The Seller's Obligation Under UCC Section 2-702

Section 2-702(1) of the Uniform Commercial Code provides that “[w]here the seller discovers the buyer to be insolvent he may refuse delivery except for cash . . . ." Whether the seller is under any duty to give notice to the buyer that delivery will not be made except for cash, however, is a question not addressed by this section. In addition, the few courts which have construed this aspect of section 2-702(1) are not in agreement. Though the right to refuse delivery except for cash was also a common law remedy, neither is a uniform resolution of this problem to be found in the pre-Code cases. Yet, it is not difficult to hypothesize a situation in which the answer to this question may determine liability. For instance, the seller and the buyer agree to a sale of goods on credit, and subsequently the seller discovers buyer to be insolvent. The seller does not notify the buyer that he is withholding delivery except for cash. Is either party in breach if the goods are not delivered on the date called for by the contract? This comment examines the varying judicial responses to this problem and attempts to assess them in light of general common law and Code principles.