Whether a transaction is a "sale on approval" must be determined by an objective examination of the transaction documents and the parties' performance, rather than examination of the parties' subjective intent. Houghton Wood Products v. Badger Wood Products, 196 Wis. 2d 457
, 538 N.W.2d 621
(Ct. App. 1995), 95-0004
When a good is used in the manufacturing process where it undergoes transformation and is subsequently resold, it is not delivered for "use" under sub. (1). Houghton Wood Products v. Badger Wood Products, 196 Wis. 2d 457
, 538 N.W.2d 621
(Ct. App. 1995), 95-0004
Special incidents of sale on approval and sale or return. 402.327(1)(1)
Under a sale on approval unless otherwise agreed:
Although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; and
Use of the goods consistent with the purpose of trial is not acceptance but failure seasonably to notify the seller of election to return the goods is acceptance, and if the goods conform to the contract acceptance of any part is acceptance of the whole; and
After due notification of election to return, the return is at the seller's risk and expense but a merchant buyer must follow any reasonable instructions.
Under a sale or return unless otherwise agreed:
The option to return extends to the whole or any commercial unit of the goods while in substantially their original condition, but must be exercised seasonably; and
In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.
A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in the auctioneer's discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.
Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until the auctioneer announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract a bid until the auctioneer's announcement of completion of the sale, but a bidder's retraction does not revive any previous bid.
If the auctioneer knowingly receives a bid on the seller's behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at the buyer's option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.
History: 1991 a. 316
TITLE, CREDITORS, AND GOOD FAITH PURCHASERS
Passing of title; reservation for security; limited application of this section.
Each provision of this chapter with regard to the rights, obligations, and remedies of the seller, the buyer, purchasers, or other 3rd 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 chapter and matters concerning title become material the following rules apply:
Title to goods cannot pass under a contract for sale prior to their identification to the contract (s. 402.501
), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by chs. 401
. 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 ch. 409
, title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.
Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes the seller's 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:
If the contract requires or authorizes the seller to send the goods to the buyer but does not require the seller to deliver them at destination, title passes to the buyer at the time and place of shipment; but
If the contract requires delivery at destination, title passes on tender there.
Unless otherwise explicitly agreed where delivery is to be made without moving the goods:
If the seller is to deliver a tangible document of title, title passes at the time when and the place where the seller delivers such documents and, if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
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.
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".
Title to a vehicle passes to the buyer when the seller completes performance of the contract with reference to the transfer of physical possession, despite the seller's retention of the certificate of title. National Exchange Bank of Fond du Lac v. Mann, 81 Wis. 2d 352
, 260 N.W.2d 716
Rights of seller's creditors against sold goods. 402.402(1)(1)
Except as provided in subs. (2)
, rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the buyer's rights to recover the goods under ss. 402.502
A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void, if as against the creditor a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.
Nothing in this chapter shall be deemed to impair the rights of creditors of the seller:
Where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this chapter constitute the transaction a fraudulent transfer or voidable preference.
History: 1991 a. 316
Power to transfer; good faith purchase of goods; "entrusting". 402.403(1)
A purchaser of goods acquires all title which the purchaser's transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though:
The transferor was deceived as to the identity of the purchaser; or
The delivery was in exchange for a check which is later dishonored; or
It was agreed that the transaction was to be a "cash sale"; or
The delivery was procured through fraud punishable as larcenous under the criminal law.
Any entrusting of possession of goods to a merchant who deals in goods of that kind gives the merchant power to transfer all rights of the entruster to a buyer in ordinary course of business.
"Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.
The rights of other purchasers of goods and of lien creditors are governed by chs. 407
History: 1991 a. 316
; 2009 a. 110
A person with a voidable title in property, having the power to pass title to a good faith purchaser under this section, may transfer a security interest in that property. Return of Property in State v. Pippin, 176 Wis. 2d 418
, 500 N.W.2d 407
(Ct. App. 1993).
"Voidable titles" under sub. (1) (a) are discussed. Met-Al, Inc. v. Hansen Storage Co. 844 F. Supp 485
Buyer in ordinary course of business under article 9 of the uniform commercial code (and related matters). Skilton, 1974 WLR 1.
Insurable interest in goods; manner of identification of goods. 402.501(1)(1)
The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and the buyer has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs:
When the contract is made if it is for the sale of goods already existing and identified;
If the contract is for the sale of future goods other than those described in par. (c)
, when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers;
When the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within 12 months after contracting or for the sale of crops to be harvested within 12 months or the next normal harvest season after contracting whichever is longer.
The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in the seller and where the identification is by the seller alone the seller may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.
Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
History: 1991 a. 316
Buyer's right to goods on seller's repudiation, failure to deliver, or insolvency. 402.502(1)
Subject to subs. (2)
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 the buyer has a special property under s. 402.501
may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:
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
In all cases, the seller becomes insolvent within 10 days after receipt of the first installment on their price.
The buyer's right to recover the goods under sub. (1) (a)
vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
If the identification creating the buyer's special property has been made by the buyer, the buyer acquires the right to recover the goods only if they conform to the contract for sale.
History: 1991 a. 316
; 2001 a. 10
Manner of seller's tender of delivery. 402.503(1)
Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable the buyer to take delivery. The manner, time and place for tender are determined by the agreement and this chapter, and in particular:
Tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
Unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.
Where the case is within s. 402.504
respecting shipment tender requires that the seller comply with its provisions.
Where the seller is required to deliver at a particular destination tender requires that the seller comply with sub. (1)
and also in any appropriate case tender documents as described in subs. (4)
Where goods are in the possession of a bailee and are to be delivered without being moved:
Tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer's right to possession of the goods; but
Tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in ch. 409
receipt by the bailee of notification of the buyer's rights fixes those rights as against the bailee and all 3rd persons; but risk of loss of the goods and of any failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.
Where the contract requires the seller to deliver documents:
The seller must tender all such documents in correct form, except as provided in s. 402.323 (2)
with respect to bills of lading in a set; and
Tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.
Shipment by seller. 402.504(1)(1)
Where the seller is required or authorized to send the goods to the buyer and the contract does not require the seller to deliver them at a particular destination, then unless otherwise agreed the seller must:
Put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and
Obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and
Failure to notify the buyer under sub. (1) (c)
or to make a proper contract under sub. (1) (a)
is a ground for rejection only if material delay or loss ensues.
History: 1991 a. 316
Seller's shipment under reservation. 402.505(1)(1)
Where the seller has identified goods to the contract by or before shipment:
The seller's procurement of a negotiable bill of lading to the seller's own order or otherwise reserves in the seller a security interest in the goods. The seller's procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller's expectation of transferring that interest to the person named.