(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 4-2-705).
(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 days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery, the ten day limitation does not apply. Except as provided in this subsection (2), 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) of this section is subject to the rights of a buyer in ordinary course or other good faith purchaser under this article (section 4-2-403). Successful reclamation of goods excludes all other remedies with respect to them.
Source: L. 65: p. 1334, § 1. C.R.S. 1963: § 155-2-702. L. 77: (3) amended, p. 313, § 7, effective January 1, 1978.
ANNOTATION
Law reviews. For article, "Commercial Law", see 58 Den. L.J. 279 (1981). For article, "Executory Contracts in Bankruptcy: Protecting the Fundamental Terms of the Bargain", see 54 U. Colo. L. Rev. 507 (1983).
This section is not applicable where there was no credit transaction. Ranchers & Farmers Livestock Auction Co. v. Honey, 38 Colo. App. 69, 552 P.2d 313 (1976).
Necessary prerequisite to the right to reclaim under this section is a demand for the return of the goods made within 10 days of their receipt. In re Colacci's of Am., 490 F.2d 1118 (10th Cir. 1974).
If the credit seller does not follow up on his rights as to possession, there is a waiver. In re Colacci's of Am., Inc., 490 F.2d 1118 (10th Cir. 1974).
"Follow up" by person seeking to be reclaiming seller means regaining of possession or bona fide attempt to do so. In re Colacci's of Am., Inc., 490 F.2d 1118 (10th Cir. 1974).
Creation of a security interest out of the right to reclaim might allow recovery which would be greater than the mere recovery of goods originally transferred. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166, 519 P.2d 354 (1974).
Seller was not "reclaiming seller". Where the seller did not act, and instead acquiesced in the buyer's retention of the goods for some four months after they were delivered, although not without some argument and without an expressed consent, and the insistent demands were for payment, and the seller hoped to be paid for the goods during the stalling, and so allowed them to remain at the buyer's, and only after two creditors' meetings did the seller take action to "follow up" its demand, the seller did not become a "reclaiming seller". In re Colacci's of Am., Inc., 490 F.2d 1118 (10th Cir. 1974).