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3. Circumstances in Which a Seller’s Creditors May Treat a Sale or Identification of Goods as Void Per § 2-402(2), a creditor of the seller may treat as void any sale of goods or identification of goods to a contract if, under the law of the state where the goods are located, the seller’s retaining possession of the goods is fraudulent as against the creditor. There is one qualification to this rule. Namely, if the seller is a merchant dealing in goods of the kind, it is not fraudulent for the seller to retain possession (1) in good faith, (2) in the current course of trade, and (3) for a commercially reasonable time after the sale or identification. Obviously, this rule has no basis to apply if the buyer has possession of the goods. [U.C.C. § 2-402(2) (1951); 2 Hawkland UCC Series § 2-402:3, Westlaw (database updated June 2021).] a. Whether a Transfer Is Fraudulent as to a Creditor In some ways, the rule in § 2-402(2) is seen as codifying the common-law ostensible- ownership doctrine. At the risk of overgeneralizing, that doctrine posits that, for a transfer to be good as against one’s creditors, it must be objectively determinable—that is, there must be extrinsic, objective, observable facts indicating that the transfer has occurred. Thus, a transfer unsubstantiated by extrinsic, objective, observable facts would be void as against creditors. Accordingly, if a seller retains possession of sold goods, then depending on the state, her creditors may be able to treat the goods’ sale or identification as void, subject to the exception for good-faith retention for a commercially reasonable time by a merchant. [ See U.C.C. § 2-402(2) (1951); In re Waggoner , 622 B.R. 915 (Bankr. D. N.M. 2020).] b. Commercially Reasonable Time for the Seller to Retain the Goods Just what is a commercially reasonable time for the seller to retain the goods obviously depends on the case’s peculiar facts. Broadly speaking, the seller can often retain the goods for long enough to take various necessary steps to complete the sale, such as for the seller to arrange to ship the goods or for the buyer to arrange to receive them. Commercially reasonable time is generally measured from the time the goods are identified to the contract. [ See 2 Hawkland UCC Series § 2-402:3, Westlaw (database updated June 2021).] Example : A manufacturer of oil-field pump jacks contracted to manufacture and sell a large, heavy jack to a buyer. The sale was one small part of an overall transaction in which the buyer was to take over the manufacturer’s business and premises. The manufacturer started work on the jack a few weeks after contracting, at which point the jack became identified to the contract. The manufacturer retained possession of the jack for seven days afterward, both to complete the jack and to leave it on the premises for the buyer to collect when it
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