Buyer's right to goods on seller's repudiation, failure to deliver, or insolvency.
(1) Subject to subsections (2) and (3) and even though the goods have not been shipped a buyer who has paid a part or all of the price of goods in which he or she has a special property under the provisions of the immediately preceding section may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:
(a) in the case of goods bought for personal, family, or household purposes, the seller repudiates or fails to deliver as required by the contract; or
(b) in all cases, the seller becomes insolvent within ten days after receipt of the first installment on their price.
(2) The buyer's right to recover the goods under subdivision (1)(a) vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
(3) If the identification creating his or her special property has been made by the buyer he or she acquires the right to recover the goods only if they conform to the contract for sale.
Source:Laws 1963, c. 544, Art. II, § 2-502, p. 1737; Laws 1999, LB 550, § 57.
Prior Uniform Statutory Provision: Compare sections 17, 18, and 19, Uniform Sales Act.
1. This section gives an additional right to the buyer as a result of identification of the goods to the contract in the manner provided in section 2-501. The buyer is given a right to recover the goods, conditioned upon making and keeping good a tender of any unpaid portion of the price, in two limited circumstances. First, the buyer may recover goods bought for personal, family, or household purposes if the seller repudiates the contract or fails to deliver the goods. Second, in any case, the buyer may recover the goods if the seller becomes insolvent within 10 days after the seller receives the first installment on their price. The buyer's right to recover the goods under this section is an exception to the usual rule, under which the disappointed buyer must resort to an action to recover damages.
2. The question of whether the buyer also acquires a security interest in identified goods and has rights to the goods when insolvency takes place after the ten-day period provided in this section depends upon compliance with the provisions of the Article on Secured Transactions (Article 9).
3. Under subsection (2), the buyer's right to recover consumer goods under subsection (1)(a) vests upon acquisition of a special property, which occurs upon identification of the goods to the contract. See section 2-501. Inasmuch as a secured party normally acquires no greater rights in its collateral than its debtor had or had power to convey, see section 2-403(1) (first sentence), a buyer who acquires a right to recover under this section will take free of a security interest created by the seller if it attaches to the goods after the goods have been identified to the contract. The buyer will take free, even if the buyer does not buy in ordinary course and even if the security interest is perfected. Of course, to the extent that the buyer pays the price after the security interest attaches, the payments will constitute proceeds of the security interest.
4. Subsection (3) is included to preclude the possibility of unjust enrichment, which would exist if the buyer were permitted to recover goods even though they were greatly superior in quality or quantity to that called for by the contract for sale.
Point 1: Sections 1-201 and 2-702.
Point 2: Article 9.
Definitional Cross References:
"Buyer". Section 2-103.
"Conform". Section 2-106.
"Contract for sale". Section 2-106.
"Goods". Section 2-105.
"Insolvent". Section 1-201.
"Right". Section 1-201.
"Seller". Section 2-103.