4-2-401. Passing of title - reservation for security - limited application of this section.
Statute text
Each provision of this article with regard to the rights, obligations, and remedies of the seller, the buyer, purchasers, or other third parties applies irrespective of title to the goods, except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this article and matters concerning title become material, the following rules apply:
(1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (section 4-2-501), and unless otherwise explicitly agreed, the buyer acquires by their identification a special property as limited by this title. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the article on secured transactions (article 9 of this title), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.
(2) Unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:
(a) If the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but
(b) If the contract requires delivery at destination, title passes on tender there.
(3) Unless otherwise explicitly agreed, where delivery is to be made without moving the goods:
(a) If the seller is to deliver a tangible document of title, title passes at the time when and the place where the seller delivers such documents, and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
(b) If the goods are at the time of contracting already identified and no documents of title are to be delivered, title passes at the time and place of contracting.
(4) A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a "sale".
(5) Notwithstanding any other provision of this section, when livestock have been delivered under a contract of sale, if on the accompanying brand inspection certificate or memorandum of brand inspection certificate the seller has conspicuously noted that payment of the consideration for the sale has not been received, title does not pass until payment is made.
History
Source: L. 65: p. 1318, 1. C.R.S. 1963: 155-2-401. L. 75: (5) added, p. 232, 2, effective June 20. L. 2006: (3) amended, p. 491, 9, effective September 1.
Annotations
Editor's note - Colorado legislative change. Colorado added subsection (5). There is no counterpart to subsection (5) in the uniform act.
Annotations
Cross references: For secured transactions, see article 9 of this title.
Annotations
OFFICIAL COMMENT
Prior Uniform Statutory Provision: See generally, Sections 17, 18, 19 and 20, Uniform Sales Act.
Purposes: To make it clear that:
1. This Article deals with the issues between seller and buyer in terms of step by step performance or non-performance under the contract for sale and not in terms of whether or not "title" to the goods has passed. That the rules of this section in no way alter the rights of either the buyer, seller or third parties declared elsewhere in the Article is made clear by the preamble of this section. This section, however, in no way intends to indicate which line of interpretation should be followed in cases where the applicability of "public" regulation depends upon a "sale" or upon location of "title" without further definition. The basic policy of this Article that known purpose and reason should govern interpretation cannot extend beyond the scope of its own provisions. It is therefore necessary to state what a "sale" is and when title passes under this Article in case the courts deem any public regulation to incorporate the defined term of the "private" law.
2. "Future" goods cannot be the subject of a present sale. Before title can pass the goods must be identified in the manner set forth in Section 2-501. The parties, however, have full liberty to arrange by specific terms for the passing of title to goods which are existing.
3. The "special property" of the buyer in goods identified to the contract is excluded from the definition of "security interest"; its incidents are defined in provisions of this Article such as those on the rights of the seller's creditors, on good faith purchase, on the buyer's right to goods on the seller's insolvency, and on the buyer's right to specific performance or replevin.
4. The factual situations in subsections (2) and (3) upon which passage of title turn actually base the test upon the time when the seller has finally committed himself in regard to specific goods. Thus in a "shipment" contract he commits himself by the act of making the shipment. If shipment is not contemplated subsection (3) turns on the seller's final commitment, i.e. the delivery of documents or the making of the contract.
Cross References:
Point 2: Sections 4-2-102, 4-2-501 and 4-2-502.
Point 3: Sections 4-1-201, 4-2-402, 4-2-403, 4-2-502 and 4-2-716.
Definitional Cross References:
"Agreement". Section 4-1-201.
"Bill of lading". Section 4-1-201.
"Buyer". Section 4-2-103.
"Contract". Section 4-1-201.
"Contract for sale". Section 4-2-106.
"Delivery". Section 4-1-201.
"Document of title". Section 4-1-201.
"Good faith". Section 4-2-103.
"Goods". Section 4-2-105.
"Party". Section 4-1-201.
"Purchaser". Section 4-1-201.
"Receipt" of goods. Section 4-2-103.
"Remedy". Section 4-1-201.
"Rights". Section 4-1-201.
"Sale". Section 4-2-106.
"Security interest". Section 4-1-201.
"Seller". Section 4-2-103.
"Send". Section 4-1-201.
Annotations
ANNOTATION
Annotations
Law reviews. For article, "Commercial Law", see 58 Den. L.J. 279 (1981).
Annotator's note. Since 4-2-401 is similar to repealed CRS 53, 17 through 20, and CSA, C. 143A, 17 through 20 (uniform sales act), relevant cases construing those provisions have been included in the annotations to this section.
Delivery by the seller to a carrier for shipment to the buyer constitutes delivery to the buyer and the title passes. Denver-Chicago Trucking Co. v. Republic Drug Co., 134 Colo. 461, 306 P.2d 1076 (1957).
Where by the terms of the contract the merchandise to be sold is to be paid for in full upon delivery, the property in the merchandise is not to be transferred to the buyer unless and until payment in full is made by him, and unless this contract is amended, qualified, or in some manner changed, the only way which the buyer could rightfully come into title or property of this merchandise is by payment pursuant to the terms of the agreement. Panhandle Pipe & Supply Co. v. S. W. Pressey & Son, 25 Colo. 355, 243 P.2d 756 (1952).
Delivery of automobiles sufficient to pass title. Delivery of automobiles to buyer who had made payment by check which subsequently was returned for insufficient funds was sufficient to pass title to the buyer, although the seller failed to provide certificates of title. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 32 Colo. App. 235, 511 P.2d 912 (1973), aff'd, 184 Colo. 166, 519 P.2d 354 (1974).
Nondelivery of a certificate of title does not prevent a change of ownership, and delivery of possession constitutes a transfer of ownership as between the parties involved. Retention of an inchoate security interest in a vehicle does not compel a different outcome. Kerns v. Nat'l Union Fire Ins. Co., 281 F. Supp. 3d 1126 (D. Colo. 2017).
Failure to deliver bill of sale after giving buyer possession of assets. Where plaintiffs' testimony revealed that it was their intent to sell the business and its assets to the buyer, the failure to deliver the bill of sale after giving the buyer possession of the assets was, at most, a reservation of title, and as such acted as a reservation of a security interest in the property. Young v. Golden State Bank, 39 Colo. App. 45, 560 P.2d 855 (1977).
Passage of title to livestock. The livestock bill of sale laws are not superseded by the UCC, and passage of title to livestock in Colorado is accomplished by compliance with article 54 of title 35. When neither party has complied with the livestock bill of sale laws, however, the law merchant, as embodied in the UCC provisions governing passage of title, applies. Rochester Ranch Co. v. Stubblefield, 640 P.2d 267 (Colo. App. 1981); Cugnini v. Reynolds Cattle Co., 648 P.2d 159 (Colo. App. 1981), aff'd, 687 P.2d 962 (Colo. 1984).
Application of UCC provisions to aspects of a livestock transaction other than passage of title is not inconsistent with the additional requirements of compliance with the livestock bill of sale laws. Cugnini v. Reynolds Cattle Co., 648 P.2d 159 (Colo. App. 1981), aff'd, 687 P.2d 962 (Colo. 1984).
Applied in Rancher & Farmers Livestock Auction Co. v. Honey, 38 Colo. App. 69, 552 P.2d 313 (1976); John Deere Indus. Equip. Co. v. Moorehead, 38 Colo. App. 220, 556 P.2d 91 (1976); Mari v. Wagner Equipment Co., Inc., 721 P.2d 1208 (Colo. App. 1986); Brink v. McNeil, 761 P.2d 271 (Colo. App. 1988).