(N.B. The following is a redacted memorandum of law which I wrote while at K & L Gates.

Company A was the firm’s client)

Question Presented

In the absence of title, what are the best arguments which would allow Company A to

take possession of the goods from Company C?

Short Answer

Company A does not have title to the goods because of the terms of their contract with

Company B. Company B, however, retains title to the goods according to the terms of the B-C

contract. Company A has a special property interest in the goods by virtue of the identification of

the goods in the A-B contract. Based on that special property interest, Company A has a right to

replevy the goods from a third party who does not hold title, in this case Company C. Secondly,

Company B has a cause of action against Company C for replevin and conversion, because

Company B retains title to the goods in Company C’s possession. Section 2-722 of the Uniform

Commercial Code allows a buyer with a special property interest to bring a seller’s cause of

action against a third party. Therefore, Company A can recover the goods from Company C

using Company B’s rights.

Statement of Facts

Company B, Inc. was a manufacturing company. It stockpiled several different rare

metals and elements for its manufacturing needs. When Company B became insolvent it went

into bankruptcy and began liquidating its assets. In this liquidation, Company A bought

Company B’s stockpile of goods for approximately $5,000,000, a price well below the market

value for goods of this type. The contract provided the following:

Title; Risk of Loss: Title to and risk of loss of or damage to the Product shall pass to Buyer when the Product is delivered to Buyer as per the applicable delivery terms above.1

Other: Buyer shall use reasonable best efforts to remove the product within 60 days from the date of this Agreement, but shall have 120 days to remove the Product from the later of the date of this Agreement, and the securing of all necessary permits, if applicable.

Unbeknownst to Company A, the goods it was buying were very difficult to transport and had

special storage requirements.

The goods’ special requirements delayed shipping significantly and Company A was

unable to pick the goods up within the contractual 120 day time limit. Nonetheless, Company B

continued to work with Company A on removal of the goods from its property. The two parties

continuously cooperated for another two and a half months after the expiration of the 120 day

delivery window.

After that two and half month period, Company B sold all of its remaining assets to

Company C. The B-C contract transferred all of Company B’s assets to Company C, except for

the Schedule (r) Excluded Assets, which were not transferred. One of the provisions on the

Schedule was (r)(6), which excluded: “All inventory, whether or not such inventory remains on

the Property that has been sold pursuant to an order of the Bankruptcy Court prior to the date of

this Agreement.”

Once the asset sale was complete, Company C claimed title to the goods. It argued that

the B-C contract transferred title to the goods to Company C, and it refused to allow Company A

to remove them from the property. Company C argues that Company A never took delivery of

the goods and thus it never had title to them. It further argues that Company A’s payment for the

goods is of no consequence in determining who holds title to them; it points to the fact that

Company B’s selling the goods to Company C despite its contractual obligations to Company A

1. Buyer was to pick up the goods from the seller’s lot.

is a cause of action Company A has against Company B, but not against Company C, with whom

Company A was not in privity.

Discussion of Authority

“A ‘sale’ consists in the passing of title from the seller to the buyer for a price.” Del.

Code Ann. tit. 6, § 2-106. Title determines who holds the right to possess goods. Matter of GEC

Industries, 128 B.R. 892, 898 (Bankr. Del. 1991). Goods can be constructively delivered, so “the

mere fact that the seller retains possession of the goods does not prevent concluding that title has

passed to the buyer.” Id. Parties can, however, preempt Uniform Commercial Code by providing

in the contract when title passes. Id. at 899. In such a case, the language of the contract will

control when title passes. Id. As Company A specifically bargained for when title would pass, it

cannot now make the argument that there was constructive delivery or any other argument

dependent on title having vested in Company A.

Company A does have two arguments it can make to recover the goods, however. First,

that by virtue of the identification of the goods in the A-B contract, Company A has the right to

replevy the goods. Second, under U.C.C. § 2-722, Company A can bring any actions that

Company B has against Company C on behalf of Company B. Both of these arguments are

dependent on title remaining with Company B, and so where title currently lies will be addressed

first.

A. By the terms of the Company B-Company C contract, Company C never took title to the goods. Therefore, title remains with Company B.

In order to determine where title lies, an analysis of the contract as between Company B

and Company C is necessary. Section 2.01 of the B-C contract states that the buyer is taking title

to all of the seller’s assets, with the exception of the Excluded Assets. Under Schedule 1.01(r):

Excluded Assets, subsection (6) states that the agreement excludes: “All inventory, whether or

not such inventory remains on the Property that has been sold pursuant to an order of the

Bankruptcy Court prior to the date of this Agreement.” Article 9 of the U.C.C. defines inventory,

in pertinent part, as “goods, other than farm products, which: (D) consist of raw materials, work

in process, or materials used or consumed in a business.” Del. Code Ann. tit. 6, § 9-102.

Company C contends that the inventory in question was transferred to them in the B-C contract

because Company A never took delivery to the goods, and taking title is necessary to effect a

technical “sale” under the U.C.C. The carve-out only excludes those goods subject to sale, and so

Company A has no right to the goods. Though Company C is correct that title never vested in

Company A, it is incorrect that title passed to them. Title still lies in Company B.

a. The term “sale” in the Company B-Company C Contract is ambiguous.

Company C interprets Schedule 1.01(r)(6) as meaning that only inventory whose title has

already transferred is excluded from the B-C contract. Company B and Company A should

contend, however, that the provision covers the goods because the meaning of the term “sale” in

the contract is ambiguous, and because to interpret the contract to exclude the goods would

render certain contract terms and phrases as “surplusage”.

“An ambiguity exists ‘[w]hen the provisions in controversy are fairly susceptible of

different interpretations or may have two or more different meanings.’ Where a contract term or

provision is ambiguous, “the interpreting court must look beyond the language of the contract to

ascertain the parties' intentions.’” GMG Capital Investments, LLC v. Athenian Venture Partners

I, L.P., 36 A.3d 776, 780 (Del. 2012). In that case, parol evidence is admissible to determine the

parties’ intentions, and thus cure the ambiguity. In re IBP, Inc. Shareholders Litig., 789 A.2d 14,

55 (Del. Ch. 2001). “By permitting the court to consider the parol evidence regarding a

negotiated corporate instrument, this approach advances the central aim of contract

interpretation, which is to 'reserve to the extent feasible the expectations that form the basis of a

contractual relationship.” Salamone v. Gorman, 106 A.3d 354, 371 (Del. 2014).2

Here, the contract term “sale” is ambiguous within the context of the Company B-

Company C contract. “Sale” is not defined in the contract, and it could be given two different

meanings under the U.C.C. One meaning is the strict Article 2 definition,3 which requires that

title pass in order for there to be a sale. The second meaning it could be given is the liberal

Article 2 interpretation, in which sale encompasses both a present sale and a contract to sell.

Scholarship, case law, and Article 2 itself advance the more liberal definition. “The

distinction between a present sale and a contract to sell is of limited importance in Article 2

given the diminished role of the concept of title to determine the rights and liabilities of the

buyer and the seller.” Hawkland, Uniform Commercial Code Series § 2-106:2. Further, “[a]

contract for the sale of goods includes ‘both a present sale of goods and a contract to sell goods

at a future time.’ ” Merritt-Campbell, Inc. v. RxP Products, Inc., 164 F.3d 957, 962 (5th Cir.

2. There are several other parol evidence factors for interpretation which could be helpful to show the correct meaning of “sale.” The parol evidence factors are as follows:

If an agreement is ambiguous, courts may resort to extrinsic evidence to determine the meaning of the contract. See, e.g., Quintus Corp. v. Avaya, Inc., 353 B.R. 77, 82 (Bankr. D. Del. 2006). This extrinsic evidence “‘may include the structure of the contract, the bargaining history, and the conduct of the parties that reflects their understanding of the contract's meaning.’” Bethlehem Steel Corp. v. United States, 270 F.3d 135, 139 (3d Cir. 2001) (quoting Teamsters Indus. Employees Welfare Fund v. Rolls–Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993)); see also Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1233 (Del. 1997) (“In construing an ambiguous contractual provision, a court may consider evidence of prior agreements and communications of the parties as well as trade usage or course of dealing”) (footnote omitted).

Of these areas of inquiry, particular importance is often placed on the conduct of the parties. See Artesian Water Co. v. Delaware, 330 A.2d 441, 443 (Del. 1974) (“Courts of this State have long looked to relevant facts and circumstances surrounding the contract, including the actions of the parties, in ascertaining the intention of the parties.... Such actions are of great weight in determining the meaning and applicability of the contract, and lead the Court to a presumptively correct interpretation.”) (citations omitted); Bd. of Educ. v. Appoquinimink Educ. Ass'n, No. 16812, 1999 WL 826492, *8, 1999 Del. Ch. LEXIS 188, *24 (Del. Ch. Oct. 6, 1999) (“When interpreting an ambiguous contract, the parties' prior conduct under the agreement is an important source of evidence to which the court should turn”).

In re Safety-Kleen Corp., 380 B.R. 716, 738 (Bankr. D. Del. 2008)3. “A ‘sale’ consists in the passing of title from the seller to the buyer for a price….” Del. Code Ann.

tit. 6, § 2-106(1).

1999) (holding that the “rights of parties are not effected [sic] by whether the transaction is one

for a present sale of goods or a contract relating to the future”) (internal citations omitted).4

Finally, the official comment to § 2-106(1) states that “‘Contract for sale’ is used as a general

concept throughout this Article, but the rights of the parties do not vary according to whether the

transaction is a present sale or a contract to sell unless the Article expressly so provides.” Del.

Code Ann. tit. 6, § 2-106.

Therefore, there are three reasons why the term “sale” in the Company B-Company C

contract encompasses both a present sale and a contract to sell. First, Company B contends that

they meant to exclude the goods from the contract, and, as the term is ambiguous, that parol

evidence is admissible to show what the parties meant by “sale.” Second, Article 2 has

diminished the importance of a distinction between a contract to sell and present sale, and so the

term should encompass both meanings within the contract. Third, to interpret in any other way

would make other contract terms surplus and thus contradict Delaware contract interpretation

law.

4. It is at least arguable that § 2-106(1) supports this proposition on its face. The whole of the provision states:

(1) In this Article unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. A “sale” consists in the passing of title from the seller to the buyer for a price (Section 2-401). A “present sale” means a sale which is accomplished by the making of the contract.

Del. Code Ann. Tit. 6, § 2-106(1). If a contract for sale includes both present and future sales, then the definition of sale is actually describing how contracts for sale function, rather than stating some separate function. It makes no sense to say that contracts for sale encompass both present and future sales, but that a sale only occurs when title actually passes. That interpretation leads to an absurd situation in which a contract for sale is a contract for sale only when it is for a present sale, but the term still encompasses future sales.

b. Company C’s interpretation of the contract contradicts Delaware’s law on the interpretation of contracts.

Under Delaware law, a contract must be interpreted “as a whole…[giving] each provision

and term [an] effect, so as not to render any part of the contract mere surplusage.” Kuhn Const.,

Inc. v. Diamond State Port Corp., 990 A.2d 393, 396-97 (Del. 2010). This is because “[a]

presumption exists that every provision of a contract was included for a particular purpose.”

Organizational Strategies, Inc. v. Feldman Law Firm LLP, 15 F. Supp. 3d 527, 531 (D. Del.

2014) opinion clarified, No. CV 13-764-RGA, 2014 WL 2446441 (D. Del. May 29, 2014) aff'd,

No. 14-1704, 2015 WL 1285958 (3d Cir. Mar. 20, 2015), and aff'd, No. 14-1704, 2015 WL

1285958 (3d Cir. Mar. 20, 2015). “Delaware adheres to the ‘objective’ theory of contracts, i.e. a

contract's construction should be that which would be understood by an objective, reasonable

third party.” Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) “Specific

language in a contract controls over general language, and where specific and general provisions

conflict, the specific provision ordinarily qualifies the meaning of the general one.” DCV

Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005).

Under Company C’s interpretation of Schedule (r)(6), a sale only occurs once a title

passes, and therefore Company C owns any goods still on the property for which title has not

passed. This is a very narrow view of a “sale”, which constricts the applicability of the (r)(6)

provision. By necessity any goods still on the property have not been delivered to the buyers, and

therefore, no title could have passed. See Del. Code Ann. 6, § 2-401(2) (“[T]itle passes to the

buyer at the time and place at which seller completes his performance with reference to the

physical delivery of the goods…”).5 The practical effect of the provision under Company C’s

5. The statutory provision and the contract provision have identical effect on when and how title passes, so the reference in §2-401(2) to varying title and risk of loss by contract is omitted.

interpretation, then, is to exclude from the asset sale only those goods still on the property in

which the parties varied by contract the terms of the passing of title.

There are three problems with Company C’s interpretation of the provision. The first

problem is that it renders the portion of Schedule (r)(6) which reads “[a]ll inventory, whether or

not such inventory remains on the Property…,” redundant and surplus. If title to goods on the

property had already passed, there would be no need to specifically mention that the goods are

still on the property. The fact that title had passed to a buyer other than Company C would be

enough to exclude those goods from the sale, both by the terms of the contract (“subject to prior

sale”), and according § 2-403 (“[a] purchaser of goods acquires all title which his transferor had

or had power to transfer…”). Company C’s interpretation renders the portion of the contract

which mentions the location of the goods subject to prior sale surplus and, and thereby cuts

against Company C’s interpretation’s legitimacy.

Second, and incorporating the above reasoning, the Company C’s interpretation renders

the provision without effect. The contract purports to exclude assets still in the possession of a

seller from inclusion in a sale to a third party. Yet, if title must have actually passed, the

exclusion provision utterly fails in its purpose, as the goods still on the seller’s property have

clearly not been delivered, and therefore, they will all be included in the sale to the third party.

What, then, is the point of an exclusion provision which does not have the effect of actually

excluding any assets from the Company B-Company C contract?

Third, and incorporating the above reasoning, Company C’s interpretation is not

objectively reasonable. Applying a reasonable third-party standard, a contract term which did not

actually exclude any assets from the B-C contract would make little sense. The plain meaning

and function of this provision is to exclude assets which had already been spoken for by other

parties. Company C was aware, either actually or constructively, that the goods were subject to

the A-B contract because Article IV, 4.01 (b) (No Violation; Consents and Approvals), (e)

(Consents, Approvals or Waivers) and Article V, 5.03 (Access to Information) of the B-C

contract made that information available to them. Finally, an objective observer would believe

that Company B, knowing that it had already sold the goods and received payment for them,

meant to exclude those goods from the B-C contract.

Company A and Company B’s interpretation that Schedule (r)(6) excludes goods subject

to both present and future from the Company B-Company C contract is superior to Company C’s

interpretation. Firstly, because it utilizes rather than rendering surplus the portion of the

provision covering the location of the goods subject to prior sale. Secondly, because it gives the

provision an effect on the overall deal. And thirdly, because an objective observer would believe

that Company B meant to exclude the goods for which it had already received payment from the

Company B-Company C contract.

B. Company A has a right to recover the goods because it holds a special property interest in the goods identified in their contract with Company B.

Company A has an action for replevin because it has a special property interest in the

goods identified in the A-B contract and because Company B waived the 120 day limit for

delivery time. The concept of title is to be applied narrowly when construing the U.C.C., which

sought to diminish the importance of title. Hawkland, Uniform Commercial Code Series § 2-

106:2; see Merritt-Campbell, Inc., 164 F.3d at 962. The U.C.C. liberalizes the common law

replevin cause of action, which determined who had “title to, and the right of immediate

possession of” the goods in question. Harlan & Hollingswoth Corp. v. McBride et. al., 69 A.2d 9,

12 (Del. 1949); In re Markel, 254 A.2d 236, 239 (Del. 1969).

Instead, the U.C.C. provides that a “buyer has a right of replevin for goods identified6 to

the contract if after reasonable effort he or she is unable to effect cover for such goods or the

circumstances reasonably indicate that such effort will be unavailing.” Del. Code Ann. tit. 6, § 2-

716; see also E.I. DuPont de Nemours & Co. v. Pressman, 679 A.2d 436, nt. 21 (Del. 1996);

Taylor v. Ventresca, No. CIVIL ACTION 6501, 1983 WL 18033, at *4 (Del. Ch. Aug. 12, 1983)

(holding that specific performance of a contract for pharmaceutical tables was necessary even

though the defendant had returned the purchase price).7 “For example, Buyer may have paid

$1,000 for 1,000 widgets. If Seller breaches and refuses to deliver the widgets, Buyer can cover

by buying 1,000 widgets from someone else. Buyer may pay more than $1,000, but the

breaching party must pay Buyer's costs of cover. 6 Del.C. § 2-712. If cover is not possible, as in

the case of a real estate sales contract, specific performance is available.” Pressman, 679 A.2d at

nt. 21.

Company C will likely argue that the A-B contract was invalid because Company A

failed to take delivery within the contractually obligated time. The provision time limit for

6. “The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are non-conforming and he or she has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties…” Del. Code Ann. tit. 6, § 2-501.7. The U.C.C. Comment 3 to §2-716 indicates that §2-716’s replevin cause of action exists in addition to the §2-512 action for replevin for consumer goods or seller’s insolvency:

The legal remedy of replevin is given to the buyer in cases in which cover is reasonably unavailable and goods have been identified to the contract. This is in addition to the buyer's right to recover identified goods under Section 2-502. For consumer goods, the buyer's right to replevin vests upon the buyer's acquisition of a special property, which occurs upon identification of the goods to the contract. See Section 2-501. Inasmuch as a secured party normally acquires no greater rights in its collateral that its debtor had or had power to convey, see Section 2-403(1) (first sentence), a buyer who acquires a right of replevin under subsection (3) will take free of a security interest created by the seller if it attaches to the goods after the goods have been identified to the contract. The buyer will take free, even if the buyer does not buy in ordinary course and even if the security interest is perfected. Of course, to the extent that the buyer pays the price after the security interest attaches, the payments will constitute proceeds of the security interest.

Del. Code Ann. tit. 6, § 2-716. Section 2-502 is of little help to Company A, because Company A was aware of the seller’s insolvency at the time of purchasing and because the goods are not consumer goods.

delivery, however, was waived by Company B. Company B, once being informed of the

difficulty of moving the goods, continued to work with Company A. “[W]here one party to a

contract commits a minor breach in its performance which is brought to the attention of the other

party, who deliberately excuses it,” then the excusing party waives that contract provision. Mead

v. Collins Realty Co., 75 A.2d 705, 707 (Del. Super. 1950). Del. Code Ann. tit. 6, § 2--209. The

U.C.C. allows parties to waive performance without consideration, and when the excused party

detrimentally relies on such a waiver, the waiving party is estopped from retracting the waiver.

Del. Code Ann. tit. 6, § 2--209; Mead, 75 A.2d 705, 706. Therefore, the A-B contract is still

valid, regardless of Company A’s failure to take delivery of the goods.

The fact that the goods are in the possession of a third party does not bar an action in

replevin where the goods are identified in the contract. Delaware law states:

Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract (a) a right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods…

Del. Code Ann. tit. 6, § 2-722 (Who Can Sue Third Parties for Injury to Goods). Therefore,

“[t]he action of replevin is available to anyone who claims ownership, or the right to immediate

possession of a chattel,” In re Markel, 254 A.2d at 239, regardless of whether they actually hold

legal title to the goods in controversy, Paul v. Sturevant, 2006 WL 1476888, *1 (2006) (citing

Willey v. Wiltbank, 567 A.2d 424 (Del. 1989)),8 and regardless of whether the goods are in the

possession of a third party.

In Attachment B to the A-B contract, the parties identified the goods. Once that

identification took place, Company A gained a special and insurable property interest in the

8. The applicable commercial statutes determine who has title to goods in controversy. Harlan & Hollingswoth Corp., 69 A.2d at 12 (applying the predecessor of the U.C.C., the Uniform Sales Act, to determine the right of possession in an action in replevin).

goods. The A-B contract remained in force past the 120 day time limit for delivery of the goods

because Company B waived that provision. The fact that the identified goods are in the

possession of a third party does not bar a successful action for replevin from being brought

against Company C. Therefore, Company A can successfully bring an action in replevin, 9

provided of course that the court does not find that title vested in Company C. 10

C. Section 2-722 extends to a buyer and a seller all remedies that either would have against a third party to both, and so Company A can bring Company B’s causes of action against Company C.

a. Company B has a cause of action for conversion or replevin

In light of the foregoing, Company B has an action in conversion against Company C. “It

is not necessary to a conversion that there should be a manual taking of the thing in question by

the defendant; [neither is it] necessary that it should be shown that he has applied it to his own

use,” as long as the defendant exercises dominion over the goods in question “in exclusion or in

defiance of the plaintiff’s right.” Drug, Inc. v. Hunt, 168 A. 87, 93 (Del. 1933). If a defendant

has done so, he has converted the goods in question. Id. Good faith is no defense to an action of

conversion. Id. at 94.

9. I could find no case law which addresses whether a § 2-401 special property interest survives transfer of title to a third party. Section 2-401(1) also provides for the seller’s security interest, which is subject to Article 9 of the U.C.C. In re Aleris Intern., Inc., 456 B.R. 35, 53-6 (Bankr. Del. 2011). A seller’s security interest only survives transfer when that security interest is perfected. Unlike the seller’s security interest, a special property interest is not subject to Article 9, yet it would seem to be the stronger argument that it would act in a similar way. Id. The purpose of the security instrument is to put subsequent buyers on notice of the interest, but whether actual or constructive knowledge would be enough to satisfy this purpose, or whether some formal Article 9-like perfection of the special property interest would be necessary is entirely unclear. Id.

10. By way of illustration, a law review article provides the following hypothetical and answer. “S, a non-merchant owner of a television set, sells the set to his neighbor, N, for cash. S is to deliver the set to N, but before delivery, N permits S to retain the set to watch one more color show. S then sells and delivers the set to B. As between N and B, who is entitled to possession of the set? Ownership and possession rights between N and B will be determined on the basis of title. Since S was to deliver the goods to N, title would not pass to N until S actually delivered them. Thus title never passed to N. ‘A purchaser of goods acquires all title which his transferor had or had power to transfer….’ Since S had title to the goods, he transferred this title to B when he delivered the set to B. B would prevail over N.” Robert M. Dixon, Special Property Under the Uniform Commercial Code: A New Concept in Sales, Vol. 4, No. 1, 98 Nat. Resources J. 98, 101 (1964).

Furthermore, Company B has a cause of action of replevin against Company C.

“[R]eplevin is primarily a form of action for the recovery of the possession… property which has

been taken or withheld from the owner unlawfully.” McBride, 69 A.2d at 11. “The right asserted

in replevin is on its face a right to possession…,” and if the right to possession is found in the

plaintiff, the goods must be returned to them. In re Markel, 254 A.2d 236, 239 (Del. 1969).

Traditionally, the determination of where title lies will dictate the victor in an action in replevin.

McBride, 69 A.2d at 11.

As title lies with Company B, it has the present right to possession of the goods. Though

Company C did not “take” the goods, it is presently in possession of them, and is denying both

Company A and Company B access to them. Company C is thereby exercising dominion over

property to which belongs to Company B, and Company C has therefore converted that property.

Further, as Company B has title, and Company C does not, Company B has the right to replevy

the goods from Company C. Once Company B has retrieved the goods, it is contractually

obligated then to transfer them to Company A according to the original purchase order.

b. Company B may consent to Company A suing on its behalf.11

“Where a third party so deals with goods which have been identified to a contract for

sale as to cause actionable injury to a party to that contract (c) either party [buyer or seller] may

with the consent of the other sue for the benefit of whom it may concern.” Del. Code Ann. tit. 6,

§ 2-722 (West) Del. Code Ann. tit. 6, § 2-722(1); see Manchester Equip. Co. v. Am. Way

Moving & Storage Co., Inc., 47 F. App'x 189, nt. 2 (3d Cir. 2002). Section 2-722 was “designed

to liberalize the standing-to-sue rules.” Cargill, Inc. v. Boag Cold Storage Warehouse, Inc., 71

F.3d 545, 551 (6th Cir. 1995). “[A] plain reading of §2-722 shows that the seller and buyer 11. Delaware case law is sparse concerning the interpretation of this provision of the U.C.C. This memorandum looks towards other states interpretations of the U.C.C. because there “is no material difference among the relevant statutory provisions applicable in Delaware and other states since all are modeled on the Uniform Commercial Code.” Matter of GEC Industries, 128 B.R. at 896.

possessed a single, collective cause of action to obtain one recovery…” where the goods are

identified in the contract. Mitsui & Co. (USA) Inc. v. Hudson tank Terminals Corp., 790 F.2d

226, 232-3 (2d Cir. 1986). Section 227, therefore, makes third parties liable for “conversions,

physical damage to the goods, or interference with the rights of a buyer in the goods.” Draper v.

Minneapolis-Moline, Inc., 241 N.E.2d 342, 344 (Ill. App. Ct. 1968).

With Company B’s consent, Company A can bring suit against Company C for Company

B’s claims of conversion and replevin. Even if the causes of action brought by Company A on its

own behalf are not successful, Company A still has a good chance to recover the goods from

Company C in action on behalf of Company B.

Conclusion

Company A does not have title to the goods because of the terms of their contract with

Company B. Company B, however, retains title to the goods according to the terms of the B-C

contract. Company A has a special property interest in the goods by virtue of the identification of

the goods in the A-B contract. Based on that special property interest, Company A has a right to

replevy the goods from a third party who does not hold title, in this case Company C. Secondly,

Company B has a cause of action against Company C for replevin and conversion, because

Company B retains title to the goods in Company C’s possession. Section 2-722 of the Uniform

Commercial Code allows a buyer with a special property interest to bring a seller’s cause of

action against a third party. Therefore, Company A can recover the goods from Company C

using Company B’s rights.