The Attorney General of Texas 

August 26, 1980 

MARK WHITE 

Attorney General 

Honorable Robert E. Stewart 

Banking Commissioner 

Department of Banking 

2601 North Lamar 

Austin, Texas 78705 

Opinion No. NW-229 

Re: Time credit prices for prepaid 

funeral contracts 

Dear Commissioner Stewart: 

The Department of Banking is charged with the administration of 

article 548b, V.T.C.S., which regulates the sale of prearranged or prepaid 

funeral merchandise. Contracts therefor must be in writing on forms 

approved by the Department and must set forth the particulars of the 

merchandise, the professional services, and the facilities to be provided. 

V.T.C.S. art. 548b, S2. You ask: 

May a time price differential be included in a 

contract for prearranged benefits when the payments 

on the contracts are on a deferred basis? 

The term “time price differential” is used in the Retail Installment 

Sales Act, chapter 6, of the Consumer Credit Code, to mean the amount 

paid for the privilege of purchasing goods and services, as there defined, 

that are to be paid out in installments over a period of time. V.T.C.S. art. 

5069-6.01(h). It signifies the difference between the seller’s “cash price” and 

his “credit price” for the goods and services sold A time price differential 

arising out of a credit sale does not constitute interest, and an authorized, 

bona fide charge &es not constitute usury. V.T.C.S. arts. 5069-1.01, 5069- 

2.01(h); Rattan v. Commercial Credit Co., 131 SW. 2d 399 (Tex. Civ. App. - 

Dallas 1939, writ rePd). 

We heve concluded that contracts for prearranged funeral benefits 

regulated by the department under article 548b may not properly include a 

“time price differential,” even though payments on the contracts are 

deferred, because such contracts do not evidence “retail installment 

transactions” within the meaning of the Retail Installment Sales Act, nor 

“credit sales” within the meaning of articlea 5069-1.01 and 5069-2.01(h), 

V.T.C.S. 

Article 548b expressly provides that the date of death of the 

beneficiary of such a contract shall be the maturity date of the contract. 

y. S5(3). Moreover, it provides that the delivery of funeral merchandise 

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Honorable Robert E. Stewart - Page Two (NW-229 1 

prior to death shall not constitute performance or fulfillment, either wholly or in part, 

of any such contract. Id Sl. All monies paid by the purchaser cn the contract must 

be deposited in a trust-&id for the use and benefit of the purchaser or beneficiary, 

except that a statutorily designated amount may be retained by the seller. Id. S5(1), 

(2). The purchaser may cancel the contract at any time before maturity andxcover 

back all monies paid except such amounts retained. Id. S5t4). See Falkner v. Memorial 

Gardens Assoc., 298 S.W. 2d 934 (Tex. Civ. App. - Ai&n 1957,writ rePd n.r.e.). 

In 1967 the Texas Legislature enacted the Consumer Credit Code,. declaring a 

need for “a comprehensive code of legislation to clearly define interest and usury,. . . 

to regulate credit sales and services, and place limitations on charges imposed in 

connection with such sales and services” in consumer transactions. Acts 1967, 60th 

Leg., ch. 274 at 608. Chapter six thereof, the Retail Installment Sales Act, regulates 

retail installment transactions and allows the inclusion of time price differentials 

therein. See V.T.C.S. arts. 5069-6.01, 5069-6.02(9)(a). “Goods” are &fined in article 

5069-6.01tomean tangible personal property when purchased for personal, family or 

household use and mt for commercial or business use, excluding money, things in 

action or intangible personal property. The definition of “services” excludes the 

services of a professional person licensed by the state except when rendered in 

connection with the purchase of “goods.” V.T.C.S. art. 5069-6.01(a), (b). 

Funeral directors and embalmers are professional persons licensed by the state. 

V.T.C.S. art. 4582b. Although funeral directors’ services are often rendered in 

connection with the purchase of tangible property, such as caskets and grave vaults, 

the purchaser of a prearranged funeral contract does not thereby acquire title to any 

specific goods. He acquires only the right to have tangible goods, as well as services, 

of a particular description provided at a future but uncertain time. 

The seller parts with no goods nor with the title to any specific goods prior to the 

death of the beneficiary, and the contract forms approved by the Department of 

Banking uniformly stipulate that the seller is under no obligation to deliver or provide 

any merchandise for which the stipulated purchase price has not been fully paid. See 

V.T.C.S. art. 548b, S2. Under such terms, no “sale” of funeral merchandise or servi= 

occurs until that time, and when it occurs it is a “cash sale,” not a “credit sale.” 

A “sale” consists of the passing of title from the seller to the buyer for a price. 

Bus. & Corn. Code 62.106. See First National Bank v. Ryerson & Son, Inc., 487 S.W. 2d 

377 (Tex. Civ. App. - Texa&%a 1972, writ ref’d n.r.e.1. Goods must be both existing 

and identified before any interest in them can pass. Bus. & Corn. Code S2.105. See 

Bus. & Corn. Code SS2.102, 9.109, 9.203(d); 50 Tex. Jur. 2d rev. Sales S18 at 270 (196x 

The codes do not define a “credit sale,” nor have Texas cases been found that define 

the precise term, but Texas courts, in our opinion, would agree with the court in 

Parnell v. Baham, 228 So. 2d 53 (La. App. - 4th Cir. 1969, writ rePd), where it was said: 

A ‘cash sale’ contemplates the concurrence of the payment 

with delivery and the transfer of ownership. . . . When delivery 

is made and ownership transferred by the seller to the purchaser 

upon an agreement that the purchaser will pay later - whether 

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Honorable Robert E. Stewart - Page Three (Mw-229) 

it be hours, days, or longer - it is a credit sale. The seller parts 

with his goods upon the promise of the purchaser to pay. 

(Emphasis added) 

Cf. Rush v. Smitherman, 294 S.W. 2d 873 (Tex. Civ. App. - San Antonio 1956, writ 

i??d.)(similar facts). 

The effect of the contracts authorized by article 548b, V.T.C.S., and approved by 

the Department of Banking is to give the purchasers thereof an option to later acquire 

funeral goods and services of a particular description at specified prices, and to have 

the consideration paid for the option applied against the purchase price of the goods 

when acquired and the services when performed. 

An option to purchase is a contract supported by consideration whereby one party 

sells to another party the right, at the election of the latter, to purchase certain 

described property, for the price and upon the terms and conditions of the contract. 

Ferguson v. von Seggern, 434 S.W. 2d 380 (Tex. Civ. App. -Dallas 1968, writ rePd 

n.r.e.). Cf. Clayton Brokerage Co. v. Mouer, 520 S.W. 2d 802 (Tex. Civ. App. - Austin 

19751, wxdism’d, 531 S.W. 2d 8051 (Tex. 1975) (London option). It is not a sale of 

tangible property; it is the sale of a privilege to acquire tangible property. Knox v. 

Brown, 277 S.W. 91 (Tex. Comm’n App. 1925). See 50 Tex. Jur. 2d rev. Sales S40 at 304 

(1969). 

- 

Here, the buyer has a statutory right to elect at any time (prior to the maturity 

of the contract) to cancel the arrangement and pass up the purchase, forfeiting only 

the small retainage allowed the seller and recovering the remainder of all he has paid. 

Clearly, the initial transaction is not a sale of tangible property; it is but the sale of a 

privilege to acquire it later. As a consequence, neither the pie-code nor post-code 

cases cited to us as authority for a different result can be applicable here. Whether or 

not other distinctions might also be made, they all involved in contracts effecting bona 

fide sales of tangible property. See International Harvester Co. v. Rotello, 580 S.W. 

2d 418 (Tex. Civ. App. - Houston-t Dist.1 1979, no writ); Anguiano v. Jim Walter 

Homes, Inc., 561 S.W. 2d 249 (Tex. Civ. App. -San Antonio 1978, writ rePd n.r.e.); 

, 183 S.W. 2d 657 

redit Co., supra. 

SUMMARY 

A time price differential may not be included in contracts 

for prearranged or prepaid funeral benefits regulated by article 

548b, V.T.C.S. 

*M 

Attorney General of Texas 

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. -_ 

Honorable Robert E. Stewart - Page Four (MW-229) 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

Prepared by Bruce Youngblood 

Assistant Attorney General 

APPROVED: 

OPINION COMMFTEE 

C. Robert Heath, Chairman 

Jon Bible 

Cathy Frayer 

Susan Garrison 

Ride Gilpin 

Bruce Youngblood 

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