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Kansas Statutes Annotated

K.S.A. § 84-2-702 (2026)

Seller's remedies on discovery of buyer's insolvency

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84-2-702. Seller's remedies on discovery of buyer's insolvency. (1) 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 84-2-705).

(2) 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.

(3) 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 article (section 84-2-403). Successful reclamation of goods excludes all other remedies with respect to them.

History: L. 1965, ch. 564, § 98; L. 1967, ch. 519, § 3; July 1.

KANSAS COMMENT, 1996

1. This section provides a seller with special remedies upon discovery that the buyer is insolvent. Since insolvency is not itself a breach, the seller will not have the remedies provided in section 84-2-703. Instead, under subsection (1) the seller may refuse delivery except for cash. The seller may also exercise its right to stop delivery under section 84-2-705 and demand adequate assurances of performance under section 84-2-609. For the definition of "insolvent," see 84-1-201(23).

2. Subsection (2) applies when the goods are already in the hands of an insolvent buyer and gives the seller a limited right to reclaim the goods. Passage of title is irrelevant. Instead, an unpaid seller on credit may reclaim the goods only if the buyer was insolvent when it received the goods and if the seller demands reclamation within ten days after the buyer receives the goods. The ten-day limitation does not apply when the buyer has made a written misrepresentation of solvency to the seller within three months before delivery. Since reclamation of the goods amounts to preferential treatment as against the buyer's other creditors, subsection (3) bars all other remedies when the seller successfully reclaims.

3. If the goods have reached the hands of a good faith purchaser for value or a buyer in ordinary course, the seller's right to reclamation under this section is cut off. Good faith purchasers can include secured parties, and so a reclaiming seller normally loses in a priority struggle as against an Article 9 secured creditor whose after-acquired property clause reaches the goods. See, e.g., In re Samuels & Co., 526 F.2d 1238 (5th Cir.), cert. denied, 429 U.S. 834 (1976), cited favorably in Iola State Bank v. Bolan, 235 K. 175, 679 P.2d 720 (1984). For a discussion of a seller's right to reclaim in cash sales, see 1996 Kansas Comments 2 & 3 to 84-2-507. The Bankruptcy Code recognizes the seller's right of reclamation as valid against the trustee in bankruptcy, although the bankruptcy law requirements for exercise of the right differ somewhat from those under this section. 11 U.S.C. § 546(c); see also In re Pester Refining Co., 964 F.2d 842 (8th Cir. 1992) (examining relationship between section 546(c) of the Bankruptcy Code and section 84-2-702).

Law Review and Bar Journal References:

Survey of Kansas commercial law, 18 K.L.R. 388 (1970).

"Commercial Transactions Under the New Bankruptcy Act," Paul B. Rasor, 48 J.B.A.K. 199, 204, 213 (1979).

"Electronic Commerce in Kansas: Contract Formation and Formalities Under Article 2," Christopher R. Drahozal, 68 J.K.B.A. No. 5, 22 (1999).

CASE ANNOTATIONS

1. No liability for disregarding seller's demand to withhold delivery in absence of bailment relationship. White, Inc. v. Leftwich, 2 Kan. App. 2d 341, 344, 579 P.2d 164.

2. Buyer's right to retain and dispose of goods conditioned on seller's right of reclamation; right to reclaim exists where checks dishonored; right to reclaim not indefinite. Holiday Rambler Corp. v. First Nat. Bank and Trust, 723 F.2d 1449, 1451, 1452 (1983).

3. Bank availed nothing where subrogated to rights hereunder that were not exercised. In re Cascade Oil Co., Inc., 51 B.R. 877, 880 (1985).

4. Parallel of statute with federal law permitting right of reclamation within 10 days examined. In re Eston Grain Co., Inc., 55 B.R. 308, 315 (1985).

5. Right to reclaim goods delivered to insolvent buyer not extinguished because seller's right subject to unsecured creditors floating liens in buyer's inventory. In Re Pester Refining Co., 964 F.2d 842, 843, 845, 849 (1992).

6. Seller lost right to stop delivery because of debtor's insolvency when livestock were constructively delivered to debtor. Kunkel v. Sprauge Nat. Bank, 128 F.3d 636, 643 (1997).

Notes of Decisions
Cited in 5 cases, 1978–1997 · leading case: In Re Cascade Oil Co., Inc., 51 B.R. 877 (Bankr. D. Kan. 1985).
Sort: Relevance Newest Treatment
In Re Cascade Oil Co., Inc., 51 B.R. 877 (Bankr. D. Kan. 1985). · cites it 2× “At that juncture of Cascade’s insolvency the only manner in which Trident could have compelled a full recovery would have been by way of a ten-day seller’s demand reclamation under K.S.A. § 84-2-702. Trident chose, rather, to rely on the post-dated check and was fortunate in…”
In Re Esbon Grain Co., Inc., 55 B.R. 308 (Bankr. D. Kan. 1985). · cites it 2× “The parallel with Kan.Stat.Ann. § 84-2-702 is obvious. However, no seller reclamation rights are asserted here.”
Phillip Kunkel v. Sprague Natl. Bank, 128 F.3d 636 (8th Cir. 1997). “See Kan. Stat. Ann. § 84-2-702 . Hoxie lost its Article 2 right to stop delivery, however, when the cattle were constructively delivered to Morken and Hoxie acknowledged to Morken in the feedlot agreements and other transaction documents that Morken had purchased the cattle and…”
Collingwood Grain, Inc. v. Coast Trading Co., 744 F.2d 686 (9th Cir. 1984). “§ 4-2-702(3) (1974) and Kan.Stat.Ann. § 84-2-702(3) (1983). Section 2-403 provides that a good faith purchaser for value obtains good title from one to whom the goods have been delivered even though the initial buyer had only voidable title.”
H. Lynn White, Inc. v. Leftwich, 579 P.2d 164 (Kan. Ct. App. 1978). · cites it 2× “In the absence of a bailment relationship, as contemplated *344 by K.S.A. 84-2-702 and K.S.A. 84-2-705, Leftwich may not be held liable for disregarding White’s demand to withhold delivery of the carpet to Granger.”
K.S.A. § 84-2-702(1): 1 case
H. Lynn White, Inc. v. Leftwich, 579 P.2d 164 (Kan. Ct. App. 1978). “In the absence of a bailment relationship, as contemplated *344 by K.S.A. 84-2-702 and K.S.A. 84-2-705, Leftwich may not be held liable for disregarding White’s demand to withhold delivery of the carpet to Granger.”
K.S.A. § 84-2-702(3): 1 case
Collingwood Grain, Inc. v. Coast Trading Co., 744 F.2d 686 (9th Cir. 1984). “§ 4-2-702(3) (1974) and Kan.Stat.Ann. § 84-2-702(3) (1983). Section 2-403 provides that a good faith purchaser for value obtains good title from one to whom the goods have been delivered even though the initial buyer had only voidable title.”
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