MBE Rules · Contracts
Sale on Approval and Sale or Return
UCC §2-326
The rule
Goods for the buyer's use are on approval (risk and title with seller until acceptance); goods for resale are sale-or-return (buyer's risk, returnable at buyer's expense) and reachable by the buyer's creditors.
In plain English
In a sale on approval, the buyer can use the goods but does not own them until they formally accept them, meaning the seller retains both risk and title until that point. In a sale or return, the buyer purchases the goods but can return them; however, the buyer assumes the risk of loss and the goods can be claimed by the buyer's creditors.
Worked example
A buyer receives a set of expensive tools on approval to test their functionality before deciding to purchase. The buyer uses the tools for a week but decides not to keep them and returns them to the seller. Since it was a sale on approval, the seller retains the title and risk until the buyer accepts the tools.
Memory hook
Approval means no ownership until you say yes; return means you own it but can send it back.
The trap
Exams often confuse students by mixing up the terms 'approval' and 'return,' leading candidates to misapply the rules regarding risk and title.
How examiners test it
Questions frequently present scenarios involving goods being tested or returned, requiring candidates to identify whether the transaction is a sale on approval or a sale or return.
Drill this rule until it can't fail you.
Vrenberg generates unlimited questions on this exact rule, tracks your mastery of it, and brings it back until it sticks.