Nebraska Uniform Commercial Code 2-401

UCC 2-401

2-401.

Passing of title; reservation for security; limited application of this section.

Each provision of this article with regard to the rights, obligations, and remedies of the seller, the buyer, purchasers, or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this article and matters concerning title become material the following rules apply:

(1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (section 2-501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by the Uniform Commercial Code. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the Article on Secured Transactions (Article 9), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.

(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading

(a) if the contract requires or authorizes the seller to send the goods to the buyer but does not require him or her to deliver them at destination, title passes to the buyer at the time and place of shipment; but

(b) if the contract requires delivery at destination, title passes on tender there.

(3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods,

(a) if the seller is to deliver a tangible document of title, title passes at the time when and the place where he or she delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or

(b) if the goods are at the time of contracting already identified and no documents of title are to be delivered, title passes at the time and place of contracting.

(4) A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a "sale".

Source

Annotations

  • This section does not provide for a revesting of title for nonpayment of purchase price alone, unless the contract of sale so provides. The effect of a reservation of title under this section is the retention of a security interest. Maryott v. Oconto Cattle Co., 259 Neb. 41, 607 N.W.2d 820 (2000).

  • A security interest which attaches upon delivery has fully attached and is valid even though the goods are thereafter, even immediately, installed in such a way as to become fixtures of realty, and even though such goods were contemplated throughout the transaction to become fixtures. First National Bank v. Rose, 213 Neb. 611, 330 N.W.2d 894 (1983).

  • If a contract does not contemplate the delivery of any document of title, title passes under the provisions of this section at the time of contracting. Southwest Bank of Omaha v. Moritz, 203 Neb. 45, 277 N.W.2d 430 (1979).

  • Where contract for sale of goods did not specifically refer to passage of title, held, title passed upon delivery. Huskinson v. Vanderheiden, 197 Neb. 739, 251 N.W.2d 144 (1977).

  • This section does not apply where situation involved is covered elsewhere in article. Goosic Constr. Co. v. City Nat. Bank of Crete, 196 Neb. 86, 241 N.W.2d 521 (1976).

  • If there was an explicit agreement for title to pass upon completion of the necessary paperwork which had not occurred, seller still had insurable interest. Bowman v. American Home Assur. Co., 190 Neb. 810, 213 N.W.2d 446 (1973).

  • Purchase money priority is exception to basic rule of priority to first filed financing statement and should be applied only in strict compliance with all limitations in Uniform Commercial Code. North Platte State Bank v. Production Credit Assn., 189 Neb. 45, 200 N.W.2d 1 (1972).

  • For title to revest in seller, evidence must show rejection or other refusal by the buyer to receive or retain the goods, or a justified revocation of acceptance. Jordan v. Butler, 182 Neb. 626, 156 N.W.2d 778 (1968).

  • Title to the one hundred forty-five head of cattle passed to H & O Farms at the time the plaintiff delivered them and, therefor, any interest the plaintiff retained was no more than a security interest provided there was no agreement between the parties, either expressly or in course of conduct, that altered the result. Myers v. Columbus Sales Pavilion, Inc., 575 F.Supp. 805 (D. Neb. 1983).

  • COMMENT

  • Prior Uniform Statutory Provision: See generally, sections 17, 18, 19, and 20, Uniform Sales Act.

  • Purposes:

  • To make it clear that:

  • 1. This article deals with the issues between seller and buyer in terms of step-by-step performance or nonperformance under the contract for sale and not in terms of whether or not "title" to the goods has passed. That the rules of this section in no way alter the rights of either the buyer, seller, or third parties declared elsewhere in the article is made clear by the preamble of this section. This section, however, in no way intends to indicate which line of interpretation should be followed in cases where the applicability of "public" regulation depends upon a "sale" or upon location of "title" without further definition. The basic policy of this article that known purpose and reason should govern interpretation cannot extend beyond the scope of its own provisions. It is therefor necessary to state what a "sale" is and when title passes under this article in case the courts deem any public regulation to incorporate the defined term of the "private" law.

  • 2. "Future" goods cannot be the subject of a present sale. Before title can pass the goods must be identified in the manner set forth in section 2-501. The parties, however, have full liberty to arrange by specific terms for the passing of title to goods which are existing.

  • 3. The "special property" of the buyer in goods identified to the contract is excluded from the definition of "security interest"; its incidents are defined in provisions of this article such as those on the rights of the seller's creditors, on good faith purchase, on the buyer's right to goods on the seller's insolvency, and on the buyer's right to specific performance or replevin.

  • 4. The factual situations in subsections (2) and (3) upon which passage of title turn actually base the test upon the time when the seller has finally committed himself or herself in regard to specific goods. Thus in a "shipment" contract he or she commits himself or herself by the act of making the shipment. If shipment is not contemplated subsection (3) turns on the seller's final commitment, i.e., the delivery of documents or the making of the contract. As to delivery of an electronic document of title, see definition of delivery in article 1, section 1-201. This article does not state a rule as to the place of title passage as to goods covered by an electronic document of title.

  • Cross References:

  • Point 2: Sections 2-102, 2-501, and 2-502.

  • Point 3: Sections 1-201, 2-402, 2-403, 2-502, and 2-716.

  • Definitional Cross References:

  • "Agreement". Section 1-201.

  • "Bill of lading". Section 1-201.

  • "Buyer". Section 2-103.

  • "Contract". Section 1-201.

  • "Contract for sale". Section 2-106.

  • "Delivery". Section 1-201.

  • "Document of title". Section 1-201.

  • "Good faith". Section 2-103.

  • "Goods". Section 2-105.

  • "Party". Section 1-201.

  • "Purchaser". Section 1-201.

  • "Receipt" of goods. Section 2-103.

  • "Remedy". Section 1-201.

  • "Rights". Section 1-201.

  • "Sale". Section 2-106.

  • "Security interest". Section 1-201.

  • "Seller". Section 2-103.

  • "Send". Section 1-201.