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Potential Risks Under The Ohio Revised Code

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I. Potential Risks Under the Ohio Revised Code; Title XIII Commercial Transactions; Chapter 1309: Uniform Commercial Code and Article 9 UCC

A. Rights and Title of Consignee with Respect to Creditors and Purchasers

Per Ohio Rev. Code Ann. § 1309.319 (West), for purposes of determining the rights of creditors of, and purchasers for value of goods from, a consignee, while the goods are in the possession of the consignee, the consignee is deemed to have rights and title to the goods identical to those the consignor had or had power to transfer.

B. Creditors’ Claims to Consigned Goods

A “consignment” transaction, as defined in revised Article 9 of the Uniform Commercial Code (UCC), gives the consignor a security interest in the …show more content…

As a result, creditors of the consignee can obtain judicial liens and security interest in the goods.

UCC 9-103(d) also states that a consignor has a purchase money security interest in its consigned goods that is equivalent to a purchase money security interest in inventory. As such, the consignor would have priority over a prior floating security interest in the consignee’s inventory if the consignor satisfies all of the following requirements for a valid purchase money security interest contained in UCC 9-324: (1) the consignment interest is perfected when the consignee received possession of the goods; (2) the consignor sent an authenticated notification to the holders of conflicting security interests in the consignee 's inventory; (3) the holders of conflicting security interests received the notice within five years of the consignee 's receipt of the goods; and (4) the notice states that the consignor has, or expects to acquire, a consignment interest in the goods and describes the goods.

See Consignment the Wrong Way: Or How to Become Last in Line, Am. Bankr. Inst. J., NOVEMBER 2002, at 14.

II. Practical Risks Associated with Consignment Merchandise

A. Consignee Typically Bears Most of the Risk:

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