2019 New Mexico Statutes
Chapter 55 - Uniform Commercial Code
Article 2 - Sales
Section 55-2-401 - Passing of title; reservation for security; limited application of this section.

Universal Citation: NM Stat § 55-2-401 (2019)

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 55-2-501 NMSA 1978), and unless otherwise explicitly agreed, the buyer acquires by their identification a special property as limited by the Uniform Commercial Code. 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 Chapter 55, Article 9 NMSA 1978, 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 the seller 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 are to be delivered, title passes at the time and place of contracting; and

(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".

History: 1953 Comp., § 50A-2-401, enacted by Laws 1961, ch. 96, § 2-401; 2005, ch. 144, § 30.



UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

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. As to delivery of an electronic document of title, see definition of delivery in Article 1, Section 1-201 [55-1-201 NMSA 1978]. This Article does not state a rule as to the place of title passage as to goods covered by an electronic document of title.

Point 2: Sections 2-102, 2-501 and 2-502.

Point 3: Sections 1-201, 2-402, 2-403, 2-502 and 2-716.

"Agreement". Section 1-201.

"Bill of lading". Section 1-201.

"Buyer". Section 2-103.

"Contract". Section 1-201.

"Contract for sale". Section 2-106.

"Delivery". Section 1-201.

"Document of title". Section 1-201.

"Good faith". Section 2-103.

"Goods". Section 2-105.

"Party". Section 1-201.

"Purchaser". Section 1-201.

"Receipt" of goods. Section 2-103.

"Remedy". Section 1-201.

"Rights". Section 1-201.

"Sale". Section 2-106.

"Security interest". Section 1-201.

"Seller". Section 2-103.

"Send". Section 1-201.

The 2005 amendment, effective January 1, 2006, modified Subsection (3)(a) to provide that if the seller is to deliver a tangible document of title, title passes at the time when and the place where the seller delivers the document and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document.

Question of ownership of automobile in suit on insurance policy is for jury, where alleged owner was part-time salesman for an automobile dealer under an arrangement whereby salesman was to sell the car or keep it himself, paying off the balance. Knotts v. Safeco Ins. Co. of Am., 1967-NMSC-213, 78 N.M. 395, 432 P.2d 106.

Title revests on refusal of conditional tender. — Bankrupt, when it refused to accept the tender of crude oil from seller conditioned upon payment by bankrupt of seller's common carrier lien, caused thereby title to the oil to revest in the oil producing sellers. Amoco Pipeline Co. v. Admiral Crude Oil Corp., 490 F.2d 114 (10th Cir. 1974).

Law reviews. — For article, "Special Property Under the Uniform Commercial Code: A New Concept in Sales," see 4 Nat. Resources J. 98 (1964).

For article, "Buyers and Sellers of Goods in Bankruptcy," see 1 N.M. L. Rev. 435 (1971).

Am. Jur. 2d, A.L.R. and C.J.S. references. — 15A Am. Jur. 2d Commercial Code § 7; 67 Am. Jur. 2d Sales §§ 387 to 464; 68A Am. Jur. 2d Secured Transactions §§ 13, 225 et seq.

Receipt of partial payment or commercial paper for purchase price for goods as terminating vendor's right of stoppage in transitu, 7 A.L.R. 1412.

Dishonor of draft or check for purchase price on a cash sale as affecting seller's rights in respect of property or its proceeds, 31 A.L.R. 578, 54 A.L.R. 526.

Failure to ship by carrier designated by buyer as affecting passing of title, 31 A.L.R. 955.

Rule that title passes on delivery to carrier as applicable to shipment in "pool" car for several purchasers, 36 A.L.R. 410.

Delivery to carrier of quantity of goods greater than that called for by contract as passing title, 38 A.L.R. 1544.

Effect of provision making acceptance of goods conditional on approval by third person, as affecting passing of title, 46 A.L.R. 869.

Passing of title to goods by acceptance of draft for purchase price, with warehouse receipt attached, or by transfer of draft with receipt, 55 A.L.R. 1116.

Time and place of passage of title to goods shipped under bill of lading, with draft attached, consigning them to shipper's order, 60 A.L.R. 677.

Validity as to creditors of the buyer or consignee of reservation of title to goods delivered under implied or express authority to resell, 63 A.L.R. 355.

Accession to property which is the subject of a conditional sale or chattel mortgage, 68 A.L.R. 1242.

Necessity and sufficiency of appropriation to pass title on sale of corporate stock or securities, 78 A.L.R. 1019.

Applicability of protective provisions of Uniform Conditional Sales Act or similar statutes where there has been a novation of the contract, 83 A.L.R. 998.

F.O.B. provision in sale contract as affecting time or place of passing of title, 101 A.L.R. 292.

Right of seller of fixtures retaining title thereto or lien thereon, as against purchasers or encumbrancers of the realty, 111 A.L.R. 362, 141 A.L.R. 1283.

Passing title to personal property under contract covering real and personal property, 117 A.L.R. 395.

Valuables secreted in articles sold, 4 A.L.R.2d 318.

Measures of damages in action for breach of warranty of title to personal property under U.C.C. § 2-714, 94 A.L.R.3d 583.

77A C.J.S. Sales § 214 et seq.

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