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PaperclipPerfector  21hr ago (text post)   2782 thread views

Culture War Roundup for the week of June 8, 2026

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The real villain here is the Universal Commercial Code. It turns out that a consignment agreement isn't a consignment agreement. If you attempt to enter into one, what you have actually done is transferred title of the goods to the consignee and retained only a security interest in them. So if the consignee then loses his inventory to a creditor, the creditor gets the consignor's goods free and clear and the consignor has only a worthless debt owed by the bankrupt consignee. All 100% legal. You can avoid this, if you're a commercial lawyer, by filing a form (UCC-1) which declares your interest in the goods; this gives you a security interest superior to the other creditors. Of course, random people doing a one-time sale of whatever would never know to do this. Presumably this law was written by banks or other creditors.

This doesn't seem right:

(A) the merchant:

(i) deals in goods of that kind under a name other than the name of the person making delivery;

(ii) is not an auctioneer; and

(iii) is not generally known by its creditors to be substantially engaged in selling the goods of others;

(B) with respect to each delivery, the aggregate value of the goods is $1,000 or more at the time of delivery;

(C) the goods are not consumer goods immediately before delivery; and

(D) the transaction does not create a security interest that secures an obligation.

This case likely fails on Aiii and C. It seems like the ucc rules are in general meant to apply to b2b suppliers consigning inventory, and not random people consigning their collections of shit.

The courts are apparently very reluctant to consider A(iii).

I don't think people realize how risky mom-and-pop shops are as counterparties. FinnaSkipTown LLC can just shut down and not give you your money, stuff, or services at any time.

The real villain here is the Uniform Commercial Code. It turns out that a consignment agreement isn't a consignment agreement.

Source

Generally, if the consignee under such a consignment arrangement files for bankruptcy relief, the consigned goods are property of the consignee's bankruptcy estate. Accordingly, 11 U.S.C. ยง362(a)(3) prohibits the consignor from picking up the consigned goods after the filing of the bankruptcy.

The typical consignor is relegated to the status of a general unsecured creditor.

There are numerous requirements and exceptions to the foregoing rules. Many transactions that have often been referred to as "consignments" are not deemed to be consignments for the purposes of the foregoing rules. For example, transactions involving goods "consigned" to auctioneers, goods delivered "on consignment" to what generally everyone knows is a consignment shop, goods "consigned" to a merchant for resale, for any delivery where the aggregate value of the goods is less than $1,000, and goods that were consumer goods (i.e., goods used or bought primarily for use for personal, family or household purposes) in the hands of the "consignor" are definitely not consignments. These transactions are, or may be, "true consignments" (in the usual sense), but the drafters of UCC Article 9 consciously chose not to have Article 9 apply to them. Moreover, if the goods will not be delivered, at least in part, to a merchant for resale, there can be no consignment under Article 9. Similarly excluded are transactions that may be designated as "consignments" but that, in reality, are transactions that secure an obligation (other than the "consignee's" obligation to return the "consigned" goods). When in doubt about whether the Article 9 consignment rules apply, the "consignor" should take all steps necessary both to create and perfect a purchase-money security interest in the "consigned goods."

I would expect Lego sets to fall under the "consumer goods" exception, though.

Presumably this law was written by banks or other creditors.

Source

Prior to the UCC, it was generally held that the consignee's creditors had no claim against the consignor if the consignee's assets were inadequate to satisfy their respective claims. This was so despite the fact that the consignor was not required to record the transaction or to give notice that he retained title to the goods. The basic reason for ruling in the consignor's favor was that title had not passed to the consignee and the creditor could not secure an interest in, or attach, any goods to which the debtor did not have title. This decisional law placed a creditor of the consignee in an unfavorable position, particularly if he had relied on the consignee's possession of consigned goods and failed to ask for proof of ownership. It was difficult for a creditor to discover a consignment because the consignor was not required to give notice in order to protect his interests. For example, if a consignee presented his goods as collateral for a loan, the creditor who relied on the consignee's possession would have no protection if the goods involved were consigned.

This problem did not exist under the 1952 Code, since section 1-201(37), at that time, included all consignments as security interests. Under the present [1962] Code, however, the question of intention is all-important and presents a difficult problem of legal and factual determination.

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