provided for.”141 To build a record ofcompliance, a secured party should use one of the U.S. Postal Serviceconfirmation services (e.g., delivery confirmation, signature confirmation, orreturn receipt) to verify receipt of an attempted delivery of the notification.

I have set the standard for the address to which the secured party mustsend the notification as the address embodied in the record that comprises thesecurity agreement or an address the debtor furnishes in writing to the securedparty. The agreed standard requires that the secured party make a singleattempt to notify the debtor, and rejects the “second try” requirement that somecourts have adopted in cases where the secured party knows the debtor did notreceive the notification.142 Article 9 includes no provision requiring a “secondtry,” but “leaves to judicial resolution, based on the facts of each case, thequestion whether the requirement of ‘reasonable notification’ requires a‘second try.’”143 A court might, in accordance with the comment, find asecured party’s unsuccessful attempt to notify the debtor unreasonableregardless that the debtor agreed on an authorized address.144 However, not allcourts adopt the “second try” rule.145 They recognize that the UCC definitionsof “send” and “notifies” do not require that the addressee must receive the


146. “Send” is defined at section 1–201(b)(36)(A) and “notifies” at section 1–202(d). The definition ofnotifies permits compliance with a duty to notify “whether or not the other person actually comes toknow of it.” U.C.C. §§ 1–201(b)(36)(A)(d); 1–202(d).

147. See Springfield Chrysler-Plymouth, 858 S.W.2d 240 and Underwood, 453 So. 2d 742 for courts citingparties’ agreement regarding standards of notification as a relevant factor in their determination thatnotification sent was reasonable although never received.

148. U.C.C. § 9–603(a).149. U.C.C. § 9–611(b) (emphasis added).

notice in order to comply with the requirement.146 I think the agreement of theparties adopting a standard for an address should obviate a “second try”requirement.147

If the parties agree on an address standard, the only relevant inquiry underArticle 9 should be whether the standard chosen is “not manifestlyunreasonable.”148 A standard that adopts the address embodied in the record,yet allows the debtor to change the address by furnishing a written change tothe secured party is not manifestly unreasonable. It allows the debtor to set theaddress to which it wants any notice sent.

The following paragraph represents, in my opinion, a sufficientnotification provision:

Debtor agrees that notification of the sale of the collateral shall bereasonable, regardless whether Debtor receives the notification, ifnotification is mailed to Debtor at least ten (10) days before the salebegins, through the U.S. Postal Service, postage prepaid, to Debtor’saddress as it appears in this record or to such other address as Debtorshall have furnished in writing to the secured party.

Because section 9–611 requires a secured party send “a reasonableauthenticated notification of disposition,” the agreement need not deem thenotification “commercially reasonable” rather than “reasonable.”149

Nevertheless, the agreement should satisfy section 9–611 even if the partiesinsert “commercially reasonable” in place of “reasonable.”

B. Commercially Reasonable Standards

There are many aspects of a sale on eBay that are pertinent to commercialreasonableness. They include the dates of sale, the advertising of the sale, andthe price at which the goods will be sold. This is not an exhaustive list, but itdoes include the “aspects of a disposition” listed in section 9–610 that remain


150. See section 9–610(b) for the Article 9 list of aspects of disposition. For lists of factors courts haveused to judge whether a sale is commercially reasonable, see Lister v. Lee-Swofford Inv., L.L.P., 195S.W.3d 746 (Tex. App. 2006); Westgate State Bank v. Clark, 642 P.2d 961 (Kan. 1982); and In reCrosby, 176 B.R. 189 (B.A.P. 9th Cir. 1994).

151. Advertising the disposition sale is discussed supra pp. 296–309.152. Of 160 auctions I observed in researching this article, 125 were seven day auctions (data on file with

author). eBay offers sellers the choice to list their vehicle for 3, 5, 7 or 10 days (some auctions canbe set to last one day, but not vehicle auctions). eBay Selecting a Selling Format,http://pages.ebay.com/help/sell/formats.html (last visited Oct. 30, 2006).

153. An eBay seller can set a “reserve” price, the minimum price at which the seller will sell the vehicle.eBay Reserve Price, http://pages.ebay.com/help/sell/reserve.html (last visited Dec. 28, 2006).

154. Another factor which has been included in lists of commercially reasonable factors, but which I donot discuss, is the length of time between the secured party obtaining possession of the vehicle andselling it. I think a secured party should consider setting agreement as to the length of time it can holdthe collateral before selling it. I do not have sufficient data regarding how much time a secured partyneeds to process and prepare the collateral for sale to enable me to propose a reasonable time.

germane after a secured party decides on an eBay auction.150 Accordingly, anagreement between the debtor and secured party should cover those factorsand provide as follows:

Debtor agrees that a sale of the collateral through an eBay internetauction shall be commercially reasonable if the sale is advertised priorto the sale one time in one newspaper of general circulation in the areawhere the vehicle is located, the time for bidding on the collateral isat least seven (7) days, and the collateral is sold to the highest bidder.

Previously, I concluded that national advertising, although advisable, is notnecessary for a commercially reasonable sale.151 Thus, the agreement adoptslocal advertising as the standard. A secured party who decides to implementnational advertising should set the standards for such advertising in theagreement. I choose seven days as the length of the auction in order to givesufficient time to attract “a lively concourse of bidders.” The majority ofauctions I observed on eBay lasted seven days, although eBay Motorsauthorizes auction sales of three, five, seven or ten days.152 Thus, seven dayscomplies with the existing commercial practices and moreover seems like areasonable length of time. Selling the collateral to the highest bidder at anauction is a typical way of setting the price and thus is consistent withcommercial practice.153

There are several facets of a typical default sale for which I included nostandards. In the following paragraphs I discuss three standards a securedparty may want to add to the agreement.154 First, I omitted any agreementrelating to preparation of the collateral for sale by the secured party. Article9 does not impose an affirmative duty on the secured party to prepare thecollateral for sale. In fact, it seems to allow a secured party to choose whetherto sell the collateral in its present condition or take any commercially


155. U.C.C. § 9–610(a).156. U.C.C. § 9–610, cmt. 4.157. Id. The secured party is “advancing” the costs of preparation against the proceeds of sale because

expenses of preparation are in the first payment tier pursuant to section 9–615(a)(1). First tierexpenses include the expenses of retaking, holding, and preparing for disposition. U.C.C §9–615(a)(1).

158. U.C.C. § 9–504(1) (1995). See, e.g., Franklin State Bank v. Parker, 346 A.2d 632, 635 (N.J. Dist. Ct.1975) (holding sale commercially unreasonable when secured party failed to make “minor repairs”to a vehicle that would make it mechanically operational). Other cases include Chavers v. Frazier (Inre Frazier), 93 B.R. 366 (Bankr. M.D. Tenn. 1988); Farmers & Merch. Bank v. Barnes, 705 S.W.2d450 (Ark. 1986); and Weiss v. Nw. Acceptance Corp., 546 P.2d 1065 (Or. 1976). See Zinnecker,supra note 109, at 1149–51 for excerpts from the Revised Article 9 Drafting Committee deliberationson this issue.

159. See U.C.C. § 9–626.160. U.C.C. § 9–610, cmt. 4.

reasonable acts in preparation: “After default, a secured party may sell . . . anyor all of the collateral in its present condition or following any commerciallyreasonable preparation or processing.”155 However, the Official Commentincludes this decision to act or not as part of the requirement that every aspectof the sale be commercially reasonable:

A secured party may not dispose of collateral “in its then condition”when, taking into account the costs and probable benefits ofpreparation or processing and the fact that the secured party would beadvancing the costs at its risk, it would be commercially unreasonableto dispose of the collateral in that condition.156

The comment indicates a cost/benefit approach is warranted wherein thesecured party balances the costs of preparation it would be “advancing”against the “probable” benefits of preparation.157 Revised Article 9 and itscomment match former Article 9 and the cases that examined the issue.158

Accordingly, a secured party does not have an unbridled choice whether or notto prepare the collateral for sale. Moreover, the choice is important becausethe commercial reasonableness of the sale affects the power of a secured partyto recover a deficiency.159 Unfortunately there is no bright-line test as to whena secured party can safely choose not to incur expenses in preparing thecollateral for sale. However, the drafters did caution courts to “not be quickto impose a duty of preparation or processing on the secured party . . . .”160

Because the commercial reasonableness of preparing or not preparing thecollateral depends on the facts of each case, it is advisable, I think, to refrainfrom including an agreement on this factor. An agreement that preparation isnot required or that limits expenditure to an agreed small amount might bemanifestly unreasonable if the circumstances are such that minimal preparationwould yield increased sale proceeds. Alternatively, an agreement that providesfor a fixed expenditure on preparation could result in a situation where a


161. Interviews with Brad Piller, First State Bank, in Mendota, Ill. (June 19, 2006), and Tess Burkhardt,Peoples Credit Co. of Oregon, in Portland, Or. (June 20, 2006). Both were employees of the securedparties, but were not attorneys (data on file with author).

162. Ford Motor Credit Co. v. Solway, 825 F.2d 1213 (7th Cir. 1987); Ford Motor Credit Co. v. DeValkLincoln-Mercury, Inc., 600 F.Supp. 1547 (N.D. Ill. 1985). Because both cited cases involved FordMotor Credit Company, one could surmise that a regular commercial practice of Ford Motor CreditCompany is to include an agreement deeming three bids as commercially reasonable.

163. Wombles Charters, Inc. v. Orix Credit Alliance, Inc., 39 U.C.C. Rep. Serv.2d 599 (S.D.N.Y. 1999);Orix Fin. Services, Inc. v. Thunder Ridge Energy, Inc., 2006 WL 587483 (S.D.N.Y. 2006). For a caseupholding an agreement that did not contain payment terms other than that the collateral would besold to the highest cash bidder, see Ford Motor Credit Co. v. Solway 825 F.2d 1213 (7th Cir. 1987).

164. See Lister v. Lee-Swofford Inv, L.L.P., 195 S.W.3d 746 (Tex. App. 2006); Westgate State Bank v.Clark 642 P.2d 961 (Kan. 1982); and In re Crosby, 176 B.R. 195 (B.A.P. 9th Cir. 1994). Section9–610(b) lists “other terms” as subject to the commercially reasonable duty. U.C.C. § 9–610(b). Ofcourse a payment term is included in “other terms.” Section 9–504(3) of former Article 9 included“terms” among the aspects of a disposition subject to the commercially reasonable standard. U.C.C.§ 9–504(3) (1995).

secured party is obligated to incur costs that may be unnecessary given thestate of the collateral. It seems best for a secured party to approach this issuecase by case, being cognizant that a commercially reasonable disposition mayrequire preparation expenditures.

Second, I did not include an agreement regarding the number of bids thatmake the sale commercially reasonable. Two secured party sellers ofrepossessed vehicles on eBay with whom I spoke indicated a belief that courtswould validate a sale if the seller received three bids.161 Illinois federal courtshave approved agreements that required three or more bids as establishingcommercially reasonable standards.162 Accordingly, a secured party shoulddecide whether to include a standard on the number of bids, and if anagreement is warranted, a “not manifestly unreasonable” number seems to bethree.

Finally, I did not include an agreement pertaining to when the buyer mustmake complete payment. Several courts have approved agreements containingpurchase terms.163 Thus an existing practice may be to include terms in theagreement. However, a payment term is not expressly listed in section9–610(b) as an aspect of disposition of collateral, nor does it appear on lists offactors compiled by courts.164 Accordingly, I believe the payment term couldbe omitted from the agreement without diminishing its effectiveness indetermining the standards of commercial reasonableness.

C. Form Agreement

A secured party should carefully consider using the grant from section9–603 to create an agreement on the standards for compliance with the duties


165. “Every aspect of a disposition of collateral, including the method, manner, time, place, and otherterms, must be commercially reasonable.” U.C.C. 9–610(b).

166. See 2 GILMORE, supra note 12, at 1183. Professor Gilmore was the primary drafter of the first officialArticle 9)the 1962 Official Text. CLARK & CLARK, supra note 12, at 1–6. Gilmore was speakingof Part 5 of the original Article 9, particularly section 9–504. His reference to the statutoryillustrations of reasonableness is embodied in section 9–627. See infra p. 318.

Article 9 places on a secured party in a default sale. It seems especiallyadvisable for an eBay Motors auction because of the lack of case law or UCCpronouncement on whether such a sale is commercially reasonable. Althougha debtor could contest the standards adopted in such an agreement as“manifestly unreasonable,” I have designed my model agreement to protectagainst that contention. I urge strongly a secured party accept Article 9'sinvitation to agree on standards as part of its effort to achieve a commerciallyreasonable disposition. Of course the secured party must comply with thestandards the parties establish. Coupling my notification provision with mysale provision produces the following agreement.

Debtor agrees that notification of the sale of the collateral shall be reasonable,regardless whether Debtor receives the notification, if notification is mailedto Debtor at least ten (10) days before the sale begins, through the U.S. PostalService, postage prepaid, to Debtor’s address as it appears in this record orto such other address as Debtor shall have furnished in writing to the securedparty.

Debtor agrees that a sale of the collateral through an eBay Motors internetauction shall be commercially reasonable if the sale is advertised prior to thesale one time in one newspaper of general circulation in the area where thevehicle is located, the time for bidding on the collateral is at least seven (7)days, and the collateral is sold to the highest bidder.

V. AN EBAY MOTORS AUCTION SHOULD BECOMMERCIALLY REASONABLE AS A MEANS OF

DISPOSING OF A REPOSSESSED VEHICLE

A secured party who sells its motor vehicle collateral on eBay Motors isbound by Article 9’s commercially reasonable standard the same as anysecured party disposing of collateral.165 What a secured party must do toachieve a commercially reasonable disposition is left open by Article 9.Professor Gilmore noted that the drafters intended that result: “This term[commercially reasonable] is deliberately left undefined although it is limitedby a few statutory illustrations of reasonableness and unreasonableness.”166


167. William E. Hogan, The Secured Party and Default Proceedings Under the U.C.C., 47 MINN. L. REV.205, 219 (1962).

168. Revised Article 9 continues the requirement that the disposition be commercially reasonable usingwords very similar to those in original Article 9. Note 170 compares the texts of the commerciallyreasonable standards in the original Article 9, section 9–504 and the current Article 9, section 9–610.

169. “Although such an approach may have been justifiable in the less litigious era of the 1950s, it is nolonger acceptable to state rules governing enforcement rights in a ‘loosely organized, informal,anything-goes type of foreclosure pattern,’ leaving it to the courts to exercise ‘supervision andcontrol.’ That is wasteful, expensive, inefficient, unfair, and detrimental to secured financing.”Donald J. Rapson, Default and Enforcement of Security Interests Under Revised Article 9, 74 CHI.-KENT L. REV. 893, 894 (1999).

170. Comparing section 9–610(b) of Revised Article 9 with section 9–504(3) reveals no change insubstance and only slight change in wording. “Every aspect of a disposition of collateral, includingthe method, manner, time, place, and other terms, must be commercially reasonable.” U.C.C. §9–610(b) (2005) (words added by Revised Article 9 are underlined). “[E]very aspect of thedisposition including the method, manner, time, place and terms must be commercially reasonable.”U.C.C. § 9–504(3) (1995) (words deleted by Revised Article 9 are struck through).

171. See, e.g., R & J of Tenn. v. Blankenship-Melton Real Estate, Inc., 166 S.W.3d 195, 206 (Tenn. Ct.App. 2004) (listing six factors: the type of collateral involved; the condition of the collateral; thenumber of bids solicited; the time and place of sale; the purchase price received or the terms of thesale; and, any special circumstances involved); Westgate State Bank v. Clark 642 P.2d 961, 970–72(Kan. 1982) (listing nine factors: the duty to clean up, fix up, and paint up the collateral; public orprivate disposition; wholesale or retail disposition; disposition by unit or in parcels; the duty topublicize the sale; length of time collateral held prior to sale; the duty to give notice of the sale to thedebtor and competing secured parties; the actual price received at the sale; and, other factors). Thecommentators have identified even more criteria. See, e.g., Rudow, supra note 13, at 139 (identifying12 factors); and Tinney, supra note 13, at 308 (identifying 17 factors). Some courts reject the comfortof a list of factors for a holistic approach. See, e.g., Leasing Serv. Corp. v. First Tenn. Bank N.A.,826 F.2d 434, 439 (6th Cir. 1987) (“Commercial reasonableness requires that the disposition of thecollateral be made in keeping with the prevailing trade practices among respectable and responsiblebusiness and commercial enterprises engaged in the same or similar business.”).

Professor William Hogan described the drafters’ policy as “to provide asimple, efficient, and flexible tool to produce the maximum amount from thedisposition of the collateral.”167 Both of these commentators were speaking ofsection 9–504 of the first Official Text of the UCC.168 The flexibility of the“commercially reasonable” standard has been criticized as resulting inincreased costs of secured financing.169 The Drafting Committee for RevisedArticle 9 reacted to the criticism by undertaking an extensive revision ofArticle 9’s default provisions, culminating in an expansion of the number ofArticle 9 sections pertaining to default from seven to twenty-eight. However,section 9–610 of Revised Article 9, retained the commercially reasonablerequirement practically verbatim from former Article 9.170 Section 9–610,while requiring that every aspect of a disposition be commercially reasonable,lists five aspects of a disposition: method, manner, time, place, and otherterms. Courts and commentators have posted lists of factors relevant towhether a sale is commercially reasonable.171

Although section 9–627 assists in the determination of whether thedisposition is commercially reasonable, it is not a panacea. It permits a


172. U.C.C. § 9–627(a).173. U.C.C. § 9–627(c).174. U.C.C. § 9–627(b).175. Grant Gilmore, Article 9 of the Uniform Commercial Code)Part V: Default, 7 PERS. FIN. L. Q. REP.

4, 7 (1952). Professor Hogan noted that: “The attempt to provide flexible, effective, and efficientrealization procedures hopefully will result in fewer deficiencies and more realistic resale prices.”See Hogan, supra note 167, at 253.

176. U.C.C. § 9–610, cmt. 2.177. U.C.C. § 9–627(a).

The fact that a greater amount could have been obtained by a collection,enforcement, disposition, or acceptance at a different time or in a different methodfrom that selected by the secured party is not of itself sufficient to preclude thesecured party from establishing that the collection, enforcement, disposition, oracceptance was made in a commercially reasonable manner.

See also U.C.C. §§ 9–627(a) cmt. 2; 9–610 cmt. 10. See, e.g., Eagle Bank & Trust Co. v. Dixon, 15S.W.3d 695, 698 (Ark. Ct. App. 2000) (holding low price alone is not dispositive of whether a saleis commercially reasonable).

secured party to establish the commercial reasonableness of a disposition evenif the evidence shows that a different sale could have realized a greater saleprice.172 It authorizes a secured party to seek a pre-sale approval of thedisposition from a court or creditors’ committee.173 Finally, it describes threetypes of dispositions that are commercially reasonable: a sale in the usualmanner on a recognized market; a sale at the price current in any recognizedmarket; and, a sale in conformity with reasonable commercial practices amongdealers in the type of property sold.174 With the exception of the pre-saleapproval, none of those options provides a secured party selling a motorvehicle on eBay Motors with a fail-safe formula for a commercially reasonablesale.

However, before a secured party selling collateral on eBay Motors getsbogged down into lists of factors or tries to fit the sale into a section 9–627category, it is helpful to consider the basic idea behind the flexibility of thecommercially reasonable requirement)to obtain a fair price. ProfessorGilmore notes that the Article 9 drafters’ task was to create a statutory schemethat would “promote the highest possible yield on disposition of the collateral,allowing the secured party all freedom of action consistent with protection ofthe interests of the debtor and his other creditors.”175 The comment to section9–610 expresses the assumption that the flexibility the section allows willresult “in higher realization on collateral for the benefit of all concerned.”176

These statements do not make the sale price the most important factor of acommercially reasonable sale. Nor do they make the “best possible price” anindispensable element of a commercially reasonable sale. Price is relevant, butArticle 9 makes it clear in both section and comment that low price alone doesnot make a sale commercially unreasonable.177 The drafters’ thoughts onprice, however, reveal their intended policy that price is a factor in determining


178. Although courts label the question of whether a sale is commercially reasonable a question of fact,many times the trier of fact is the trial judge and thus the court is making the commercially reasonabledetermination. See, e.g., Union Nat’l Bank of Wichita v. Schmitz, 853 P.2d 1180, 1184 (Kan. Ct.App. 1993).

179. 78 B.R. 514, 515 (Bankr. S.D. Ohio 1987). The court also found that the secured party failed tocomply with the notification requirement under former U.C.C. § 9–504(3) (1995).

180. Id. The court was not swayed by its finding that the secured party advertised the public sale, receivedthree bids, and sold the vehicle to the highest bidder, and thus the “procedure may technically bewithin the standard established.” Id.

181. See In re Estate of Sagmiller, 615 N.W.2d 567 (N.D. 2000); Ford Motor Credit Co. v. Mathis, 660So. 2d 1273 (Miss. 1995); and Union Nat’l Bank of Wichita v. Schmitz, 853 P.2d 1180 (Kan. Ct.App. 1993). See also Action Mgmt., Inc. v. Gross, 44 U.C.C. Rep. Serv. 2d 623 (Pa. C. P. 2001),declared a “dealer only” sale was commercially unreasonable in the absence of any prior attempt tosell the vehicle.

182. U.C.C. § 9–627(b)(3) declares that a disposition is made in a commercially reasonable manner if itis “in conformity with the reasonable commercial practices among dealers in the type of property thatwas the subject of the disposition.”

the commercial reasonableness of a disposition of collateral. Thus, a securedparty should strive to achieve a fair price and must be aware of the effect itsactions might have on the sale price.

The main inquiry arising from an eBay Motors auction is whether it is acommercially reasonable means of sale that will result in a fair price, assumingall other aspects of the sale are commercially reasonable. A secured partyselling its motor vehicle collateral on eBay Motors could have a sale that isprocedurally commercially reasonable, yet a court might not confirm the saleas commercially reasonable because it might believe that eBay Motors is nota commercially reasonable method of selling motor vehicle collateral.178 Forexample, in In re Britt, a bankruptcy judge found a public sale commerciallyunreasonable notwithstanding his recognition that the sale procedure “may beconsidered commercially reasonable.”179 The defect, according to the court,was the secured party’s failure to establish a minimum bid requirement.180

Furthermore, appellate courts are still reversing trial courts that hold “dealeronly” auction sales commercially unreasonable simply because they arewholesale auctions.181 However, an eBay Motors auction is a retail sale andthus unlike a “dealers only” auction. Nevertheless, it is not too far a stretch ofimagination to envision a court finding an eBay Motors auction commerciallyunreasonable simply because it has not yet risen to a “commercial practice”among secured parties selling repossessed motor vehicles.”182

Although a secured party’s compliance with the commercially reasonablerequirement is a question of fact and consequently the secured party cannotguarantee the commercial reasonableness of a disposition, the secured partycontrols the aspects of the sale and thus can act to fulfill the commerciallyreasonable standard. The secured party decides when and how to sell thecollateral, to notify the debtor, to advertise the sale, and to prepare the


183. The time frame of the sales was June 19, 2006 to July 31, 2006 and October 26, 2006 to December3, 2006. To restrict my data to repossessions only, I searched “repo” and “bank repo” on eBayMotors.

184. Data for all auctions are on file with the author.185. I am including data for sales not offered explicitly by secured parties because it is possible that some

auctions I observed were held by a secured party, regardless that the seller did not designate itself assuch, or the seller was acting as the selling agent for the secured party.

186. Forty-seven bids does not mean there were forty-seven different bidders because it is possible, as itis with all auctions, that a bidder will bid more than once.

187. The “Buy It Now” option allows a seller to hold an auction while setting a price for immediatepurchase by a buyer. eBay Buy It Now, http://pages.ebay.com/help/sell/bin.html (last visited Jan. 15,2007); eBay Buying With Buy It Now, http://pages.ebay.com/help/buy/how-buy-bin.html (last visitedJan. 15, 2007).

188. One of the eight includes the “Buy It Now” sale.189. A “reserve” means the seller has set a minimum selling price for the motor vehicle. eBay Reserve

Price, http://pages.ebay.com/help/sell/reserve.html (last visited Dec. 28, 2006). Consequently, abidder might make the highest bid, but would not have purchased the collateral if the seller has seta “reserve” and the bid is not equal or greater than it. An eBay listing typically will show if a sellerhas set a reserve, but it will not show the reserve amount.

collateral for sale. I have already discussed previously many of these factorsand the steps a secured party should take to achieve a commercially reasonablesale. Other factors such as method and place are fixed by the secured party’sdecision to auction the collateral on eBay Motors, consequently the securedparty can do little to ensure the commercial reasonableness of those factors.Thus, the question remains whether an eBay Motors auction is a commerciallyreasonable method of obtaining a fair price for motor vehicle collateral.

In my opinion, based on the eBay Motors auctions I observed whileresearching this article, an eBay Motors auction of a repossessed motor vehicleshould be commercially reasonable provided the secured party’s other actionsare commercially reasonable. I observed auctions of repossessed motorvehicles during two six-week periods in 2006.183 Eighty-four auctions wereheld by secured parties.184 Seventy-six auctions of repossessed motor vehicleswere held by other sellers.185 The following data on number of bids andamount bid indicate that eBay Motors auctions provide an opportunity for adisposition of collateral to bring a fair price.

The highest number of bids for any auction held by a secured party wasforty-seven.186 The lowest number was one: an auction where the selleroffered a “Buy It Now” option.187 Seventy-five auctions held by securedparties had bid numbers between ten and forty. Only eight auctions sales hadless than ten bidders.188 The highest number of bids in non-secured party saleswas forty-seven; the lowest number was zero. The auctions receiving no bidsappear to be the result of sellers setting a “starting bid.” A “starting bid”means the seller has set a minimum bid. As such, the “starting bid” acts as areserve although it is not the same as a reserve.189 The number of bids in


190. The Kelley Blue Book Web page is located at http://www.kbb.com. Kelley Blue Book defines “trade-in” value as “what consumers can expect to receive from a dealer for a trade-in vehicle.” Kelley BlueBook FAQs, http://www.kbb.com/kbb/CompanyInfo/FAQ.aspx?section=UsedCar#uc_3 (last visitedon Feb. 17, 2007). Although this value is likely greater than the price a dealer would pay to purchasea vehicle at a “dealers-only” auction, it is comparable to the “wholesale value.”

191. Three lower-than-trade-in-value auctions were of badly damaged vehicles or vehicles that did not run(data on file with author).

192. While the difference in number of auctions above trade-in value seems significant, I had no meansto determine the reason for the difference.

193. Press Release, J.D. Power and Assoc., Online Used Vehicle Classifieds Outpace Print Ads Two toOne, http://www.jdpower.com/global/press-releases/pressrelease.asp?StudyID=1128 (May 26, 2006)(last visited Dec. 18, 2006).

194. Id.195. Press Release, eBay, Inc., eBay Motors Announces Acquisition Agreement and New Strategic

Relationship, http://investor.ebay.com/releasedetail.cfm?ReleaseID=100770 (last visited Dec.18,2006).

auctions held by secured parties shows the potential for the auction to producea fair price.

Although most sellers do not list the value of the vehicle, variousvaluations of motor vehicles are available easily on the internet. For the eBayMotors auctions I observed, I obtained the “trade-in” value for the vehiclefrom the Kelley Blue Book Web page.190 In the auctions I observed held bysecured creditors, thirty-four highest bids out of eighty-four auctions weregreater than the trade-in value. An additional twenty-six highest bids were70% or greater than the trade-in value.191 Thus, fifty of eighty-four auctionshad highest bids at least 70% of the Kelley Blue Book trade-in value. In non-secured creditor auctions, fifteen highest bids out of seventy-six auctions weregreater than trade-in value.192 An additional eleven highest bids were 70% orgreater than trade-in value. These data indicate the price generated in auctionsheld by secured parties is a fair price.

If an eBay Motors auction provides the opportunity to generate a “livelyconcourse of bidders” and a fair price, is there an inherent flaw in such salesthat would justify holding such auctions not commercially reasonableregardless that all aspects of it are commercially reasonable? I think not. Thefact the auction is virtual and not physical should not prevent commercialreasonableness. eBay’s data and data from other studies show that used-vehicle-buyers regularly use the internet when buying motor vehicles. Onestudy finds that 59% of used vehicle buyers used the internet during theshopping process.193 It further found that 80% of used-vehicle buyers haveaccess to the internet.194 eBay Motors publicizes itself as the top internetmotor vehicle market: “Consistently ranked the No. 1 automotive site on theWeb by Nielsen//NetRatings, eBay Motors sold more than three billion dollarsworth of vehicles and parts on its site in 2002.”195 Internet auctions can reachgreater numbers of potential buyers than any other type of auction. eBay


196. The eBay 2005 Annual Report reported approximately 72 million active users, defined as any userwho bid on, bought, or listed an item during the prior 12-month period, compared with approximately56 million active users at the end of 2004. eBay 2005 Annual Report, p. 2 available athttp://files.shareholder.com/downloads/ebay/75360119x0x43771/6D8B8042–3A58–4050–BF9F–52D1F5BE5F06/AnnualReport2005.pdf.

197. Press Release, eBay, Inc., Two Millionth Passenger Vehicle Sold on eBay Motors,http://investor.ebay.com/releasedetail.cfm?ReleaseID=206868 (last visited Dec. 12, 2006).

198. Ebay Motors Why It Works, http://pages.motors.ebay.com/services/whysell.html (last visited Dec.20, 2006).

199. U.C.C. § 1–103.

reported its auctions had 72 million “active users” in 2005.196 In August 2006,eBay motors reported it sold its two millionth passenger vehicle.197 Therelikely are more persons who know that eBay holds auctions of motor vehiclesthan persons who would know of the typical public auction of repossessedgoods. eBay Motors is available 24 hours a day, seven days a week. Itproclaims it has ten million shoppers every month and sells a vehicle every 60seconds.198 Accordingly, there is a high probability that an eBay Motorsauction will attract bidders and achieve a fair price. While it is true that eBayMotors motor vehicle auctions are a relatively recent means of sale, that factshould not prevent a sale from being commercially reasonable. The draftersintended for the UCC to embrace new commercial practices:

The Uniform Commercial Code must be liberally construed andapplied to promote its underlying purposes and policies, which are:(1) to simply, clarify, and modernize the law governing commercialtransactions [and] (2) to permit the continued expansion ofcommercial practices through custom, usage, and agreement of theparties . . . .199

VI. CONCLUSION

It seems likely that internet auctions of motor vehicles will progress tobecome a typical method of selling a vehicle. eBay Motors auctions can bescheduled quickly, and they are inexpensive and effective. Secured creditorsare already utilizing this technology and more will undoubtedly elect to sellusing this method. However, they must be careful to act in a commerciallyreasonable manner. And they must have confidence that courts will findinternet auctions commercially reasonable if the secured party has actedcommercially reasonable. This article outlines those steps and providesgrounds for finding an eBay Motors auction of a motor vehicle commercially


200. BOB DYLAN, The Times They Are a-Changin, on THE TIMES THEY ARE A-CHANGIN (ColumbiaRecords 1964).

reasonable. Internet auctions are not a fleeting phenomenon. Courts shouldnot get in the way because “the times they are a-changin.”200

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