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Consignments and Reclamation Rights: Documentation, UCC Rules, and Treatment in Bankruptcy

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
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Conducted on Wednesday, May 5, 2021

Recorded event now available

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This CLE course will examine the treatment of consignments and reclamation rights under the UCC and in bankruptcy. The panel discussion will include an analysis of the UCC definition of "consignment" and how it impacts the documentation and perfection, as well as the priority of a consignor's interest in consigned goods. The panel will also discuss reclamation rights in goods in and out of bankruptcy and how these issues play out in retail bankruptcies.


Suppliers often provide goods to retailer merchants on a consignment or sale basis. In doing so, they should be aware of the UCC rules governing consignments and reclamation rights and their treatment in bankruptcy. Disputes among consignors, sellers, inventory lenders, and bankruptcy debtors frequently arise in retail and other bankruptcy cases. Such disputes can be mitigated if consignors and sellers of goods take steps to protect their rights and interests.

Whether a particular consignment falls within the UCC definition is a critical issue. If a consignment falls outside of the UCC definition, common law rules apply, and the consignor, as the owner of the goods, usually prevails as to the goods over the claims and interests of creditors or a bankruptcy trustee of the consignee. If a consignment falls within the UCC, the consignor needs to take the same steps as an inventory purchase-money secured party to perfect its interest and prevail over a competing inventory secured lender's security interest.

UCC Section 2-702(2) codifies reclamation, the seller's right to take back goods sold on credit terms to an insolvent buyer. If the buyer files for bankruptcy before a seller exercises its UCC remedies, the seller must look to Section 546(c) of the Bankruptcy Code to enforce its reclamation rights. A seller might also pursue an administrative expense claim under Section 503(b)(9) in certain circumstances. Counsel must have a thorough understanding of the reclamation and other remedies available, given the facts and circumstances.

Listen as our authoritative panel discusses proper documentation of a consignment of goods and steps for perfection and priority under the UCC, if applicable. The panel will also discuss reclamation rights procedures under the UCC and in bankruptcy proceedings as well as best practices.



  1. UCC vs. non-UCC consignments
  2. UCC perfection and priority
    1. Searches
    2. Notification to competing inventory secured lenders
    3. Filings
  3. Reclamation under the UCC Section 2-702(2)
  4. Reclamation in bankruptcy
    1. Section 546(c): procedures and pitfalls
    2. Section 503(b)(9) administrative claim for value: limitations


The panel will review these and other key issues:

  • What constitutes a consignment of "goods" under the UCC, and why is it an important determination to make upfront?
  • What steps should a consignor of goods take to ensure perfection and priority of its interest over a bankruptcy trustee or competing inventory secured lender?
  • How does reclamation under Section 2-702(2) of the UCC differ from the reclamation under Section 546(c) the Bankruptcy Code?
  • When is an administrative expense claim available under Section 503(b)(9)?


Kettering, Kenneth
Professor Kenneth C. Kettering
Visiting Professor at Large
Kenneth C. Kettering

Mr. Kettering last taught as Lecturer in Law at Columbia University School of Law, and before that taught at Case...  |  Read More

Smith, Edwin
Edwin E. Smith

Morgan, Lewis & Bockius

Mr. Smith concentrates his practice in commercial law, debt financings, structured financings, workouts, bankruptcies,...  |  Read More

Weise, Steven
Steven O. Weise

Proskauer Rose

Mr. Weise practices in all areas of commercial law and has extensive experience in financing, especially in those...  |  Read More

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