For food sold by weight in stores, see bulk bins

Bulk bins

Bulk bins are a way of selling consumables by weight. The product is stored in bins in a section of the retail floor. A customer can measure out an amount of product into a plastic bag, to be later weighed at the point of sale. The product is usually less expensive per unit compared to...

.

A bulk sale, sometimes called a bulk transfer, is a sale of goods

Product (business)

In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...

 by a business

Business

A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

 that represents all or substantially all of its inventory

Inventory

Inventory means a list compiled for some formal purpose, such as the details of an estate going to probate, or the contents of a house let furnished. This remains the prime meaning in British English...

 to a single buyer

Buyer

When someone gets characterised by their role as buyer of certain assets, the term "buyer" gets new meaning:A "buyer" or merchandiser is a person who purchases finished goods, typically for resale, for a firm, government, or organization...

 unless such a sale would be common in the ordinary course of its business

Ordinary course of business

In law, the ordinary course of business covers the usual transactions, customs and practices of a certain business and of a certain firm. This term is used particularly to judge the validity of certain transactions...

. In order to protect the purchaser from claims made by creditors of the seller, the seller must usually complete an affidavit

Affidavit

An affidavit is a written sworn statement of fact voluntarily made by an affiant or deponent under an oath or affirmation administered by a person authorized to do so by law. Such statement is witnessed as to the authenticity of the affiant's signature by a taker of oaths, such as a notary public...

 outlining its secured and unsecured creditors. The affidavit must usually be filed with a government department, such as a court office. Such procedures are outlined in the bulk sales act of most jurisdictions. If the buyer does not complete the registration process for a bulk sale, creditors of the seller may obtain a declaration that the sale was invalid against the creditors and the creditors may take possession of the goods or obtain judgment for any proceeds the buyer received from a subsequent sale.

History

Bulk sales legislation came into place to prevent the fraudulent practice of selling the entire inventory of a farm or a store in order to defeat the claims of creditors who would otherwise be able to seize the goods to satisfy a debt

Debt

A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

. Under traditional fraudulent conveyance

Fraudulent conveyance

A fraudulent conveyance, or fraudulent transfer, is a civil cause of action. It arises in debtor/creditor relations, particularly with reference to insolvent debtors. The cause of action is typically brought by creditors or by bankruptcy trustees...

 law, such a sale was not void against creditors unless it was made in bad faith

Bad faith

Bad faith is double mindedness or double heartedness in duplicity, fraud, or deception. It may involve intentional deceit of others, or self deception....

 for insufficient consideration

Consideration

Consideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from...

. However, a bulk sale would generally allow a storekeeper to abscond with money while leaving creditors unpaid. However, because such a transaction was generally at arm's length, was for appropriate consideration, and may have been made in good faith

Good faith

In philosophy, the concept of Good faith—Latin bona fides “good faith”, bona fide “in good faith”—denotes sincere, honest intention or belief, regardless of the outcome of an action; the opposed concepts are bad faith, mala fides and perfidy...

, it was generally binding on creditors until bulk sales statutes were passed. Bulk sales legislation, such as Article Six of the Uniform Commercial Code

Uniform Commercial Code

The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...

 was designed to eliminate this type of fraud.

For example, in the ordinary course of business

Ordinary course of business

In law, the ordinary course of business covers the usual transactions, customs and practices of a certain business and of a certain firm. This term is used particularly to judge the validity of certain transactions...

, a car dealer would sell a number of cars in one day. In extraordinary circumstances, it might sell its entire inventory to different buyers within a short period of time. However, if it attempted to sell all its cars to a single buyer, this would be considered a bulk sale, as it is not something an auto dealer would generally do in the normal course of business.

However, not all sales in bulk are outside of the ordinary course of business. For example, farmers often have agreed well in advance of harvesting their crop to sell it to a single buyer. This is a normal part of farming practice. However, a dairy farmer, although he might sell his milk in bulk, would never sell his dairy cows in bulk in the normal course of business.

Application

Although statutes vary, the legal requirements for a bulk sale generally apply to a sale of all or most of the materials, supplies or inventory of a business in a way not normally done in the ordinary course of the seller's business.

The sale of an entire inventory is not a bulk sale if it is sold to buyers in a manner that ensures adequate consideration. For example, if a merchant holds an auction

Auction

An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...

 sale for the entire contents of the business and the sale is in good faith, the buyer in not required to comply with bulk sales legislation. However, the buyer of a business with inventory would be expected to complete the bulk sales registration as part of the normal course of closing the sale. Similarly, if a merchant has a deep discount sale, that is not a bulk sale as deep discounts can be made in the ordinary course of business.

In the modern era, many retail businesses operate on consignment or short credit terms, so compliance with bulk sales registration in the purchase of such a business, or its assets, is generally mandatory. For example, in a typical convenience store

Convenience store

A convenience store, corner store, corner shop, commonly called a bodega in Spanish-speaking areas of the United States, is a small store or shop in a built up area that stocks a range of everyday items such as groceries, toiletries, alcoholic and soft drinks, and may also offer money order and...

, generally the terms of sale are on consignment

Consignment

Consignment the act of consigning, which is placing any material in the hand of another, but retaining ownership until the goods are sold or person is transferred. This may be done for shipping, transfer of prisoners, to auction, or for sale in a store Consignment the act of consigning, which is...

(return for full credit, pay for what you keep) or 30 days net (pay 30 days after delivery), with very little cash up front. As such, little of the inventory in a convenience store has actually been paid for by the merchant, and suppliers expect to be paid out of the ongoing cash flow of the business.