/* The Uniform Commercial Code is one of the greatest works of

jurisprudence of the century. In some ways it simplified the

process of lending, selling and borrowing. In other ways it

introduced arcane complexity. The UCC like the Internal Revenue

Code and the Bankruptcy Code is a code in that it is a

"codification" of law, but also a "code" in that it also uses

words that have secret meanings. Section 1 is VITAL because of

the fact that it defines terms that are used throughout the code.

*/

UNIFORM COMMERCIAL CODE

ARTICLE 1

GENERAL PROVISIONS

PART 1. SHORT TITLE, CONSTRUCTION, APPLICATION AND SUBJECT

MATTER OF THE ACT

Section

1-101. Short Title.

1-102. Purposes; Rules of Construction; Variation by Agreement.

1-103. Supplementary general Principles of Law Applicable.

1-104. Construction Against Implicit Repeal.

1-105. Territorial Application of the Act; Parties' Power to

Choose Applicable Law.

1-106. Remedies to Be Liberally Administered.

1-107. Waiver or Renunciation of Claim or Right After Breach.

1-108. Severability.

1-109. Section Captions.

PART 2. GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1-201. General Definitions.

1-202. Prima Facie Evidence by Third Party Documents.

1-203. Obligation of Good Faith.

1-204. Time; Reasonable Time; Seasonably.

1-205. Course of Dealing and Usage of Trade.

1-206. Statute of Frauds for Kinds of Personal Property Not

Otherwise Covered.

1-207. Performance or Acceptance Under Reservation of Rights.

1-208. Option to Accelerate at Will.

1-209. Subordinated Obligations.

UNIFORM COMMERCIAL CODE

ARTICLE 1

General Provisions

PART I

SHORT TITLE, CONSTRUCTION, APPLICATION AND SUBJECT MATTER OF THE

ACT

1-101. Short Title.

This Act shall be known and may be cited as Uniform Commercial

Code.

1-102. Purposes; Rules of Construction; Variation by Agreement

(1) This Act shall be liberally construed and applied to

promote its underlying purposes and policies.

(2) Underlying purposes and Policies of this Act are

(a) to simplify, clarify and modernize the law governing

commercial transactions

(b) to permit the continued expansion of commercial

practices through custom, usage and agreement of the parties.

(c) to make uniform the law among the various jurisdictions

(3) The effect of provisions of this Act may be varied by

agreement, except as otherwise provided in this Act and except

that the obligations of good faith, diligence, reasonableness and

care prescribed by this Act may not be disclaimed by agreement

but the parties may by agreement determine the standards by which

the performance of such obligations is to be measured if such

standards are not manifestly unreasonable.

(4) The presence in certain provisions of this Act

of the words "unless otherwise agreed" or words of similar import

does not imply that the effect of other provisions

may not be varied by agreement under subsection (3).

(5) In this Act unless the context otherwise requires

(a) words in the singular number include the plural, and in

the plural include the singular;

(b) words of the masculine gender include the feminine and

the neuter, and when the sense so indicates words of the neuter

gender may refer to any gender.

1-103. Supplementary General Principles of Law Applicable.

Unless displaced by the particular provision of this Act, the

principles of law and equity, including the law merchant and the

law relative to capacity to contract, principal and agent,

estoppel, fraud, misrepresentation, duress, coercion, mistake,

bankruptcy, or other validating or invalidating cause shall

supplement its provisions.

1-104. Construction Against Implicit Repeal.

This Act being a general act intended as a unified coverage of

its subject matter no part of it shall be deemed to be impliedly

repealed by subsequent legislation if such construction can

reasonably be avoided.

1-105. Territorial Application of the Act; Parties' Power to

Choose Applicable Law.

(1) Except as provided hereafter in this section, when a

transaction bears a reasonable relation to this state and also to

another state or nation the parties may agree that the law either

of this state or of such other state or nation shall govern

their rights and duties. Failing such agreement this Act applies

to transactions bearing an appropriate relation to this state.

(2) Where one of the following provisions of this Act

specifies the applicable law, that provision governs and a

contrary agreement is effective only to the extent permitted by

the law (including the conflict of laws rules) so specified:

Rights of creditors against sold goods: Section 2-402.

Applicability of the Article on Leases: Sections 2A-105 and

2A-106.

Applicability of the Article on Bank Deposits and

Collections: Section 4-102.

Governing Law in the Article on Funds Transfers: Section 4A-507.

Bulk sales subject to the Article on Bulk Sales: Section 6-103.

[If a state adopts the repealer of Article 6, this item should be

deleted.]

Applicability of the Article on Investment Securities: Section

8-106.

Perfection provisions of the Article on Secured Transactions:

Section 9-103.

1-106. Remedies to Be Liberally Administered.

(1) The remedies provided by this Act shall be liberally

administered to the end that the aggrieved party may be put in as

good a position as if the other Party had fully performed but

neither consequential or special nor penal damages may be had

except as specifically provided in this Act or by other rule of

law.

(2) Any right or obligation declared by this Act is

enforceable by action unless the provision declaring it specifies

a different and limited effect.

1-107. Waiver or Renunciation of Claim or Right After Breach.

Any claim or right arising out of an alleged breach can be

discharged in whole or in part without consideration by a written

waiver or renunciation signed and delivered by the aggrieved

party.

1-108. Severability.

If any provision or clause of this Act or application thereof

to any person or circumstances is held invalid, such invalidity

shall not affect other provisions or applications of the Act

which can be given effect without the invalid provision or

application, and to this end the provisions of this Act are

declared to be severable.

1-109. Section Captions.

Section captions are parts of this Act.

PART 2

GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1-201. General Definitions.

Subject to additional definitions contained in the subsequent

Articles of this Act which are applicable to specific Articles or

Parts thereof, and unless the context otherwise requires, in this

Act:

(1) "Action" in the sense of a judicial proceeding includes

recoupment, counterclaim, set-off, suit in equity and any other

proceedings in which rights are determined.

(2) "Aggrieved party" means a party entitled to resort to a

remedy.

(3) "Agreement" means the bargain of the parties in fact as

found in their language or by implication from other

circumstances including course of dealing or usage of trade or

course of performance as provided in this Act (Sections 1-205 and

2-208). Whether an agreement has legal consequences is determined

by the provisions of this Act, if applicable; otherwise by the

law of contracts (Section 1-103). (Compare "Contract".)

(4) "Bank" means any person engaged in the business of

banking.

/* As with other definitions within the UCC, this definition does

not require that the person be properly licensed to do a banking

business. If a persons acts as a bank, regardless of the legality

of that for criminal purposes, the UCC will treat them as a

"bank" for contract law purposes. */

(5) "Bearer" means the person in possession of an instrument,

document of title, or certificated security payable to bearer or

indorsed in blank.

(6) "Bill of lading" means a document evidencing the receipt

of goods for shipment issued by a person engaged in the business

of transporting or forwarding goods, and includes an airbill.

"Airbill" means a document serving for air transportation as a

bill of lading does for marine or rail transportation, and

includes an air consignment note or air waybill.

(7) "Branch" includes a separately incorporated foreign branch

of a bank.

(8) "Burden of establishing" a fact means the burden of

persuading the triers of fact that the existence of the fact is

more probable than its nonexistence.

(9) "Buyer in ordinary course of business" means a person who

in good faith and without knowledge that the sale to him is in

violation of the ownership rights or security interest of a third

party in the goods buys in ordinary course from a person in the

business of selling goods of that kind but does not include a

pawnbroker. All persons who sell minerals or the like (including

oil and gas) at wellhead or minehead shall be deemed to be

persons in the business of selling goods of that kind. "Buying"

may be for cash or by exchange of other property or on secured or

unsecured credit and includes receiving goods or documents of

title under a preexisting contract for sale but does not include

a transfer in bulk or as security for or in total or partial

satisfaction of a money debt.

(10) "Conspicuous" A term of clause is conspicuous when it is

so written that a reasonable person against whom it is to operate

ought to have noticed it. A printed heading in capitals (as:

Non-Negotiable Bill of Lading) is conspicuous. Language in

the body of a form is "conspicuous" if it is in larger or other

contrasting type or color. But in a telegram any stated term is

"conspicuous". Whether a term or clause is "conspicuous" or not

is for decision by the court.

/* Taking consideration of this away from the jury. */

(11) "Contract" means the total legal obligation which

results from the parties' agreement as affected by this Act and

any other applicable rules of law. (Compare "Agreement".)

(12) "Creditor" includes a general creditor, a secured

creditor, a lien creditor and any representative of creditors,

including an assignee for the benefit of creditors, a

trustee in bankruptcy, a receiver in equity and an executor or

administrator of an insolvent debtor's or assignor's estate.

(13) "Defendant" includes a person in the position of

defendant in a cross-action or counterclaim.

(14) "Delivery" with respect to instruments, documents of

title, chattel paper, or certificated securities means voluntary

transfer of possession.

(15) "Document of title" includes bill of lading, dock

warrant, dock receipt, warehouse receipt or order for the

delivery of goods, and also any other document which in the

regular course of business or financing is treated as adequately

evidencing that the person in possession of it is entitled to

receive, hold and dispose of the document and the goods it

covers. To be a document of title a document must purport to be

issued by or addressed to a bailee and purport to cover goods in

the bailee's possession which are either identified or are

fungible portions of an identified mass.

(16) "Fault" means wrongful act, omission or breach.

(17) "Fungible" with respect to goods or securities means

goods or securities of which any unit is, by nature or usage of

trade, the equivalent of any other like unit. Goods which are not

fungible shall be deemed fungible for the purposes of this Act

to the extent that under a particular agreement or document

unlike units are treated as equivalents.

(18) "Genuine" means free of forgery or counterfeiting.

(19) "Good faith" means honesty in fact in the conduct or

transaction concerned.

(20) "Holder," with respect to a negotiable instrument,

means the person in possession if the instrument is payable to

the bearer or, in the case of an instrument payable to an

identified person, if the identified person is in possession.

"Holder" with respect to a document of title means the person in

possession if the goods are deliverable to bearer or to the order

of the person in possession.

(21) To "honor" is to pay or to accept and pay, or where a

credit so engages to purchase or discount a draft complying with

the terms of credit.

(22) "Insolvency proceedings" includes any assignment for

the benefit of creditors or other proceedings intended to

liquidate or rehabilitate the estate of the person involved.

(23) A person is "insolvent" who either has ceased to pay

his debts in the ordinary course of business or cannot pay his

debts as they become due or is insolvent within the meaning of

the federal bankruptcy law.

/* Two definitions of one term: The equity test (not paying in

the ordinary course of business) is used here, althhough

allowances are made for balance sheet insolvency. This is one

area in which the UCC is lacking. It is one thing to define terms

in a special way for the purpose of making a codification of law.

This definition incorporates another law by reference, making it

difficult to understand the UCC meaning of the word by sole

reference to the UCC. */

(24) "Money" means a medium of exchange authorized or

adopted by a domestic or foreign government as a part of its

currency.

(25) A person has "notice" of a fact when

(a) he has actual knowledge of it; or

(b) he has received a notice or notification of it; or

(c) from all the facts and circumstances known to him at

the time in question he has reason to know that it exists.

A person "knows" or has "knowledge" of a fact when he has

actual knowledge of it. "Discover" or "learn" or a word or

phrase of similar import refers to knowledge rather than to

reason to know. The time and circumstances under which a notice

or notification may cease to be effective are not determined by

this Act.

(26) A person "notifies" or "gives" a notice or

notification to another by taking such steps as may be reasonably

required to inform the other in ordinary course whether or not

such other actually comes to know of it. A person "receives" a

notice or notification when

(a) it comes to his attention; or

(b) it is duly delivered at the place of business through

which the contract was made or at any other place held out by him

as the place for receipt of such communications.

(27) Notice, knowledge or a notice or notification received

by an organization is effective for a particular transaction from

the time when it is brought to the attention of the individual

conducting that transaction, and in any event from time to time

when it would have been brought to his attention if the

organization had exercised due diligence if it maintains

reasonable routines for communicating significant information to

the person conducting the transaction and there is reasonable

compliance with the routines. Due diligence does not require an

individual acting for the organization to communicate information

unless such communication is part of his regular duties or unless

he has reason to know of the transaction and that the transaction

would be materially affected by the information.

/* This definition appears to eliminate the use of the doctrine

of "forgotten notice" in which large companies seek to avoid the

effect of a notice that they received due to the fact that

someone resigned, etc. */

(28) "Organization" includes a corporation, government or

governmental subdivision or agency, business trust, estate,

trust, partnership or association, two or more persons having a

joint or common interest, or any other legal or commercial

entity.

(29) "Party", as distinct from "third party", means a

person who has engaged in a transaction or made an agreement

within this Act.

(30) "Person" includes an individual or an organization

(See Section 1-102).

(31) "Presumption" or "presumed" means that the trier of

fact must find the existence of the fact presumed unless and

until evidence is introduced which would support a finding of its

non-existence.

(32) "Purchase" includes taking by sale, discount,

negotiation, mortgage, pledge, lien, issue or re-issue, gift or

any other voluntary transaction creating an interest in property.

(33) "Purchaser" means a person who takes by purchase.

(34) "Remedy" means any remedial right to which an

aggrieved party is entitled with or without resort to a tribunal.

(35) "Representative" includes an agent, an officer of a

corporation or association, and a trustee, executor or

administrator of an estate, or any other person empowered to act

for another.

(36) "Rights" includes remedies.

(37) "Security interest" means an interest in personal

property or fixtures which secures payment or performance of an

obligation. The retention or reservation of title by a seller of

goods notwithstanding shipment or delivery to the buyer (Section

2-401) is limited in effect to a reservation of a "security

interest". The term also includes any interest of a buyer of

accounts or chattel paper which is subject to Article 9. The

special property interest of a buyer of goods on identification

of those goods to a contract for sale under section 2-401 is not

a "security interest", but a buyer may also acquire a "security

interest" by complying with Article 9. Unless a consignment is

intended as security, reservation of title thereunder is not a

"security interest", but a consignment in any event is subject to

the provisions on consignment sales (Section 2-326).

Whether a transaction creates a lease or security interest

is determined by the facts of each case; however, a transaction

creates a security interest if the consideration the lessee is to

pay the lessor for the right to possession and use of the goods

is an obligation for the term of the lease not subject to

termination by the lessee, and

(a) the original term of the lease is equal to or greater

than the remaining economic life of the goods,

(b) the lessee is bound to renew the lease for the

remaining economic life of the goods or is bound to become the

owner of the goods,

(c) the lessee has an option to renew the lease for the

remaining economic life of the goods for no additional

consideration or nominal additional consideration upon compliance

with the lease agreement, or

(d) the lessee has an option to become the owner of the

goods for no additional consideration or nominal additional

consideration upon compliance with the lease agreement.

A transaction does not create a security interest merely because

it provides that

(a) the present value of the consideration the lessee is

obligated to pay the lessor for the right to possession and use

of the goods is substantially equal to or is greater than the

fair market value of the goods at the time the lease is entered

into,

(b) the lessee, assumes risk of loss of the goods, or

agrees to pay taxes, insurance, filing, recording, or

registration fees, or service or maintenance costs with respect

to the goods,

(c) the lessee has an option to renew the lease or to

become the owner of the goods,

(d) the lessee has an option to renew the lease for a fixed

rent that is equal to or greater than the reasonably predictable

fair market rent of the use of to goods for the term of the

renewal at the time the option is to be performed, or

(e) the lessee has an option to become the owner of the

goods for a fixed price that is equal to or greater than the

reasonably predictable fair market value of the goods at the time

the option is to be performed.

For purposes of this subsection (37):

(x) Additional consideration is not nominal if (1) when the

option to renew the lease is granted to the lessee the rent is

stated to be the fair market rent for the use of the goods for

the term of the renewal determined at the time the option is to

be performed, or (ii) when the option to become the owner of the

goods is granted to the lessee the price is stated to be the fair

market value of the goods determined at the time the option is to

be performed. Additional consideration is nominal if it is less

than the lessee's reasonably predictable cost of performing under

the lease agreement if the option is not exercised;

(y) "Reasonably predictable" and "remaining economic life

of the goods" are to be determined with reference to the facts

and circumstances at the time the transaction is entered into;

and

(z) "Present value" means the amount as of a date certain

of one or more sums payable in the future, discounted to the

date certain. The discount is determined by the interest rate

specified by the parties if the rate is not manifestly

unreasonable at the time the transaction is entered into;

otherwise, the discount is determined by a commercially

reasonable rate that takes into account the facts and

circumstances of each case at the time the transaction was

entered into.

(38) "Send" in connection with any writing or notice means

to deposit in the mail or deliver for transmission by any other

usual means of communication with postage or cost of transmission

provided for and properly addressed and in the case of an

instrument to an address specified thereon or otherwise agreed,

or if there be none to any address reasonable under the

circumstances. The receipt of any writing or notice within the

time at which it would have arrived if properly sent had the

effect of a proper sending.

(39) "Signed" includes any symbol executed or adopted by a

party with present intention to authenticate a writing.

(40) "Surety" includes guarantor.

(41) "Telegram" includes a message transmitted by radio,

teletype, cable, any mechanical method of transmission, or the

like.

(42) "Term" means that portion of an agreement which

relates to a particular matter.

(43) "Unauthorized" signature or indorsement means one made

without actual, implied or apparent authority and includes a

forgery.

(44) "Value". Except as otherwise provided with respect to

negotiable instruments and bank collections (Sections 3-303,

4-210 and 4-211) a person gives "value" for fights if he acquires

them

(a) in return for abiding commitment to extend credit or

for the extension of immediately available credit whether or not

drawn upon and whether or not a charge-back is provided for in

the event of difficulties in collection; or

(b) as security for on in total or partial satisfaction of

a re-existing claim; or

(c) by accepting delivery pursuant to a pre-existing

contract for purchase; or

(d) generally, in return for any consideration sufficient

to support a simple contract.

(45) "Warehouse receipt" means a receipt issued by a person

engaged in the business of storing goods for hire.

(46) "Written" or "writing" includes printing, typewriting

or any other intentional reduction to tangible form.

1-202. Prima Facie Evidence by Third Party Documents.

A document in due form purporting to be a bill of lading,

policy or certificate of insurance, official weigher's or

inspector's certificate, consular invoice, or any other document

authorized or required by the contract to be issued by a third

party shall be prima facie evidence of its own authenticity and

genuineness and of the facts stated in the document by the third

party.

1-203. Obligation of good faith.

Every contract or duty within this Act imposes an obligation

of good faith in its performance or enforcement.

1-204. Time; Reasonable Time; "Seasonable".

(1) Whenever this Act requires any action to be take within

a reasonable time, ant time which is not manifestly unreasonable

may be fixed by agreement.

(2) What is a reasonable time for taking any action depends

on the nature, purpose and circumstances of such action.

(3) An action is taken "seasonably" when it is taken at or

within the time agreed or if no time is agreed at or within a

reasonable time.

1-205. Course of dealing and Usage of Trade.

(1) A course of dealing is a sequence of previous conduct

between the parties to a particular transaction which is fairly

to be regarded as establishing a common basis of understanding

for interpreting their expressions and other conduct.

(2) A usage of trade is any practice or method of dealing

having such regularity of observance in a place, vocation or

trade as to justify an expectation that it will be observed with

respect to the transaction in question. The existence and scope

of such a usage are to be proved as facts. If it is established

that such a usage is embodied in a written trade code or similar

writing the interpretation of the writing is for the court.

/* Another place where the UCC mandates that certain issues are

legal ones and are to be ruled on by the Court instead of by a

jury. */

(3) A course of dealing between parties and any usage of

trade in the vocation or trade in which they are engaged or of

which they are or should be aware give particular meaning to and

supplement or qualify terms of an agreement.

(4) The express terms of an agreement and an applicable

course of dealing or usage of trade shall be construed wherever

reasonable as consistent with each other; but when such

construction is unreasonable express terms control both course of

dealing and usage of trade and course of dealing controls usage

of trade.

(5) An applicable usage of trade in the place where any

part of performance is to occur shall be used in interpreting the

agreement as to that part of the performance.

(6) Evidence of a relevant usage of trade in the place

where any part of performance is to occur shall be used in

interpreting the agreement as to that part of the performance.

1-206. Statute of frauds for Kinds of Personal Property Not

Otherwise Covered.

(1) Except in the cases described in subsection (2) of this

section a contract for the sale of personal property is not

enforceable by way of action or defense beyond five thousand

dollars in amount or value of remedy unless there is some writing

which indicates that a contract for sale has been made between

the parties at a defined or stated price, reasonably identifies

the subject matter, and is signed by the party against whom

enforcement is sought or by his authorized agent.

/* The UCC is not the same from state to state, and this section

in the "generic" draft uses $5,000. Other states use $500 or

other amounts. */

(2) Subsection (1) of this section does not apply to

contacts for the sale of goods (Section 2-201) nor of securities

(Section 8-319) nor to security agreements (Section 9-203).

1-207. Performance or acceptance under Reservation of Rights.

(1) A party who, with explicit reservation of rights,

performs or promises performance or assents to performance in a

manner demanded or offered by the other party does not thereby

prejudice the rights reserved. Such words as "without

prejudice", "under protest" or the like are sufficient.

(2) Subsection n(1) does not apply to an accord and

satisfaction.

1-208. Option to Accelerate at Will.

A term providing that one party or his successor in interest

may accelerate payment or performance or require collateral or

additional collateral "at will" or "when he deems himself

insecure" or in words of similar import shall be construed to

mean that he shall have power to do so only if he in good faith

believes that the prospect of payment or performance is impaired.

The burden of establishing lack of good faith is on the party

against whom the power has been exercised.

1-209. Subordinated Obligations.

An obligation may be issued as subordinated to payment of

another obligation of the person obligated, or a creditor may

subordinate his right to payment of an obligation by agreement

with either the person obligated or another creditor of the

person obligated. Such a subordination does not create a

security interest as against either the common debtor or a

subordinated creditor. This section shall be construed as

declaring the law as it existed prior to the enactment of this

section and not as modifying it.