Automotive sales in North America continue to climb, and many
suppliers are prospering. However, there are some companies who are
struggling and who may face bankruptcy. We have seen companies such
as A123 Systems and certain subsidiaries of Revstone Industries
recently file for protection under the Bankruptcy Code. How can a
supplier to a troubled company protect itself? Must a supplier
continue to supply on credit terms? The Uniform Commercial Code may
assist such a supplier in this situation. UCC Section 2-702 permits
a supplier, under certain circumstances, to withhold future
deliveries and reclaim goods already delivered to an insolvent
buyer.
Section 2-702(1) of the UCC provides that "[w]here the
seller discovers the buyer to be insolvent he may refuse delivery
except for cash including payment for all goods theretofore
delivered under the contract." This right to stop delivery is
reinforced by § 2-705, which allows a supplier to "stop
delivery of goods in the
