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buyer’s insolvency. [U.C.C. § 2-702(2) (1951); 2 Hawkland UCC Series § 2-702:2, Westlaw (database updated June 2021).]
Requirement of Buyer’s Possession and Identification of Goods For the seller to reclaim the goods, the goods generally must be both (1) identified and (2) in the buyer’s possession. Thus, for instance, if the goods are delivered directly to the buyer’s customer, there is no right of reclamation, for the buyer does not have possession of the goods. [2 Hawkland UCC Series § 2-702:2, Westlaw (database updated June 2021).] Misrepresentation of Solvency For a misrepresentation of solvency to obviate the 10-day limitation on demand for reclamation, (1) the representation must be in writing, addressed to the specific seller, and dated within three months of the delivery; (2) the buyer must be insolvent when it makes the representation; and (3) the communication must convey that the buyer is solvent. Things like tendering payment by check or signing invoices are generally not representations of solvency. [ See U.C.C. § 2-702, cmt. 2 (1951); 2 Hawkland UCC Series § 2-702:2, Westlaw (database updated June 2021).] Seller’s Right of Reclamation if Buyer Is in Bankruptcy If the buyer is in bankruptcy, it is federal bankruptcy law, not Article 2, that controls the seller’s right to reclaim the goods. In bankruptcy, and subject to various qualifications, if the seller has sold goods to the buyer in the ordinary course of business, the seller may reclaim the goods if the buyer received them while insolvent (as defined in federal bankruptcy law) and within 45 days before the bankruptcy filing. However, the seller must demand reclamation in writing (1) within 45 days after the debtor received the goods or (2) within 20 days after the bankruptcy filing, if the 45-day period expires after that time. [11 U.S.C. § 546(c); 2 Hawkland UCC Series § 2-702:2, Westlaw (database updated June 2021).] Exclusivity of Reclamation If the seller successfully reclaims the goods, then the seller loses all other remedies concerning those goods. [U.C.C. § 2-702(3) (1951).] Priority of Seller’s Right of Reclamation The seller’s right of reclamation is subject to the rights of (1) a buyer in the ordinary course and (2) any other good-faith purchaser for value, including the buyer’s secured creditor with a security interest in the goods. [U.C.C. § 2-702(3) (1951); 2 Hawkland
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