What distinguishes a good faith purchaser of chattel paper?

A good faith purchaser of chattel paper is specifically defined as someone who possesses the chattel paper without knowledge that it violates a security interest. This principle is rooted in the Uniform Commercial Code (UCC) which governs secured transactions, including the sale and purchase of chattel paper.

When a purchaser operates in good faith, it means they are acting with honesty and without intent to deceive. In the context of chattel paper, if a purchaser is unaware that their acquisition of the paper violates another party's security interest, they are protected under the law as a good faith purchaser. This status is important because it provides a layer of legal protection to the purchaser, potentially allowing them to retain ownership or rights to the chattel paper even if it technically has conflicting interests.

The other options focus on aspects that do not accurately characterize what makes someone a good faith purchaser. For instance, having the ability to sell the chattel paper in a competing market or the ability to permanently transfer ownership is not necessarily reflective of good faith. Also, having a formal agreement with the seller might imply an intention or awareness that could negate the claim of acting in good faith. Therefore, knowledge regarding any existing security interests is crucial for someone to qualify as a good faith purchaser.