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Transfer of Movable Property under U.S. Law

Discussed from a Functional Perspective


Martin Lilja

This book discusses legal rules for three functional commercial conflict situations under the laws of the U.S.A., mainly analyzing the U.C.C., the Bankruptcy Code, Common Law and Equity. In this context, the term conflict situation is meant to address a certain type of conflict arising between certain parties – e.g. buyer, seller, creditors of buyer or seller, or other types of third parties, like former title-holders to the goods – having certain colliding interests in the same property. The three conflict situations addressed in this book are the protection of a buyer in the seller’s insolvency, the protection of a seller in the buyer’s insolvency, and the conflict between a person formerly entitled to the goods and a good faith acquirer.
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III. Seller's protection in the buyer's insolvency


We will now turn our attention to the opposite situation, and discuss the rules governing the protection of a seller in the buyer's insolvency.

The issue: The focus here is on whether the seller will have a right to the goods as against the buyer and the buyer’s creditors when the buyer is or becomes insolvent. This right may, theoretically, be a right related to possession of the goods (i.e., to remain in possession or to repossess them) or to preferential payment out of the proceeds of the goods, in order to satisfy the seller’s claim for the purchase price.

With reference to the chapter on the buyer’s protection in the seller’s insolvency,569 the moment when the buyer acquires protection is the same as when the seller loses his or her protection to the goods. As between the parties, the transfer is effective according to the agreement, but affects third parties when possession of the movable property has been transferred to the buyer; thus, the seller is protected against the buyer’s insolvency up until the time the goods are delivered to the buyer.570

Delivery is deemed to have taken place when the movable property is handed over to the buyer or in any other manner according to the parties’ intention (i.e. both actual and constructive delivery571). This may include handing over a set of keys to the buyer “to the place where the thing is stored, or by negotiating to him a document...

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