Code of Alabama
Ala. Code § 7-2-326 (2026)
“Sale on Approval” and “Sale or Return.”
✓ official Alabama Legislature (ALISON) text, current July 2026
(1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is:
(a) A “sale on approval” if the goods are delivered primarily for use, and
(b) A “sale or return” if the goods are delivered primarily for resale.
(2) Goods held on approval are not subject to the claims of the buyer’s creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer’s possession.
(3) Any “or return” term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this article (Section 7-2-201) and as contradicting the sale aspect of the contract within the provisions of this article on parol or extrinsic evidence (Section 7-2-202).
(Acts 1965, No. 549, p. 811; Act 2001-481, p. 647, §2.)
Notes of Decisions
Cited in 6
cases, 1988–2004 · leading case: First Nat'l Bank of Birmingham v. Young, 530 So. 2d 834 (Ala. Civ. App. 1988).
First Nat'l Bank of Birmingham v. Young, 530 So. 2d 834 (Ala. Civ. App. 1988). “AmSouth contends that the transaction between Young and SME was a consignment for sale under § 7-2-326, Ala. Code 1975 (UCC), and because Young failed to comply with the provisions of the UCC, he cannot prevail over AmSouth, a perfected secured creditor.”
Georgetown Steel Co. v. Progress Rail Servs. Corp. (In Re Georgetown Steel Co.), 318 B.R. 352 (Bankr. D.S.C. 2004). “, 2002); Official Comment 4 to Ala. Code § 7-2-326 . Additionally, the definition of a “security interest” under the revised UCC now includes an interest of a consignor pursuant to Article 9.”
McGregor v. Jackson (In Re Auclair), 131 B.R. 185 (Bankr. M.D. Ala. 1991). “Code § 7-2-326 (3) (1975) regarding consignments applies to the facts of this case.”
Mattheiss v. Title Loan Express (In Re Mattheiss), 214 B.R. 20 (Bankr. N.D. Ala. 1997). “Unless a consignment is intended as security, reservation of title thereunder is not a "security interest,” but a consignment in any event is subject to the provisions on consignment sales (Section 7-2-326). This subsection of Alabama's U.”
Murphy v. Southtrust Bank of Alabama, N.A., 611 So. 2d 269 (Ala. 1992). “The test of whether a transaction is a sale or consignment is simply one of looking at the outwardly visible aspects of the transactions outlined in § 7-2-326, which are (1) the consignor’s delivery of possession to the consignee, (2) the fact the consignee engages in the…”
Rent-A-Ctr. v. Shelby (In Re Shelby), 127 B.R. 682 (Bankr. N.D. Ala. 1991). “Unless a lease or a consignment is intended as security, reservation of title thereunder is not a “security interest,” but a consignment is in any event subject to the provisions on consignment sales (section 7-2-326). Whether a lease is intended as security is to be determined…”
— Ala. Code § 7-2-326(3) — 3 cases
First Nat'l Bank of Birmingham v. Young, 530 So. 2d 834 (Ala. Civ. App. 1988). “AmSouth contends that the transaction between Young and SME was a consignment for sale under § 7-2-326, Ala. Code 1975 (UCC), and because Young failed to comply with the provisions of the UCC, he cannot prevail over AmSouth, a perfected secured creditor.”
McGregor v. Jackson (In Re Auclair), 131 B.R. 185 (Bankr. M.D. Ala. 1991). “Code § 7-2-326 (3) (1975) regarding consignments applies to the facts of this case.”
Murphy v. Southtrust Bank of Alabama, N.A., 611 So. 2d 269 (Ala. 1992). “The test of whether a transaction is a sale or consignment is simply one of looking at the outwardly visible aspects of the transactions outlined in § 7-2-326, which are (1) the consignor’s delivery of possession to the consignee, (2) the fact the consignee engages in the…”
— Ala. Code § 7-2-326(3)(1992) — 1 case
Georgetown Steel Co. v. Progress Rail Servs. Corp. (In Re Georgetown Steel Co.), 318 B.R. 352 (Bankr. D.S.C. 2004). “, 2002); Official Comment 4 to Ala. Code § 7-2-326 . Additionally, the definition of a “security interest” under the revised UCC now includes an interest of a consignor pursuant to Article 9.”
— Ala. Code § 7-2-326(3)(c) — 1 case
Murphy v. Southtrust Bank of Alabama, N.A., 611 So. 2d 269 (Ala. 1992). “The test of whether a transaction is a sale or consignment is simply one of looking at the outwardly visible aspects of the transactions outlined in § 7-2-326, which are (1) the consignor’s delivery of possession to the consignee, (2) the fact the consignee engages in the…”
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