Also known as: UCC § 2-403 · U.C.C. § 2-403 · UCC 2-403 · power to transfer
Written by attorneys · grounded in primary & secondary sources — see below
A statutory rule providing that a purchaser of goods acquires all title the transferor had or had power to transfer. A person with voidable title may pass good title to a good faith purchaser for value. Entrusting possession of goods to a merchant dealing in goods of that kind empowers the merchant to transfer the entruster's rights to a buyer in ordinary course.
Seller delivers goods to Buyer under a purchase contract later discovered to involve fraud. Buyer then resells the goods to Good Faith Purchaser who pays value without notice. Good Faith Purchaser obtains good title under the statute even though Seller's title was voidable. The original owner cannot reclaim the goods from Good Faith Purchaser.
Purchaser obtains goods by giving a check that is later dishonored. Purchaser immediately resells to a good faith buyer for value. The buyer acquires good title because the statute grants power to transfer despite the dishonored check. Original seller cannot recover from the good faith buyer.
Select any source to read its text and confirm it supports the definition.
Owner entrusts paintings to a gallery that deals in art. Gallery sells the paintings to a buyer in ordinary course who pays value. Buyer obtains all rights of the owner even though the gallery lacked authority to sell. Owner cannot replevy from the buyer in ordinary course.
Owner transfers only a security interest in goods to Secured Party. Secured Party later sells the goods outright to a purchaser. Purchaser acquires only the limited security interest that the transferor had power to convey. Full ownership remains with the original owner.
Ugo Uberti acquires paintings from a gallery that had received them from the true owner for appraisal only. The gallery sells the works to Ugo who pays value without notice of any defect in title. Ugo claims good title as a buyer in ordinary course from a merchant entrusted with the goods. The true owner later seeks replevin.
A person with voidable title has power to transfer good title to a good faith purchaser for value. Delivery under a transaction of purchase gives the purchaser that power even if the transferor was deceived as to identity, paid with a later-dishonored check, or obtained the goods through fraud punishable as larceny.
Entrusting possession of goods to a merchant who deals in goods of that kind gives the merchant power to transfer all rights of the entruster to a buyer in ordinary course of business. The buyer obtains those rights even if the entruster did not intend a sale.
No. A purchaser cannot obtain good title from a thief. The first sentence of subsection (1) makes clear that a purchaser acquires only the title the transferor had or had power to transfer, and a thief has no title or power to transfer good title.
…true owner. Under the U.C.C. entrusting possession of goods to a merchant who deals in that kind of goods gives the merchant the power to transfer all the rights of the entruster to a buyer in the ordinary course of business. N.J.S.A. 12A:2-403(2). In a transaction under that statute, a merchant may vest good title in the buyer as…