Legal Definitions - ten-day rule

Definition: The ten-day rule is a legal doctrine that allows a seller to demand the return of goods sold on credit if they learn that the buyer is insolvent within ten days of the buyer receiving the goods. If the buyer has made a written representation of solvency to the seller within three months before delivery, the seller has even longer to demand return.

Example: John sells a computer to Jane on credit. A week later, John learns that Jane has filed for bankruptcy and is unable to pay for the computer. John has ten days from the date Jane received the computer to demand its return. If Jane had made a written representation of solvency to John within three months before delivery, John would have even longer to demand return.

Explanation: The example illustrates how the ten-day rule works in practice. If a seller sells goods on credit and later learns that the buyer is insolvent, they have a limited time to demand the return of the goods. This rule protects sellers from losses due to buyers' insolvency and encourages them to be cautious when selling on credit.