§ 2402 Seller Creditor Rights Limits

This law says that if a seller still has goods that were supposed to be sold to a buyer, the seller's creditors can sometimes take those goods instead of the buyer getting them. But there are rules to protect the buyer if the seller is acting fairly.

Key Takeaways

•If a seller still has goods that were sold to a buyer, creditors might try to take them to pay the seller's debts.
•The buyer keeps their right to the goods if the seller is holding them for a normal reason, like waiting for pickup.
•If the seller is trying to trick creditors by holding onto goods, the sale might be canceled, and creditors can take the goods.

Example

A store sells a TV to a customer but keeps it in the store for pickup later. The store owes money to a supplier.

The supplier might try to take the TV to pay off the store's debt, but if the store is holding the TV for a normal reason (like waiting for the customer to pick it up), the customer still gets the TV.

(1) Except as provided in subdivisions (2) and (3), rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the buyer’s rights to recover the goods under this division (Sections 2502 and 2716). (2) A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him or her a retention of possession by the seller is fraudulent or void under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent or void. (3) Nothing in this division shall be deemed to impair the rights of creditors of the seller: (a) Under the provisions of the division on secured transactions (Division 9); or (b) Where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a pre-existing claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this division constitute the transaction a fraudulent transfer or voidable preference. (Amended by Stats. 1988, Ch. 1368, Sec. 9. Operative January 1, 1990, by Sec. 18 of Ch. 1368.)

Key Takeaways

•If a seller still has goods that were sold to a buyer, creditors might try to take them to pay the seller's debts.
•The buyer keeps their right to the goods if the seller is holding them for a normal reason, like waiting for pickup.
•If the seller is trying to trick creditors by holding onto goods, the sale might be canceled, and creditors can take the goods.

Example

A store sells a TV to a customer but keeps it in the store for pickup later. The store owes money to a supplier.

Key Takeaways

Example

Key Terms

References

§ 2402 Seller Creditor Rights Limits

Key Takeaways

Example

Key Terms

References

Key Takeaways

Example

Key Terms

Related Statutes

References

Key Takeaways

Example

Key Terms

Related Statutes

References