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Circular priorities in secured transactions law

  • Author(s) / Creator(s)
  • Circularp riorityp roblems are endemic in secured transaction law. A circular priority situation arises when there are three or more parties with competing claims to the same asset and there is no clear ranking ofpriority among them. There are multiple approaches applied by courts or advanced by commentators to resolve circular priority problems. The different mechanisms used by the courts to resolve a circular priority problem are evaluated using criteria that reflect the general values and goals of commercial law, and the mechanism that best accords with this criteria is identified. Although consensus on the best way of breaking a circularity will reduce litigation costs, it does not provide a complete solution, as it can be undermined by ex post bargaininga mong creditors. Given this instabilityp, riorityr ules shouldb e designed so as to limit the occasions when such problems can arise. | Les problmes de priorit6 circulaire sont endimiques au droit des transactions garanties. Un problme de priorit6 circulaire sunient lorsqu 'il y a trois parties ou plus avec des revendications concurrentes pour le mime actif et qu 'il n \"y a pas vraiment de hijrarchie claire entre eux. 1l existe de nombreuses approches utilises par les cours ou 6mises par des commentateurs dons le but de rigler les problkmes de priorit circulaire. Les divers mcanismes que les cours utilisent pour r~gler ces problimes sont 6valuds b la lumi&re de criteres refldtant les valeurs g~nrales et les objectifs du droit commercial; le mdcanisme qui convient le mieux aux critbres est identfi . Bien qu'un consensus sur le meilleur moyen de briser la circularitd permette de rdduire les frais de litige, il ne rsout pas tout le problhme parce qu 'il peut etre amoindri par des nigociations C apres coup > entre crdanciers. Compte tenu de cette instabilitd, des rbgles prioritaires devraient tre laborges afin de rdduire au minimum les occasions oi ces problbmes peuvent surgir.

  • Date created
    2009
  • Subjects / Keywords
  • Type of Item
    Article (Published)
  • DOI
    https://doi.org/10.7939/R3GH9BQ3S
  • License
    © 2009 Roderick J. Wood et al. This version of this article is open access and can be downloaded and shared. The original author(s) and source must be cited.
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  • Citation for previous publication
    • Wood, R. J. (2009). Circular priorities in secured transactions law. Alberta Law Review, 47(4), 823-852. Retrieved from http://heinonline.org/HOL/Page?handle=hein.journals/alblr47&div=35&g_sent=1&collection=journals
  • Link to related item
    http://heinonline.org/HOL/Page?handle=hein.journals/alblr47&div=35&g_sent=1&collection=journals