O.C.G.A.

O.C.G.A. § 11-2-326 (2019)

Sale on approval and sale or return; rights of creditors

✓ O.C.G.A. — 2019 edition (Public.Resource.Org Release 73)

Code text and O.C.G.A. statutory annotations on this page reflect the 2019 Official Code of Georgia Annotated (Public.Resource.Org Release 73, 2019-08-21; public domain per Georgia v. Public.Resource.Org, 2020). The Syfert case-law annotations in Notes of Decisions, below, are current.

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(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 (Code Section 11-2-201) and as contradicting the sale aspect of the contract within the provisions of this article on parol or extrinsic evidence (Code Section 11-2-202).

History

Code 1933, § 109A-2-326, enacted by Ga. L. 1962, p. 156, § 1; Ga. L. 1963, p. 188, § 2; Ga. L. 2001, p. 362, § 6.

Annotations

Law reviews. For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982).

JUDICIAL DECISIONS Purpose of O.C.G.A. § 11-2-326 is to protect creditors of person in possession of goods (the dealer) who would have a right to assume goods were property of dealer. Guardian Disct. Co. v. Settles, 114 Ga.

App. 418, 151 S.E.2d 530, 1966 Ga. App. LEXIS 787 (1966). One purpose behind O.C.G.A. § 11-2326 is subordination of secret consignment seller claims to claims of consign-

ment buyer’s creditors. Financeamerica Corp. v. Morris (In re KLP, Inc.), 7 B.R. 256, 1980 Bankr. LEXIS 4013 (Bankr. N.D. Ga. 1980). O.C.G.A. § 11-2-326 importance lies primarily in role it plays, along with notice provisions of Article 9 of this title, in giving disclosed claims to property priority over secret claims. Financeamerica Corp. v. Morris (In re KLP, Inc.), 7 B.R. 256, 1980 Bankr. LEXIS 4013 (Bankr. N.D. Ga. 1980). O.C.G.A. § 11-2-326 applies to transactions which are not true sales at all, since section governs agreements which somehow provide that “delivered goods may be returned by the buyer even though they conform to the contract.” Financeamerica Corp. v. Morris (In re KLP, Inc.), 7 B.R. 256, 1980 Bankr. LEXIS 4013 (Bankr. N.D. Ga. 1980). The burden of proof is on the defendant to prove that the consignee is generally known by creditors to be substantially engaged in selling the goods of others. Loeb v. G.A. Gertmenian & Sons (In re A.J. Nichols, Ltd.), 21 B.R. 612, 1982 Bankr. LEXIS 3746 (Bankr. N.D. Ga. 1982). Consignment sales insufficient. - Debtor aviation company’s index of consignment sales at 10 percent over the course of a ten year period was insufficient to render it substantially engaged in the sale of goods to others within the meaning of O.C.G.A. § 11-2-326. ATG Aerospace, Inc. v. High-Line Aviation Ltd., 149 B.R.

730, 1992 Bankr. LEXIS 2089 (Bankr. N.D. Ga. 1992). Car delivered by owner to dealer to secure offers for owner’s approval. - Where individual owner of automobile delivers it to automobile dealer for the purpose of having said dealer secure offers for purchase thereof, and to sell same upon approval of offer by individual owner, the automobile dealer to receive a commission of set sum regardless of sale price, such transaction is not a “sale or return” transaction between a buyer and a seller within meaning of O.C.G.A. § 11-2-326. Allgeier v. Campisi, 117 Ga. App. 105, 159 S.E.2d 458, 1968 Ga. App. LEXIS 988 (1968). Transaction between a mobile home manufacturer and a retail dealer, involving a mobile home claimed by a floor-plan financer was a “sale or return,” and the mobile home was subject to the financer’s claim arising from a security interest in the dealer’s after-acquired inventory without regard to whether the manufacturer was compensated for the mobile home. GECC v. Catalina Homes, Inc., 178 Ga. App. 319, 342 S.E.2d 734, 1986 Ga. App. LEXIS 1646 (1986). Voidable preference under Bankruptcy Code. - Debtor’s return of goods held on sale or return within the preference period constituted a voidable preference under the Bankruptcy Code, 11 U.S.C. § 547(b). Loeb v. G.A. Gertmenian & Sons (In re A.J. Nichols, Ltd.), 21 B.R. 612, 1982 Bankr. LEXIS 3746 (Bankr. N.D. Ga. 1982).

RESEARCH REFERENCES Am. Jur. 2d. 67 Am. Jur. 2d, Sales, §§ 465-502. Am. Jur. Pleading and Practice Forms. 6 Am. Jur. Pleading and Practice Forms, Commercial Code, § 2:315. C.J.S. 35 C.J.S., Factors, §§ 1, 56, 60, 63. U.L.A. Uniform Commercial Code (U.L.A.) § 2326. ALR. Duty of purchaser of goods “on trial” or

“on approval” regarding notice of rejection, 78 A.L.R. 533. Reasonableness or personal judgment of buyer as test where goods are sold subject to being satisfactory to the buyer, 86 A.L.R.2d 200. Time for return of goods sold on “sale or return” absent specific time provision in contract, 93 A.L.R.2d 342. Consignment transactions under the Uniform Commercial Code, 40 A.L.R.3d 1078. “Sale on approval” and “sale or return”

contracts under Uniform Commercial Code § 2-326, 44 A.L.R.6th 441.

Notes of Decisions

Cited in 7 cases, 1984–2003 · leading case: Logan Paving Co. v. Massey-Ferguson Credit Corp., 323 S.E.2d 259 (Ga. Ct. App. 1984).

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Logan Paving Co. v. Massey-Ferguson Credit Corp., 323 S.E.2d 259 (Ga. Ct. App. 1984). · cites it 15× “The court then concluded as a matter of law that the transaction between Davis and Logan was a “sale or return” governed by OCGA § 11-2-326 (3), and held that the claim of *369 Massey-Ferguson was superior to that of Logan.”

Imex Int'l, Inc. v. Wires Eng'g, 583 S.E.2d 117 (Ga. Ct. App. 2003). · cites it 4× “OCGA § 11-2-326 (1) (a). Imex had the opportunity to inspect the plastification machine in Italy, and Imex did not either request additional time to inspect or request for a.”

ATG Aerospace, Inc. v. High-Line Aviation Ltd. (In Re High-Line Aviation, Inc.), 149 B.R. 730 (Bankr. N.D. Ga. 1992). · cites it 8× “The methods by which a consignor’s interest in goods may be protected from the consignee’s creditors are set out in O.C.G.A. § 11-2-326. This section provides that: (2) Except as provided in subsection (3) of this Code section, .”

Escrow Connection v. Haas, 3 U.C.C. Rep. Serv. 2d (West) 547 (Cal. Ct. App. 1987). · cites it 3× “Another Georgia court, determining the applicability of the Allgeier decision stated: “We agree that the undisputed facts of this case fall squarely within the provisions of OCGA § 11-2-326(3). Logan, the owner of the tractor, delivered the tractor to Davis for the purpose of…”

C's Rent to Own v. Jarrells (In Re Jarrells), 205 B.R. 994 (Bankr. M.D. Ga. 1997). · cites it 2× “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 (Code Section 11-2-326). Whether a transaction creates a lease or security interest is…”

G. E. Credit Corp. v. Catalina Homes, Inc., 342 S.E.2d 734 (Ga. Ct. App. 1986). · cites it 2× “” See OCGA § 11-2-326. Therefore, the mobile home was subject to plaintiff’s claim arising from a security interest in Harbor’s after-acquired inventory without regard to whether Catalina was compensated for the mobile home.”

Amatulli Imports, Inc. v. House of Persia, Inc., 383 S.E.2d 192 (Ga. Ct. App. 1989). · cites it 2× “” OCGA § 11-2-326 (1) (b). In the context of a “sale or return,” the buyer’s obligation to ac *829 cept or to reject goods is governed by the provisions of OCGA § 11-2-327 (2) (a), which provides: “Under a sale or return unless otherwise agreed the option to return extends to…”

— 11-2-326(3) — 2 cases

Escrow Connection v. Haas, 3 U.C.C. Rep. Serv. 2d (West) 547 (Cal. Ct. App. 1987). “Another Georgia court, determining the applicability of the Allgeier decision stated: “We agree that the undisputed facts of this case fall squarely within the provisions of OCGA § 11-2-326(3). Logan, the owner of the tractor, delivered the tractor to Davis for the purpose of…”

ATG Aerospace, Inc. v. High-Line Aviation Ltd. (In Re High-Line Aviation, Inc.), 149 B.R. 730 (Bankr. N.D. Ga. 1992). “The methods by which a consignor’s interest in goods may be protected from the consignee’s creditors are set out in O.C.G.A. § 11-2-326. This section provides that: (2) Except as provided in subsection (3) of this Code section, .”

Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.