A Short Series on Reclamation for Credit Managers, Part 1: RECLAMATION BASICS


Contributed by:
Robert S. Bernstein, Esquire
Bernstein-Burkley, P.C.

After reading the answer to Anxious in Alaska about getting inventory back post-bankruptcy if the debtor agrees, a reader asked about the availability of a remedy without the debtor’s consent. That raises the issues surrounding “reclamation.” Since the rules governing reclamation are specific, it requires a bit of detail. Therefore, the next few issues of The Law will be devoted to it.

Reclamation is a means by which a seller may “reclaim” goods that were sold and shipped to a customer on credit prior to the seller learning that the customer was insolvent. For reclamation to be effective, the seller must make a demand on the customer for the return of the goods. The Uniform Commercial Code (U.C.C.) Section 2-702(2) states:

(2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller within three months before delivery the ten day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer’s fraudulent or innocent misrepresentation of solvency or of intent to pay.

Next – Part 2: Reclamation and Bankruptcy


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