Ark. Code Ann. § 4-2-702 (2026)
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 chapter (§ 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 (10) days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three (3) months before delivery the ten day limitation does not apply. Except as provided in this subsection 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) is subject to the rights of a buyer in ordinary course or other good faith purchaser under this chapter (§ 4-2-403). Successful reclamation of goods excludes all other remedies with respect to them.
History. Acts 1961, No. 185, § 2-702; 1967, No. 303, § 4; A.S.A. 1947, § 85-2-702.
Research References
Ark. L. Rev.
The Trustee in Bankruptcy and the Secured Creditor, 17 Ark. L. Rev. 46.
Case Notes
Bankruptcy.
Where claimant's oral demand complied with state law and bankruptcy was filed after the 10 day time limit for demanding reclamation had expired, the additional requirement of the Bankruptcy Code became effective too late for the claimant to comply with it. To retroactively apply the written requirement of the Bankruptcy Code would result in subjecting the reclaiming seller to a procedure different from the procedure applicable at the time the act to be done was required to be done, and this would be inconsistent with fundamental principles of due process of law. Thus failure to make written demand as required by the Bankruptcy Code results only in claimant's right to reclaim being subject to the avoiding powers of the trustee. In re Bearhouse, Inc., 84 B.R. 552 (Bankr. W.D. Ark. 1988).
Security Interests.
If the secured party has all the prerequisites of a good faith purchaser for value with a valid security interest in the debtor's after-acquired inventory, the secured party's security interest defeats the equitable rights of the reclaiming sellers. Beebe v. MacMillan Petro. (Ark.), Inc., 115 B.R. 175 (Bankr. W.D. Ark. 1990).