UCC Good Faith Definition - Honesty in Fact in Transaction - Filing Impact?

Exactly right. I've seen lenders get into trouble by being too 'creative' with collateral descriptions thinking they're being clever. The good faith standard requires honest, straightforward filings.

This is why debtor name accuracy is so critical. You can't just pick whatever version of a company name you prefer - you need the exact legal name per the organizational documents.

That makes sense. So if we know the correct legal entity name but use a DBA instead, that could violate the good faith standard even if it wasn't intentionally deceptive?

This is where document verification becomes crucial. I've started using Certana.ai to cross-check our charter documents against UCC-1 filings. It catches name discrepancies that could create good faith issues down the road.

Interesting - how does that tool help with the good faith requirement specifically?

It automatically compares debtor names across documents so you can't accidentally file with the wrong name. Shows you exactly where discrepancies exist so you can address them honestly rather than hoping they don't matter.

So reasonable care would include verifying debtor names against official records rather than just using what's on the loan documents?

Absolutely. Loan docs might have DBAs or informal names. Good faith requires checking the actual entity formation documents - articles of incorporation, LLC agreements, etc.

The SOS databases are getting pickier about exact name matches too. What might have passed a few years ago gets rejected now.

No, good faith is about honesty and reasonable care, not perfection. A genuine typo is different from intentionally misleading information.

Ok but how do you prove intent if there's ever a dispute? Seems subjective.

That's why documentation matters. Keep records showing you verified information and made reasonable efforts to get it right.

That's a broader application than I was thinking. So it's not just about filing accuracy but the underlying transaction legitimacy?

Correct. Courts can look at whether all parties acted in good faith throughout the transaction, not just at the filing stage.

Which is why proper due diligence on the front end is so important. You can't just file first and verify later.

You're not wrong - at its core it is about basic honesty. But the legal implications can be significant if you get it wrong.

The 'don't be a jerk' standard actually isn't far off from the UCC's approach. It's meant to promote fair dealing in commercial transactions.

So if we discover our debtor name was slightly off after filing, we should file an amendment rather than just continuing the defective filing?

That would be the good faith approach - fix known errors rather than letting them persist.

Though you need to be careful about amendments vs new filings depending on how significant the error is.

Pre-filing is definitely accepted practice. The key is that you actually complete the transaction you're securing.

Good to know. We often file UCC-1s a few days before closing to make sure everything processes in time.

Just make sure your security agreement explicitly contemplates the pre-filing to avoid any potential issues.

We usually use fairly general descriptions like 'all equipment' or 'machinery and equipment.' Is that potentially a good faith issue?

Generally those are fine if they accurately describe your collateral. Problems arise when you use broad language to hide the fact that you're only securing specific items.

This is another area where document verification helps. You can check that your collateral description matches what's actually listed in your security agreement.

You need to determine which is the actual legal name according to the organizational documents. Filing with the wrong name isn't good faith even if the entity sometimes uses it.

Check the articles of incorporation or LLC formation docs. That's the definitive source for the legal name.

The LLC agreement shows one version but some contracts use another. This is getting confusing.

Upload both documents to Certana.ai - it will show you exactly where the names differ and help you identify which is the proper legal name for filing purposes.

That's helpful guidance. Sounds like maintaining good records of our verification process is as important as getting the filing details right.

Exactly. Good faith is often evaluated based on the process you followed, not just the end result.

And if you're ever unsure, err on the side of more disclosure rather than less. Transparency aligns with the good faith standard.