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84-2-401. Passing of title; reservation for security; limited application of this section. Each provision of this article with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third 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 article and matters concerning title become material the following rules apply:

(1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (K.S.A. 84-2-501, and amendments thereto), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this act. 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 the provisions of the article on secured transactions (article 9), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.

(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his 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:

(a) 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

(b) if the contract requires delivery at destination, title passes on tender there.

(3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods,

(a) 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

(b) 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.

(4) 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."

History: L. 1965, ch. 564, § 63; L. 2007, ch. 90, § 52; July 1, 2008.

KANSAS COMMENT, 1996

1. This section states the basic policy of Article 2 that title to goods is irrelevant to issues among the buyer, seller, and third parties. See also Official Comment to 84-2-101. The title rules under this section apply only when another provision of Article 2 specifically refers to "title." See, e.g., 84-2-312 (warranty of title). Many provisions of the UCC reflect the Code's de-emphasis of title. Issues formerly determined by title include creditor's rights in sold goods (see 84-2-402), insurable interest (see 84-2-501), risk of loss (see 84-2-509, 84-2-510), the seller's right to the price (84-2-709), and the buyer's right to replevin (84-2-716). The Code sets out rules for resolving these issues without regard to whether title has passed. Title, however, may remain important for some non-Code issues such as whether goods may be attached by creditors or taxed, who may sue tortfeasors, and who is liable for conversion or theft. When determination of title is relevant, this section spells out the rules for doing so.

2. Subsection (1) states some general rules concerning the Code's concept of title. Title cannot pass until the goods have been identified to the contract (see 84-2-501). When the seller retains title to goods shipped or delivered, it has in effect retained only a security interest governed by Article 9. See 84-9-113. Subject to these limitations, the parties may provide for the passage of title in any manner to which they explicitly agree.

3. Subsections (2) and (3) provide the rules for passage of title when the parties do not otherwise explicitly agree. Subsection (2) applies when goods are to be moved physically from the seller to the buyer. Normally, title passes when the seller completes its tender obligations as to the goods. Paragraph (2)(a) provides that in the case of shipment contracts, title passes at the place and time of shipment. Paragraph (2)(b) provides that in the case of destination contracts, title passes when the seller tenders the goods at their destination. Subsection (3) applies when the goods are to be transferred without physically being moved. It provides that title passes either when the seller delivers documents of title to the buyer, or, if there are no documents to be delivered and the goods are identified, when the contract is made. See Desbien v. Penokee Farmers Union Coop. Ass'n, 220 K. 358, 552 P.2d 917 (1976).

4. Under subsection (4), when the buyer rejects or revokes acceptance of the goods, whether justified or not, title revests in the seller.

Law Review and Bar Journal References:

"Floor Plan Financing Under Article 9 of the Uniform Commercial Code," Charles H. Oldfather, 14 K.L.R. 571, 574 (1966).

"Caveat Venditor—Strict Products Liability Under the Uniform Commercial Code," Norman E. Beal, 16 K.L.R. 285, 288 (1968).

"Commercial Transactions Under the New Bankruptcy Act," Paul B. Rasor, 48 J.B.A.K. 199, 205 (1979).

Attorney General's Opinions:

Cereal malt beverages; off-premises sales. 87-1.

CASE ANNOTATIONS

1. Applied; delivery without moving goods; title passed at time of contracting. Desbien v. Penokee Farmers Union Cooperative Association, 220 Kan. 358, 366, 552 P.2d 917.

2. Acceptance of goods by buyer; defendant not entitled to cure nonconformance; defects; implied warranty action proper. Linscott v. Smith, 3 Kan. App. 2d 1, 5, 587 P.2d 1271.

3. Title to goods cannot pass under contract for sale prior to identification to the contract. Reeves v. Pillsbury Co., 229 Kan. 423, 426, 429, 625 P.2d 440.

4. Cited; priority dispute between competing security interests to be resolved under article 9, not article 2. J.I. Case Credit Corp. v. Foos, 11 Kan. App. 2d 185, 188, 717 P.2d 1064 (1986).

5. Seller lost right to stop delivery because of debtor's insolvency when livestock were constructively delivered to debtor. Kunkel v. Sprauge Nat. Bank, 128 F.3d 636, 641 (1997).

6. Title passes to the purchaser at time collateral is delivered unless specific agreement is made to the contrary. Home Bank & Tr. Co. v. Cedar Bluff Cattle Feeders, Inc., 25 Kan. App. 2d 152, 157, 959 P.2d 934 (1998).


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