CO Code § 4-2-702 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 2 - Sales|Part 7 - Remedies|§ 4-2-702. Seller's Remedies on Discovery of Buyer's Insolvency

  Where the seller discovers the buyer to be insolvent, he may refuse delivery except for cash, including payment for all goods theretofore delivered under the contract, and stop delivery under this article (section 4-2-705).    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 in writing within three months before delivery, the ten day limitation does not apply. Except as provided in this subsection (2), 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.    The seller's right to reclaim under subsection (2) of this section is subject to the rights of a buyer in ordinary course or other good faith purchaser under this article (section 4-2-403). Successful reclamation of goods excludes all other remedies with respect to them.     History. Source: L. 65: P. 1334, § 1. C.R.S. 1963: § 155-2-702. L. 77: (3) amended, p. 313, § 7, effective January 1, 1978. History. Source: L. 65: P. 1334, § 1. C.R.S. 1963: § 155-2-702. L. 77: (3) amended, p. 313, § 7, effective January 1, 1978.    OFFICIAL COMMENT   Prior Uniform Statutory Provision: Subsection (1) — Sections 53(1)(b), 54(1)(c) and 57, Uniform Sales Act; Subsection (2) — none; Subsection (3) — Section 76(3), Uniform Sales Act.   Changes: Rewritten, the protection given to a seller who has sold on credit and has delivered goods to the buyer immediately preceding his insolvency being extended.   Purposes of Changes and New Matter: To make it clear that:   1. The seller's right to withhold the goods or to stop delivery except for cash when he discovers the buyer's insolvency is made explicit in subsection (1) regardless of the passage of title, and the concept of stoppage has been extended to include goods in the possession of any bailee who has not yet attorned to the buyer.   2. Subsection (2) takes as its base line the proposition that any receipt of goods on credit by an insolvent buyer amounts to a tacit business misrepresentation of solvency and therefore is fraudulent as against the particular seller. This Article makes discovery of the buyer's insolvency and demand within a ten day period a condition of the right to reclaim goods on this ground. The ten day limitation period operates from the time of receipt of the goods.   An exception to this time limitation is made when a written misrepresentation of solvency has been made to the particular seller within three months prior to the delivery. To fall within the exception the statement of solvency must be in writing, addressed to the particular seller and dated within three months of the delivery.   3. Because the right of the seller to reclaim goods under this section constitutes preferential treatment as against the buyer's other creditors, subsection (3) provides that such reclamation bars all his other remedies as to the goods involved. As amended 1966.   Cross References:   Point 1: Sections 4-2-401 and 4-2-705 .   Compare Section 4-2-502 .   Definitional Cross References:   “Buyer”. Section 4-2-103 .   “Buyer in ordinary course of business”. Section 4-1-201 .   “Contract”. Section 4-1-201 .   “Good faith”. Section 4-1-201 .   “Goods”. Section 4-2-105 .   “Insolvent”. Section 4-1-201 .   “Person”. Section 4-1-201 .   “Purchaser”. Section 4-1-201 .   “Receipt” of goods. Section 4-2-103 .   “Remedy”. Section 4-1-201 .   “Rights”. Section 4-1-201 .   “Seller”. Section 4-2-103 .   “Writing”. Section 4-1-201 .   ANNOTATION   Law reviews. For article, “Commercial Law”, see 58 Den. L.J. 279 . For article, “Executory Contracts in Bankruptcy: Protecting the Fundamental Terms of the Bargain”, see 54 U. Colo. L. Rev. 507 (1983).   This section is not applicable where there was no credit transaction. Ranchers Farmers Livestock Auction Co. v. Honey, 38 Colo. App. 69, 552 P.2d 313, cert. dismissed, 191 Colo. 503 , 553 P.2d 799 (1976).   Necessary prerequisite to the right to reclaim under this section is a demand for the return of the goods made within 10 days of their receipt. In re Colacci's of Am., 490 F.2d 1118 (10th Cir. 1974).   If the credit seller does not follow up on his rights as to possession, there is a waiver. In re Colacci's of Am., Inc., 490 F.2d 1118 (10th Cir. 1974).   “Follow up” by person seeking to be reclaiming seller means regaining of possession or bona fide attempt to do so. In re Colacci's of Am., Inc., 490 F.2d 1118 (10th Cir. 1974).   Creation of a security interest out of the right to reclaim might allow recovery which would be greater than the mere recovery of goods originally transferred. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166 , 519 P.2d 354 (1974).   Seller was not “reclaiming seller”. Where the seller did not act, and instead acquiesced in the buyer's retention of the goods for some four months after they were delivered, although not without some argument and without an expressed consent, and the insistent demands were for payment, and the seller hoped to be paid for the goods during the stalling, and so allowed them to remain at the buyer's, and only after two creditors' meetings did the seller take action to “follow up” its demand, the seller did not become a “reclaiming seller”. In re Colacci's of Am., Inc., 490 F.2d 1118 (10th Cir. 1974).