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Can we use a UCC filing to secure undelivered aggregate base material?

California

Our company has a purchase order with a material supplier for aggregate base materials. the pricing is favorable for our company and we don't want to lose the pricing. Due to project delays, the material has not yet been picked up and delivered to the project site. As a result, the material supplier wants our company to pay a significant amount to "hold" the material. We are concerned that if we pay for the material, there is no guarantee that when we do come to pick it up and truck it to the job site, the material will not be there and will be sold to others. Thus we would be out the money and not have the material. Can a UCC filing protect us? If so, would we need a security agreement first? Please advise. Thank you.

1 reply

Mar 23, 2020
I believe that a UCC-1 will be unlikely to aid in protecting you. The purpose of a UCC-1 is to put the world on notice that you have a security interest in a specific thing. However, it is difficult to identify the specific aggregate that is being held for you since aggregate is a fungible good. I recommend having a written agreement with the supplier indicating that he will hold a specific amount of aggregate for you at a set price. If the supplier fails to hold the aggregate at the stated price, refuses to fulfill the order at the stated price, or is unable to fulfill the order, you can seek recourse from him in the form of a return of your deposit and the additional cost that you are forced to pay as a result of the supplier's breach. If you choose to file a UCC-1, I recommend that you enter into a security agreement along with the agreement concerning the deposit and agreement to hold at a certain price. Best of luck!
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