84-2-326. Sale on approval and sale or return; rights of creditors. (1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is:
(a) A "sale on approval" if the goods are delivered primarily for use, and
(b) a "sale or return" if the goods are delivered primarily for resale.
(2) Goods held on approval are not subject to the claims of the buyer's creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer's possession.
(3) Any "or return" term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this article (K.S.A. 84-2-201) and as contradicting the sale aspect of the contract within the provisions of this article on parol or extrinsic evidence (K.S.A. 84-2-202).
(4) If a person delivers or consigns for sale goods which the person used or bought for use of personal, family, or household purposes, these goods do not become the property of the deliveree or consignee unless the deliveree or consignee purchases and fully pays for the goods. Nothing in this subsection shall prevent the deliveree or consignee from acting as the deliverer's agent to transfer title to these goods to a buyer who pays the full purchase price. Any payment received by the deliveree or consignee from a buyer of these goods, less any amount which the deliverer expressly agreed could be deducted from the payment for commissions, fees, or expenses, is the property of the deliverer and shall not be subject to the claims of the deliveree's or consignee's creditors.
History: L. 1965, ch. 564, § 60; L. 1991, ch. 297, § 1; L. 2000, ch. 142, § 139; July 1, 2001.
KANSAS COMMENT, 1996
1. This section addresses two common but frequently confused transactions, the "sale on approval" and the "sale or return." While their legal incidents differ, both transactions contemplate that the buyer has the right to return goods even though the goods conform to the contract. Subsection (1) defines the two types of transactions. A "sale on approval" generally involves delivery of goods to an ultimate purchaser that is unwilling to purchase the goods without an opportunity to try them out first. A "sale or return" generally involves delivery to a merchant for resale, with the merchant having the right to return unsold goods. It is commonly called a "consignment." For a discussion of prior Kansas law, see Kansas Comment 1983 to this section.
2. Subsections (2) and (3) set out rules concerning when the goods are subject to the claims of the buyer's creditors. When a buyer has possession of goods "on approval," the goods are not subject to its creditor's claims. When goods are delivered to a buyer on consignment, the goods are subject to its creditor's claims unless the seller protects itself. Of the methods stated in paragraphs (3)(a)-(d) by which a seller may protect itself, compliance with the filing provisions of Article 9 is far and away the safest. For the elements of such compliance, see 84-9-114. Kansas has no "sign law" and proving that the business is "generally known" by creditors to sell the goods of others is extremely difficult.
3. Paragraph (3)(d) and subsection (5) were added by the Kansas legislature in 1991 to protect persons who consign goods they originally bought for personal, family, or household purposes. The provisions appear directed at consumers who consign their personal property to second-hand shops for resale.
4. Subsection (4) explains how the statute of frauds and the parol evidence rule apply to sale or return contracts.
5. This section applies only to "true" consignments and sales or return. If a transaction in the form of a consignment is merely a disguised security interest, it is governed by Article 9. See 84-9-102(2). Note, however, that section 84-1-201(37) states that in any event the consignment is "subject to" this section.
Law Review and Bar Journal References:
"Changes in Article Nine of the Kansas Commercial Code," Alan Tipton, 15 W.L.J. 212, 221 (1976).
"The New UCC Article 9 Amendments," Barkley Clark, 44 J.B.A.K. 131, 133 (1975).
"The Effect of Bankruptcy on Divorce Planning," Brenda J. Bell, Sharon Wright Kellstrom and Anne Burke Miller, 70 J.K.B.A. No. 3, 30 (2001).
CASE ANNOTATIONS
1. Gap-filler statutes, under New York law, as unuseable where parol evidence admissible to establish missing terms examined. Rajala v. Allied Corp., 66 B.R. 582, 594 (1986).
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