Rights of Unsecured Creditors
(1) Obtain Judgment through default or trial
(2) Collect on Judgment
Seller’s Power over the Goods as Against Buyer
2-709 – In general if S delivers goods on credit, S can only get price, not goods
2-703 – Seller’s Remedies in General
The Right to Withhold Delivery
Cash Sale (includes checks)
2-511 – Tender of payment by B is a condition to S’s duty to deliver
2-703 – Seller’s Remedies
2-706 – Seller’s Resale
Credit Sale (note that if check is post-dated by even one day, it’s a credit sale)
S can only withhold delivery if:
B does not provide adequate assurance of performance OR
B is insolvent and doesn’t pay cash for goods; OR
2-609 – Right to Adequate Assurance – when reasonable grounds for insecurity arise w/r/t performance of K, either party may in writing demand adequate assurance of due performance and until he receives such performance may if commercially reasonable suspend performance
This is risky b/c court may not agree with S
2-702(1) – Seller’ Remedies on Discovery of B’s Insolvency
1-201(23) – Insolvency
The Right to Stop Delivery
2-705 – When goods are in possession of carrier, S can withhold delivery
2-705(2) – Time limit
2-705(3) – must notify carrier in time to act on instructions
7-403(1)(d) – Obligation of Carrier to Deliver
7-303 – Diversion
Right to Recover Delivered Goods – Exceptions to general Prohibition
General Rule = once delivered, S has no right to the goods
CREDIT SALE
Buyer Fraudulently obtains goods (e.g. B obtained goods on credit by fraud)
No UCC rule, therefore CL applies (1-103)
Under CL, a K can be rescinded when induced by fraud
Buyer make Fraudulent Promise to Pay
2-702(2) – Seller’s Remedies on Discovery of Buyer’s Insolvency
S upon discovering that B received goods on CREDIT while insolvent, can reclaim
he goods upon demand made w/in 10 days after the receipt; if there’s a written misprep of solvency w/in 3 months before delivery then 10 day limitation DNA
Goods DELIVERED on CASH SALE
2-507(2) – B’s right as against the S to retain or dispose of them is conditional upon B’s making the payment due
Seller’s Power Over the Goods as Against Third Parties
Shelter Principle – 2-403(1) – Transferee takes the goods w/ the benefits of all of transferor’s rights and powers
Purchaser of goods acquires all title which his transferor had or had power to transfer
Purchaser of limited interest acquires limited interest
Person w/ voidable title has power to transfer good title to GFP for value
Nemo Dat – Person can only transfer rights to property which it actually has; a person cannot transfer any greater rights than he has to another
