HOUSE BILL No. 5081

 

October 18, 2011, Introduced by Reps. Huuki, Cotter and Lipton and referred to the Committee on Banking and Financial Services.

 

      A bill to amend 1962 PA 174, entitled

 

"Uniform commercial code,"

 

by amending the heading for part 1 and sections 1101, 1102, 1103,

 

1106, 1201, 1202, 1203, 1204, 1205, 1206, 2103, 2202, 2A103,

 

2A501, 2A518, 2A519, 2A527, 2A528, 3103, 4104, 4A105, 4A106,

 

4A204, 5103, 8102, and 9102 (MCL 440.1101, 440.1102, 440.1103,

 

440.1106, 440.1201, 440.1202, 440.1203, 440.1204, 440.1205,

 

440.1206, 440.2103, 440.2202, 440.2803, 440.2951, 440.2968,

 

440.2969, 440.2977, 440.2978, 440.3103, 440.4104, 440.4605,

 

440.4606, 440.4704, 440.5103, 440.8102, and 440.9102), sections

 

1201, 2103, 2A103, and 9102 as amended by 2000 PA 348, sections

 

1206, 4104, and 8102 as amended by 1998 PA 278, sections 2A501,

 

2A518, 2A519, 2A527, and 2A528 as added by 1992 PA 101, section

 

3103 as amended by 1993 PA 130, sections 4A105, 4A106, and 4A204

 

as added by 1992 PA 100, and section 5103 as amended by 1998 PA


 

488, and by adding a heading for part 3 and sections 1108, 1301,

 

1302, 1303, 1304, 1305, 1306, 1307, 1308, 1309, and 1310; and to

 

repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1                              PART 1

 

 2  SHORT TITLE, CONSTRUCTION, APPLICATION AND SUBJECT MATTER OF THE

 

 3                      ACT GENERAL PROVISIONS

 

 4        Sec. 1101. (1) This act shall be known and may be cited as

 

 5  the "uniform commercial code".

 

 6        (2) This article shall be known and may be cited as the

 

 7  "uniform commercial code – general provisions".

 

 8        Sec. 1102. (1) This act shall be liberally construed and

 

 9  applied to promote its underlying purposes and policies.

 

10        (2) Underlying purposes and policies of this act are

 

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

 

12  commercial transactions;

 

13        (b) to permit the continued expansion of commercial

 

14  practices through custom, usage and agreement of the parties;

 

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

 

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

 

17  agreement, except as otherwise provided in this act and except

 

18  that the obligations of good faith, diligence, reasonableness and

 

19  care prescribed by this act may not be disclaimed by agreement

 

20  but the parties may by agreement determine the standards by which

 

21  the performance of such obligations is to be measured if such

 

22  standards are not manifestly unreasonable.

 

23        (4) The presence in certain provisions of this act of the


 

 1  words "unless otherwise agreed" or words of similar import does

 

 2  not imply that the effect of other provisions may not be varied

 

 3  by agreement under subsection (3).

 

 4        (5) In this act unless the context otherwise requires

 

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

 

 6  the plural include the singular;

 

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

 

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

 

 9  gender may refer to any gender. This article applies to a

 

10  transaction to the extent that it is governed by another article

 

11  of this act.

 

12        Sec. 1103. (1) This act must be liberally construed and

 

13  applied to promote the following underlying purposes and

 

14  policies:

 

15        (a) To simplify, clarify, and modernize the law governing

 

16  commercial transactions.

 

17        (b) To permit the continued expansion of commercial

 

18  practices through custom, usage, and agreement of the parties.

 

19        (c) To make uniform the law among the various jurisdictions.

 

20        (2) Unless displaced by the particular provisions of this

 

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

 

22  and the law relative to capacity to contract, principal and

 

23  agent, estoppel, fraud, misrepresentation, duress, coercion,

 

24  mistake, bankruptcy, or other validating or invalidating cause

 

25  shall supplement its provisions.

 

26        Sec. 1106. (1) The remedies provided by this act shall be

 

27  liberally administered to the end that the aggrieved party may be


 

 1  put in as good a position as if the other party had fully

 

 2  performed but neither consequential or special nor penal damages

 

 3  may be had except as specifically provided in this act or by

 

 4  other rule of law.

 

 5        (2) Any right or obligation declared by this act is

 

 6  enforceable by action unless the provision declaring it specifies

 

 7  a different and limited effect. All of the following apply in

 

 8  this act, unless the statutory context otherwise requires:

 

 9        (a) Words in the singular number include the plural, and

 

10  those in the plural include the singular.

 

11        (b) Words of any gender also refer to any other gender.

 

12        Sec. 1108. This article modifies, limits, and supersedes the

 

13  electronic signatures in global and national commerce act, 15 USC

 

14  7001 to 7031, except that nothing in this article modifies,

 

15  limits, or supersedes section 7001(c) of that act, 15 USC 7001,

 

16  or authorizes electronic delivery of any of the notices described

 

17  in section 7003(b) of that act, 15 USC 7003.

 

18        Sec. 1201. (1) Unless the context otherwise requires, words

 

19  or phrases defined in this section, or in the additional

 

20  definitions contained in other articles of this act that apply to

 

21  particular articles or parts of this act, have the meanings

 

22  stated.

 

23        (2) Subject to additional definitions contained in the

 

24  subsequent other articles of this act which are applicable to

 

25  specific that apply to particular articles or parts of this act,

 

26  and unless the context otherwise requires, as used in this act:

 

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


 

 1  includes recoupment, counterclaim, setoff, suit in equity, and

 

 2  any other proceedings in which rights are determined.

 

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

 

 4  to a remedy.

 

 5        (c) (3) "Agreement", as distinguished from contract as

 

 6  defined in subdivision (l), means the bargain of the parties in

 

 7  fact, as found in their language or by implication from other

 

 8  circumstances, including course of performance, course of

 

 9  dealing, or usage of trade or course of performance as provided

 

10  in this act (sections 1205 and 2208) section 1303. Whether an

 

11  agreement has legal consequences is determined by the provisions

 

12  of this act, if applicable; otherwise by the law of contracts

 

13  (section 1103). (Compare "Contract".)

 

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

 

15  banking and includes a savings bank, savings and loan

 

16  association, credit union, and trust company.

 

17        (e) (5) "Bearer" means the person in possession of an a

 

18  negotiable instrument, document of title, or certificated

 

19  security that is payable to bearer or indorsed in blank.

 

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

 

21  receipt of goods for shipment issued by a person engaged in the

 

22  business of transporting or forwarding goods. , and includes an

 

23  airbill. "Airbill" means a document serving for air

 

24  transportation as a bill of lading does for marine or rail

 

25  transportation, and includes an air consignment note or air

 

26  waybill.

 

27        (g) (7) "Branch" includes a separately incorporated foreign


 

 1  branch of a bank.

 

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

 

 3  of persuading the triers trier of fact that the existence of the

 

 4  fact is more probable than its nonexistence.

 

 5        (i) (9) "Buyer in ordinary course of business" means a

 

 6  person that buys goods in good faith, without knowledge that the

 

 7  sale violates the rights of another person in the good goods, and

 

 8  in the ordinary course from a person, other than a pawnbroker, in

 

 9  the business of selling goods of that kind. A person buys goods

 

10  in the ordinary course if the sale to the person comports with

 

11  the usual or customary practices in the kind of business in which

 

12  the seller is engaged or with the seller's own usual or customary

 

13  practices. A person that sells oil, gas, or other minerals at the

 

14  wellhead or minehead is a person in the business of selling goods

 

15  of that kind. A buyer in ordinary course of business may buy for

 

16  cash, by exchange of other property, or on secured or unsecured

 

17  credit, and may acquire goods or documents of title under a

 

18  preexisting contract for sale. Only a buyer that takes possession

 

19  of the goods or has a right to recover the goods from the seller

 

20  under article 2 may be a buyer in ordinary course of business. A

 

21  The term does not include a person that acquires goods in a

 

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

 

23  satisfaction of a money debt. is not a buyer in ordinary course

 

24  of business.

 

25        (j) (10) "Conspicuous", : A term or clause is conspicuous

 

26  when it is with reference to a term, means so written, displayed,

 

27  or presented that a reasonable person against whom which it is to


 

 1  operate ought to have noticed it. A printed heading in capitals

 

 2  (as: non-negotiable bill of lading) is conspicuous. Language in

 

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

 

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

 

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

 

 6  is for decision by the court. Conspicuous terms include any of

 

 7  the following:

 

 8        (i) A heading in capitals equal to or greater in size than

 

 9  the surrounding text, or in contrasting type, font, or color to

 

10  surrounding text of the same or lesser size.

 

11        (ii) Language in the body of a record or display in larger

 

12  type than the surrounding text, or in contrasting type, font, or

 

13  color to surrounding text of the same size, or set off from

 

14  surrounding text of the same size by symbols or other marks that

 

15  call attention to the language.

 

16        (k) "Consumer" means an individual who enters into a

 

17  transaction primarily for personal, family, or household

 

18  purposes.

 

19        (l) (11) "Contract", as distinguished from agreement as

 

20  defined in subdivision (c), means the total legal obligation

 

21  which that results from the parties' agreement as affected

 

22  determined by this act and any other applicable rules of law as

 

23  supplemented by any other applicable laws. (Compare "Agreement".)

 

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

 

25  creditor, a lien creditor, and any representative of creditors,

 

26  including an assignee for the benefit of creditors, a trustee in

 

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


 

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

 

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

 

 3  defendant in a cross action or counterclaim, cross-claim, or

 

 4  third-party claim.

 

 5        (o) (14) "Delivery", with respect to instruments, documents

 

 6  an instrument, document of title, or chattel paper, or

 

 7  certificated securities means voluntary transfer of possession.

 

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

 

 9  warrant, dock receipt, warehouse receipt, or order for the

 

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

 

11  regular course of business or financing is treated as adequately

 

12  evidencing that the person in possession of it is entitled to

 

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

 

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

 

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

 

16  the bailee's possession which are either identified or are

 

17  fungible portions of an identified mass.

 

18        (q) (16) "Fault" means wrongful act, omission, or breach a

 

19  default, breach, or wrongful act or omission.

 

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

 

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

 

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

 

23  fungible shall be deemed fungible for the purposes of this act to

 

24  the extent that under a particular agreement or document unlike

 

25  units are treated as equivalents.

 

26        (r) "Fungible goods" means either of the following:

 

27        (i) Goods of which any unit, by nature or usage of trade, is


 

 1  the equivalent of any other like unit.

 

 2        (ii) Goods that by agreement are treated as equivalent.

 

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

 

 4        (t) (19) "Good faith", means honesty in fact in the conduct

 

 5  or transaction concerned except as otherwise provided in article

 

 6  5, means honesty in fact and the observance of reasonable

 

 7  commercial standards of fair dealing.

 

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

 

 9  means the person in possession if the instrument is payable to

 

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

 

11  person, if the identified person is in possession. Holder, with

 

12  respect to a document of title, means the person in possession if

 

13  the goods are deliverable to bearer or to the order of the person

 

14  in possession. means 1 of the following:

 

15        (i) The person in possession of a negotiable instrument that

 

16  is payable either to bearer or to an identified person that is

 

17  the person in possession.

 

18        (ii) The person in possession of a document of title if the

 

19  goods are deliverable either to bearer or to the order of the

 

20  person in possession.

 

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

 

22  credit so engages to purchase or discount a draft complying with

 

23  the terms of the credit.

 

24        (v) (22) "Insolvency proceedings" includes any an assignment

 

25  for the benefit of creditors or other proceedings proceeding

 

26  intended to liquidate or rehabilitate the estate of the person

 

27  involved.


 

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

 

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

 

 3  his or her debts as they become due or is insolvent within the

 

 4  meaning of the federal bankruptcy law.

 

 5        (w) "Insolvent" means any of the following:

 

 6        (i) Having generally ceased to pay debts in the ordinary

 

 7  course of business other than as a result of a bona fide dispute.

 

 8        (ii) Being unable to pay debts as they become due.

 

 9        (iii) Being insolvent within the meaning of federal bankruptcy

 

10  law.

 

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

 

12  adopted by a domestic or foreign government. and The term

 

13  includes a monetary unit of account established by an

 

14  intergovernmental organization or by agreement between 2 or more

 

15  nations countries.

 

16        (25) A person has "notice" of a fact when he or she has

 

17  actual knowledge of it; he or she has received a notice or

 

18  notification of it; or from all the facts and circumstances known

 

19  to him or her at the time in question he or she has reason to

 

20  know that it exists. A person "knows" or has "knowledge" of a

 

21  fact when he or she has actual knowledge of it. "Discover" or

 

22  "learn" or a word or phrase of similar import refers to knowledge

 

23  rather than to reason to know. The time and circumstances under

 

24  which a notice or notification may cease to be effective are not

 

25  determined by this act.

 

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

 

27  to another by taking such steps as may be reasonably required to


 

 1  inform the other in ordinary course whether or not such other

 

 2  actually comes to know of it. A person "receives" a notice or

 

 3  notification when 1 of the following occurs:

 

 4        (a) It comes to his or her attention.

 

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

 

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

 

 7  or her as the place for receipt of such communications.

 

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

 

 9  by an organization is effective for a particular transaction from

 

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

 

11  conducting that transaction, and in any event from the time when

 

12  it would have been brought to the individual's attention if the

 

13  organization had exercised due diligence. An organization

 

14  exercises due diligence if it maintains reasonable routines for

 

15  communicating significant information to the person conducting

 

16  the transaction and there is reasonable compliance with the

 

17  routines. Due diligence does not require an individual acting for

 

18  the organization to communicate information unless such

 

19  communication is part of his or her regular duties or unless he

 

20  or she has reason to know of the transaction and that the

 

21  transaction would be materially affected by the information.

 

22        (y) (28) "Organization" includes a corporation, government,

 

23  or governmental subdivision or agency, business trust, estate,

 

24  trust, partnership or association, 2 or more persons having a

 

25  joint or common interest, or any other legal or commercial entity

 

26  means a person other than an individual.

 

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


 

 1  person who that has engaged in a transaction or made an agreement

 

 2  within subject to this act.

 

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

 

 4  section 1102).

 

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

 

 6  fact must find the existence of the fact presumed unless and

 

 7  until evidence is introduced which would support a finding of its

 

 8  nonexistence.

 

 9        (aa) "Person" means an individual, corporation, business

 

10  trust, estate, trust, partnership, limited liability company,

 

11  association, joint venture, government, governmental subdivision,

 

12  agency, or instrumentality, public corporation, or any other

 

13  legal or commercial entity.

 

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

 

15  of 1 or more sums payable in the future, discounted to the date

 

16  certain by use of either an interest rate specified by the

 

17  parties if that rate is not manifestly unreasonable at the time

 

18  the transaction is entered into or, if an interest rate is not so

 

19  specified, a commercially reasonable rate that takes into account

 

20  the facts and circumstances at the time the transaction is

 

21  entered into.

 

22        (cc) (32) "Purchase" includes means taking by sale, lease,

 

23  discount, negotiation, mortgage, pledge, lien, security interest,

 

24  issue or reissue, gift, or any other voluntary transaction

 

25  creating an interest in property.

 

26        (dd) (33) "Purchaser" means a person who that takes by

 

27  purchase.


 

 1        (ee) "Record" means information that is inscribed on a

 

 2  tangible medium or that is stored in an electronic or other

 

 3  medium and is retrievable in perceivable form.

 

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

 

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

 

 6        (gg) (35) "Representative" includes means a person empowered

 

 7  to act for another, including an agent, an officer of a

 

 8  corporation or association, and a trustee, executor, or

 

 9  administrator of an estate. , or any other person empowered to

 

10  act for another.

 

11        (hh) (36) "Rights" "Right" includes remedies remedy.

 

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

 

13  property or fixtures which secures payment or performance of an

 

14  obligation. The term also includes any interest of a consignor

 

15  and a buyer of an account accounts, chattel paper, a payment

 

16  intangible, or a promissory note in a transaction that is subject

 

17  to article 9. The term does not include the special property

 

18  interest of a buyer of goods on identification of those goods to

 

19  a contract for sale under section 2401, is not a "security

 

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

 

21  complying with article 9. Except as otherwise provided in section

 

22  2505, the right of a seller or lessor of goods under article 2 or

 

23  2A to retain or acquire possession of the goods is not a

 

24  "security interest", but a seller or lessor may also acquire a

 

25  "security interest" by complying with article 9. The retention or

 

26  reservation of title by a seller of goods notwithstanding

 

27  shipment or delivery to the buyer (section 2401) under section


 

 1  2401 is limited in effect to a reservation of a "security

 

 2  interest". Whether a transaction in the form of a lease creates a

 

 3  lease or security interest is determined under section 1203. by

 

 4  the facts of each case; however, a transaction creates a security

 

 5  interest if the consideration the lessee is to pay the lessor for

 

 6  the right to possession and use of the goods is an obligation for

 

 7  the term of the lease not subject to termination by the lessee,

 

 8  and any of the following:

 

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

 

10  than the remaining economic life of the goods.

 

11        (b) The lessee is bound to renew the lease for the remaining

 

12  economic life of the goods or is bound to become the owner of the

 

13  goods.

 

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

 

15  remaining economic life of the goods for no additional

 

16  consideration or nominal additional consideration upon compliance

 

17  with the lease agreement.

 

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

 

19  goods for no additional consideration or nominal additional

 

20  consideration upon compliance with the lease agreement.

 

21        A transaction does not create a security interest merely

 

22  because it provides any of the following:

 

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

 

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

 

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

 

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

 

27  into.


 

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

 

 2  to pay taxes, insurance, filing, recording, or registration fees,

 

 3  or service or maintenance costs with respect to the goods.

 

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

 

 5  the owner of the goods.

 

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

 

 7  rent that is equal to or greater than the reasonably predictable

 

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

 

 9  renewal at the time the option is to be performed.

 

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

 

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

 

12  reasonably predictable fair market value of the goods at the time

 

13  the option is to be performed.

 

14        As used in this subsection:

 

15        (a) Additional consideration is not nominal if when the

 

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

 

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

 

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

 

19  be performed, or when the option to become the owner of the goods

 

20  is granted to the lessee, the price is stated to be the fair

 

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

 

22  be performed. Additional consideration is nominal if it is less

 

23  than the lessee's reasonably predictable cost of performing under

 

24  the lease agreement if the option is not exercised.

 

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

 

26  1 or more sums payable in the future, discounted to the date

 

27  certain. The discount is determined by the interest rate


 

 1  specified by the parties if the rate is not manifestly

 

 2  unreasonable at the time the transaction is entered into;

 

 3  otherwise, the discount is determined by a commercially

 

 4  reasonable rate that takes into account the facts and

 

 5  circumstances of each case at the time the transaction was

 

 6  entered into.

 

 7        (c) "Reasonably predictable" and "remaining economic life of

 

 8  the goods" are to be determined with reference to the facts and

 

 9  circumstances at the time the transaction is entered into.

 

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

 

11  means to either of the following:

 

12        (i) To deposit in the mail or deliver for transmission by any

 

13  other usual means of communication with postage or cost of

 

14  transmission provided for and properly addressed and, in the case

 

15  of an instrument, to an address specified thereon on the

 

16  instrument or otherwise agreed, or if there be is none, to any

 

17  address reasonable under the circumstances. The receipt of any

 

18  writing or notice within the time at which it would have arrived,

 

19  if properly sent, has the effect of a proper sending.

 

20        (ii) In any other way to cause to be received any record or

 

21  notice within the time it would have arrived if properly sent.

 

22        (kk) (39) "Signed" includes any symbol executed or adopted

 

23  by a party with present intention to authenticate a writing,

 

24  including a carbon copy of his or her signature adopt or accept a

 

25  writing.

 

26        (40) "Surety" includes guarantor.

 

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


 

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

 

 2  like.

 

 3        (ll) "State" means a state of the United States, the District

 

 4  of Columbia, Puerto Rico, the United States Virgin Islands, or

 

 5  any territory or insular possession subject to the jurisdiction

 

 6  of the United States.

 

 7        (mm) "Surety" includes a guarantor or other secondary

 

 8  obligor.

 

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

 

10  that relates to a particular matter.

 

11        (oo) (43) "Unauthorized " signature means one signature"

 

12  means a signature made without actual, implied, or apparent

 

13  authority. and The term includes a forgery.

 

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

 

15  negotiable instruments and bank collections (sections 3303, 4208,

 

16  and 4209) a person gives "value" for rights if the person

 

17  acquires them:

 

18        (a) In return for a binding commitment to extend credit or

 

19  for the extension of immediately available credit whether or not

 

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

 

21  the event of difficulties in collection; or

 

22        (b) As security for or in total or partial satisfaction of a

 

23  preexisting claim; or

 

24        (c) By accepting delivery pursuant to a preexisting contract

 

25  for purchase; or

 

26        (d) Generally, in return for any consideration sufficient to

 

27  support a simple contract.


 

 1        (pp) (45) "Warehouse receipt" means a receipt issued by a

 

 2  person engaged in the business of storing goods for hire.

 

 3        (qq) (46) "Written" or "writing" includes printing,

 

 4  typewriting, or any other intentional reduction to tangible form.

 

 5        Sec. 1202. A document in due form purporting to be a bill of

 

 6  lading, policy or certificate of insurance, official weigher's or

 

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

 

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

 

 9  party shall be prima facie evidence of its own authenticity and

 

10  genuineness and of the fact stated in the document by the third

 

11  party. For purposes of this act:

 

12        (a) Subject to subdivision (f), a person has "notice" of a

 

13  fact if the person has any of the following:

 

14        (i) Actual knowledge of it.

 

15        (ii) Received a notice or notification of it.

 

16        (iii) From all the facts and circumstances known to the person

 

17  at the time in question, reason to know that it exists.

 

18        (b) "Knowledge" means actual knowledge. "Knows" has a

 

19  corresponding meaning.

 

20        (c) "Discover", "learn", or words of similar import refer to

 

21  knowledge rather than to reason to know.

 

22        (d) A person "notifies" or "gives" a notice or notification

 

23  to another person by taking those steps as may be reasonably

 

24  required to inform the other person in ordinary course, whether

 

25  or not the other person actually comes to know of it.

 

26        (e) Subject to subdivision (f), a person "receives" a notice

 

27  or notification when either of the following occurs:


 

 1        (i) It comes to that person's attention.

 

 2        (ii) It is duly delivered in a form reasonable under the

 

 3  circumstances at the place of business through which the contract

 

 4  was made or at another location held out by that person as the

 

 5  place for receipt of those communications.

 

 6        (f) Notice, knowledge, or a notice or notification received

 

 7  by an organization is effective for a particular transaction from

 

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

 

 9  conducting that transaction and, in any event, from the time it

 

10  would have been brought to the individual's attention if the

 

11  organization had exercised due diligence. An organization

 

12  exercises due diligence if it maintains reasonable routines for

 

13  communicating significant information to the person conducting

 

14  the transaction and there is reasonable compliance with the

 

15  routines. Due diligence does not require an individual acting for

 

16  the organization to communicate information unless the

 

17  communication is part of the individual's regular duties or the

 

18  individual has reason to know of the transaction and that the

 

19  transaction would be materially affected by the information.

 

20        Sec. 1203. Every contract or duty within this act imposes an

 

21  obligation of good faith in its performance or enforcement.

 

22        (1) Whether a transaction in the form of a lease creates a

 

23  lease or security interest is determined by the facts of each

 

24  case.

 

25        (2) A transaction in the form of a lease creates a security

 

26  interest if the consideration that the lessee is to pay the

 

27  lessor for the right to possession and use of the goods is an


 

 1  obligation for the term of the lease and is not subject to

 

 2  termination by the lessee, and any of the following are met:

 

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

 

 4  than the remaining economic life of the goods.

 

 5        (b) The lessee is bound to renew the lease for the remaining

 

 6  economic life of the goods or is bound to become the owner of the

 

 7  goods.

 

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

 

 9  remaining economic life of the goods for no additional

 

10  consideration or for nominal additional consideration upon

 

11  compliance with the lease agreement.

 

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

 

13  goods for no additional consideration or for nominal additional

 

14  consideration upon compliance with the lease agreement.

 

15        (3) A transaction in the form of a lease does not create a

 

16  security interest merely because any of the following are met:

 

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

 

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

 

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

 

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

 

21  into.

 

22        (b) The lessee assumes risk of loss of the goods.

 

23        (c) The lessee agrees to pay, with respect to the goods,

 

24  taxes, insurance, filing, recording, or registration fees, or

 

25  service or maintenance costs.

 

26        (d) The lessee has an option to renew the lease or to become

 

27  the owner of the goods.


 

 1        (e) The lessee has an option to renew the lease for a fixed

 

 2  rent that is equal to or greater than the reasonably predictable

 

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

 

 4  renewal at the time the option is to be performed.

 

 5        (f) The lessee has an option to become the owner of the

 

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

 

 7  reasonably predictable fair market value of the goods at the time

 

 8  the option is to be performed.

 

 9        (4) Additional consideration is nominal if it is less than

 

10  the lessee's reasonably predictable cost of performing under the

 

11  lease agreement if the option is not exercised. Additional

 

12  consideration is not nominal if either of the following are met:

 

13        (a) When the option to renew the lease is granted to the

 

14  lessee, the rent is stated to be the fair market rent for the use

 

15  of the goods for the term of the renewal determined at the time

 

16  the option is to be performed.

 

17        (b) When the option to become the owner of the goods is

 

18  granted to the lessee, the price is stated to be the fair market

 

19  value of the goods determined at the time the option is to be

 

20  performed.

 

21        (5) The "remaining economic life of the goods" and

 

22  "reasonably predictable" fair market rent, fair market value, or

 

23  cost of performing under the lease agreement must be determined

 

24  with reference to the facts and circumstances at the time the

 

25  transaction is entered into.

 

26        Sec. 1204. (1) Whenever this act requires any action to be

 

27  taken within a reasonable time, any time which is not manifestly


 

 1  unreasonable may be fixed by agreement.

 

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

 

 3  on the nature, purpose and circumstances of such action.

 

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

 

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

 

 6  reasonable time. Except as otherwise provided in articles 3, 4,

 

 7  and 5, a person gives value for rights if the person acquires

 

 8  them for any of the following:

 

 9        (a) In return for a binding commitment to extend credit or

 

10  for the extension of immediately available credit, whether or not

 

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

 

12  the event of difficulties in collection.

 

13        (b) As security for, or in total or partial satisfaction of,

 

14  a preexisting claim.

 

15        (c) By accepting delivery under a preexisting contract for

 

16  purchase.

 

17        (d) In return for any consideration sufficient to support a

 

18  simple contract.

 

19        Sec. 1205. (1) A course of dealing is a sequence of previous

 

20  conduct between the parties to a particular transaction which is

 

21  fairly to be regarded as establishing a common basis of

 

22  understanding for interpreting their expressions and other

 

23  conduct.

 

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

 

25  having such regularity of observance in a place, vocation or

 

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

 

27  respect to the transaction in question. The existence and scope


 

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

 

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

 

 3  writing the interpretation of the writing is for the court.

 

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

 

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

 

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

 

 7  supplement or qualify terms of an agreement.

 

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

 

 9  course of dealing or usage of trade shall be construed wherever

 

10  reasonable as consistent with each other; but when such

 

11  construction is unreasonable express terms control both course of

 

12  dealing and usage of trade and course of dealing controls usage

 

13  of trade.

 

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

 

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

 

16  agreement as to that part of the performance.

 

17        (6) Evidence of a relevant usage of trade offered by one

 

18  party is not admissible unless and until he has given the other

 

19  party such notice as the court finds sufficient to prevent unfair

 

20  surprise to the latter.

 

21        (1) Whether a time for taking an action required by this act

 

22  is reasonable depends on the nature, purpose, and circumstances

 

23  of the action.

 

24        (2) An action is taken seasonably if it is taken at or

 

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

 

26  reasonable time.

 

27        Sec. 1206. (1) Except in the cases described in subsection


 

 1  (2) of this section, a contract for the sale of personal property

 

 2  is not enforceable by way of action or defense beyond $5,000.00

 

 3  in amount or value of remedy unless there is some writing which

 

 4  indicates that a contract for sale has been made between the

 

 5  parties at a defined or stated price, reasonably identifies the

 

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

 

 7  enforcement is sought or by his or her authorized agent.

 

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

 

 9  contracts for the sale of goods (section 2201) nor of securities

 

10  (section 8113) nor to security agreements (section 9203).

 

11  Whenever this act creates a "presumption" with respect to a fact,

 

12  or provides that a fact is "presumed", the trier of fact must

 

13  find the existence of the fact unless and until evidence is

 

14  introduced that supports a finding of its nonexistence.

 

15                              PART 3

 

16           TERRITORIAL APPLICABILITY AND GENERAL RULES

 

17        Sec. 1301. (1) Except as otherwise provided in this section,

 

18  when a transaction bears a reasonable relation to this state and

 

19  also to another state or nation, the parties may agree that the

 

20  law either of this state or of that other state or nation shall

 

21  govern their rights and duties.

 

22        (2) In the absence of an agreement effective under

 

23  subsection (1), and except as provided in subsection (3), this

 

24  act applies to transactions bearing an appropriate relation to

 

25  this state.

 

26        (3) If 1 of the following provisions of this act specifies

 

27  the applicable law, that provision governs and a contrary


 

 1  agreement is effective only to the extent permitted by the law so

 

 2  specified:

 

 3        (a) Section 2402.

 

 4        (b) Sections 2A105 and 2A106.

 

 5        (c) Section 4102.

 

 6        (d) Section 4A507.

 

 7        (e) Section 5116.

 

 8        (f) Section 8110.

 

 9        (g) Sections 9301 through 9307.

 

10        Sec. 1302. (1) Except as otherwise provided in subsection

 

11  (2) or elsewhere in this act, the effect of any provision of this

 

12  act may be varied by agreement.

 

13        (2) The obligations of good faith, diligence,

 

14  reasonableness, and care prescribed by this act may not be

 

15  disclaimed by agreement. The parties, by agreement, may determine

 

16  the standards by which the performance of those obligations is to

 

17  be measured if those standards are not manifestly unreasonable.

 

18  Whenever this act requires an action to be taken within a

 

19  reasonable time, a time that is not manifestly unreasonable may

 

20  be fixed by agreement.

 

21        (3) The presence in certain provisions of this act of the

 

22  phrase "unless otherwise agreed", or words of similar import,

 

23  does not imply that the effect of other provisions may not be

 

24  varied by agreement under this section.

 

25        Sec. 1303. (1) For purposes of this act, a "course of

 

26  performance" is a sequence of conduct between the parties to a

 

27  particular transaction that exists if both of the following are


 

 1  met:

 

 2        (a) The agreement of the parties with respect to the

 

 3  transaction involves repeated occasions for performance by a

 

 4  party.

 

 5        (b) The other party, with knowledge of the nature of the

 

 6  performance and opportunity for objection to it, accepts the

 

 7  performance or acquiesces in it without objection.

 

 8        (2) For purposes of this act, a "course of dealing" is a

 

 9  sequence of conduct concerning previous transactions between the

 

10  parties to a particular transaction that is fairly to be regarded

 

11  as establishing a common basis of understanding for interpreting

 

12  their expressions and other conduct.

 

13        (3) For purposes of this act, a "usage of trade" is any

 

14  practice or method of dealing having such regularity of

 

15  observance in a place, vocation, or trade as to justify an

 

16  expectation that it will be observed with respect to the

 

17  transaction in question. The existence and scope of a usage of

 

18  trade must be proved as facts. If it is established that a usage

 

19  of trade is embodied in a trade code or similar record, the

 

20  interpretation of the record is a question of law.

 

21        (4) A course of performance or course of dealing between the

 

22  parties or usage of trade in the vocation or trade in which they

 

23  are engaged or of which they are or should be aware is relevant

 

24  in ascertaining the meaning of the parties' agreement, may give

 

25  particular meaning to specific terms of the agreement, and may

 

26  supplement or qualify the terms of the agreement. A usage of

 

27  trade applicable in the place in which part of the performance


 

 1  under the agreement is to occur may be so utilized as to that

 

 2  part of the performance.

 

 3        (5) Except as otherwise provided in subsection (6), the

 

 4  express terms of an agreement and any applicable course of

 

 5  performance, course of dealing, or usage of trade must be

 

 6  construed whenever reasonable as consistent with each other. All

 

 7  of the following apply if that construction is unreasonable:

 

 8        (a) Express terms prevail over course of performance, course

 

 9  of dealing, and usage of trade.

 

10        (b) Course of performance prevails over course of dealing

 

11  and usage of trade.

 

12        (c) Course of dealing prevails over usage of trade.

 

13        (6) Subject to section 2209, a course of performance is

 

14  relevant to show a waiver or modification of any term

 

15  inconsistent with the course of performance.

 

16        (7) Evidence of a relevant usage of trade offered by 1 party

 

17  is not admissible unless that party has given the other party

 

18  notice that the court finds sufficient to prevent unfair surprise

 

19  to the other party.

 

20        Sec. 1304. Every contract or duty within this act imposes an

 

21  obligation of good faith in its performance and enforcement.

 

22        Sec. 1305. (1) The remedies provided in this act must be

 

23  liberally administered to the end that the aggrieved party may be

 

24  put in as good a position as if the other party had fully

 

25  performed but neither consequential or special damages nor penal

 

26  damages may be had except as specifically provided in this act or

 

27  by other rule of law.


 

 1        (2) Any right or obligation declared by this act is

 

 2  enforceable by action unless the provision declaring it specifies

 

 3  a different and limited effect.

 

 4        Sec. 1306. A claim or right arising out of an alleged breach

 

 5  may be discharged in whole or in part without consideration by

 

 6  agreement of the aggrieved party in an authenticated record.

 

 7        Sec. 1307. A document in due form purporting to be a bill of

 

 8  lading, policy or certificate of insurance, official weigher's or

 

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

 

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

 

11  party is prima facie evidence of its own authenticity and

 

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

 

13  party.

 

14        Sec. 1308. (1) A party that with explicit reservation of

 

15  rights performs or promises performance or assents to performance

 

16  in a manner demanded or offered by the other party does not

 

17  prejudice the rights reserved by that performance, promise, or

 

18  assent. Words such as "without prejudice", "under protest", or

 

19  the like are sufficient.

 

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

 

21  satisfaction.

 

22        Sec. 1309. A term providing that 1 party or that party's

 

23  successor in interest may accelerate payment or performance or

 

24  require collateral or additional collateral "at will" or when the

 

25  party "deems itself insecure", or words of similar import, means

 

26  that the party has power to do so only if that party in good

 

27  faith believes that the prospect of payment or performance is


 

 1  impaired. The burden of establishing lack of good faith is on the

 

 2  party against which the power has been exercised.

 

 3        Sec. 1310. An obligation may be issued as subordinated to

 

 4  performance of another obligation of the person obligated, or a

 

 5  creditor may subordinate its right to performance of an

 

 6  obligation by agreement with either the person obligated or

 

 7  another creditor of the person obligated. Subordination does not

 

 8  create a security interest as against either the common debtor or

 

 9  a subordinated creditor.

 

10        Sec. 2103. (1) In this article unless the context otherwise

 

11  requires:

 

12        (a) "Buyer" means a person who buys or contracts to buy

 

13  goods.

 

14        (b) "Good faith" in the case of a merchant means honesty in

 

15  fact and the observance of reasonable commercial standards of

 

16  fair dealing in the trade.

 

17        (b) (c) "Receipt" of goods means taking physical possession

 

18  of them.

 

19        (c) (d) "Seller" means a person who sells or contracts to

 

20  sell goods.

 

21        (2) Other definitions applying to this article or to

 

22  specified parts thereof, and the sections in which they appear

 

23  are:

 

 

24      "Acceptance".                       Section 2606.

25      "Banker's credit".                  Section 2325.

26      "Between merchants".                Section 2104.


     "Cancellation".                     Section 2106(4).

     "Commercial unit".                  Section 2105.

     "Confirmed credit".                 Section 2325.

     "Conforming to contract".           Section 2106.

     "Contract for sale".                Section 2106.

     "Cover".                            Section 2712.

     "Entrusting".                       Section 2403.

     "Financing agency".                 Section 2104.

     "Future goods".                     Section 2105.

10      "Goods".                            Section 2105.

11      "Identification".                   Section 2501.

12      "Installment contract".             Section 2612.

13      "Letter of credit".                 Section 2325.

14      "Lot".                              Section 2105.

15      "Merchant".                         Section 2104.

16      "Overseas".                         Section 2323.

17      "Person in position of seller".     Section 2707.

18      "Present sale".                     Section 2106.

19      "Sale".                             Section 2106.

20      "Sale on approval".                 Section 2326.

21      "Sale or return".                   Section 2326.

22      "Termination".                      Section 2106.

 

 

23        (3) The following definitions in other articles apply to

 

24  this article:

 

 

25      "Check".                            Section 3104.

26      "Consignee".                        Section 7102.

27      "Consignor".                        Section 7102.

28      "Consumer goods".                   Section 9102.

29      "Dishonor".                         Section 3502.


     "Draft".                            Section 3104.

 

 

 2        (4) In addition article 1 contains general definitions and

 

 3  principles of construction and interpretation applicable

 

 4  throughout this article.

 

 5        Sec. 2202. Terms with respect to which the confirmatory

 

 6  memoranda of the parties agree or which are otherwise set forth

 

 7  in a writing intended by the parties as a final expression of

 

 8  their agreement with respect to such those terms as are included

 

 9  therein in that memoranda or writing may not be contradicted by

 

10  evidence of any prior agreement or of a contemporaneous oral

 

11  agreement but may be explained or supplemented by any of the

 

12  following:

 

13        (a) by By course of performance, course of dealing, or usage

 

14  of trade (section 1205) or by course of performance (section

 

15  2208); and under section 1303.

 

16        (b) by By evidence of consistent additional terms unless the

 

17  court finds the writing to have been intended also as a complete

 

18  and exclusive statement of the terms of the agreement.

 

19        Sec. 2A103. (1) In this article unless the context otherwise

 

20  requires:

 

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

 

22  who in good faith and without knowledge that the sale to him or

 

23  her is in violation of the ownership rights or security interest

 

24  or leasehold interest of a third party in the goods buys in

 

25  ordinary course from a person in the business of selling goods of

 

26  that kind but does not include a pawnbroker. "Buying" may be for

 


 1  cash or by exchange of other property or on secured or unsecured

 

 2  credit and includes receiving goods or documents of title under a

 

 3  pre-existing contract for sale but does not include a transfer in

 

 4  bulk or as security for or in total or partial satisfaction of a

 

 5  money debt.

 

 6        (b) "Cancellation" occurs when either party puts an end to

 

 7  the lease contract for default by the other party.

 

 8        (c) "Commercial unit" means such a unit of goods as by

 

 9  commercial usage is a single whole for purposes of lease and

 

10  division of which materially impairs its character or value on

 

11  the market or in use. A commercial unit may be a single article,

 

12  as a machine, or a set of articles, as a suite of furniture or a

 

13  line of machinery, or a quantity, as a gross or carload, or any

 

14  other unit treated in use or in the relevant market as a single

 

15  whole.

 

16        (d) "Conforming" means goods or performance under a lease

 

17  contract that are in accordance with the obligations under the

 

18  lease contract.

 

19        (e) "Consumer lease" means a lease that a lessor regularly

 

20  engaged in the business of leasing or selling makes to a lessee

 

21  who is an individual and who takes under the lease primarily for

 

22  a personal, family, or household purpose, if the total payments

 

23  to be made under the lease contract, excluding payments for

 

24  options to renew or buy, do not exceed $25,000.00.

 

25        (f) "Fault" means wrongful act, omission, breach, or

 

26  default.

 

27        (g) "Finance lease" means a lease with respect to which all

 


 1  of the following apply:

 

 2        (i) The lessor does not select, manufacture, or supply the

 

 3  goods.

 

 4        (ii) The lessor acquires the goods or the right to possession

 

 5  and use of the goods in connection with the lease.

 

 6        (iii) One of the following occurs:

 

 7        (A) The lessee receives a copy of the contract by which the

 

 8  lessor acquired the goods or the right to possession and use of

 

 9  the goods before signing the lease contract.

 

10        (B) The lessee's approval of the contract by which the

 

11  lessor acquired the goods or the right to possession and use of

 

12  the goods is a condition to effectiveness of the lease contract.

 

13        (C) The lessee, before signing the lease contract, receives

 

14  an accurate and complete statement designating the promises and

 

15  warranties, and any disclaimers of warranties, limitations or

 

16  modifications of remedies, or liquidated damages, including those

 

17  of a third party, such as the manufacturer of the goods, provided

 

18  to the lessor by the person supplying the goods in connection

 

19  with or as part of the contract by which the lessor acquired the

 

20  goods or the right to possession and use of the goods.

 

21        (D) If the lease is not a consumer lease, the lessor, before

 

22  the lessee signs the lease contract, informs the lessee in

 

23  writing of the following:

 

24        (I) The identity of the person supplying the goods to the

 

25  lessor, unless the lessee has selected that person and directed

 

26  the lessor to acquire the goods or the right to possession and

 

27  use of the goods from that person.

 


 1        (II) The lessee is entitled under this article to the

 

 2  promises and warranties, including those of any third party,

 

 3  provided to the lessor by the person supplying the goods in

 

 4  connection with or as part of the contract by which the lessor

 

 5  acquired the goods or the right to possession and use of the

 

 6  goods.

 

 7        (III) The lessee may communicate with the person supplying

 

 8  the goods to the lessor and receive an accurate and complete

 

 9  statement of those promises and warranties, including any

 

10  disclaimers and limitations of them or of remedies.

 

11        (h) "Goods" means all things that are movable at the time of

 

12  identification to the lease contract, or are fixtures (section

 

13  2A309), but the term does not include money, documents,

 

14  instruments, accounts, chattel paper, general intangibles, or

 

15  minerals or the like, including oil and gas, before extraction.

 

16  The term also includes the unborn young of animals.

 

17        (i) "Installment lease contract" means a lease contract that

 

18  authorizes or requires the delivery of goods in separate lots to

 

19  be separately accepted, even though the lease contract contains a

 

20  clause "each delivery is a separate lease" or its equivalent.

 

21        (j) "Lease" means a transfer of the right to possession and

 

22  use of goods for a term in return for consideration, but a sale,

 

23  including a sale on approval or a sale or return, or retention or

 

24  creation of a security interest is not a lease. Unless the

 

25  context clearly indicates otherwise, the term includes a

 

26  sublease.

 

27        (k) "Lease agreement" means the bargain, with respect to the

 


 1  lease, of the lessor and the lessee in fact as found in their

 

 2  language or by implication from other circumstances including

 

 3  course of dealing or usage of trade or course of performance as

 

 4  provided in this article. Unless the context clearly indicates

 

 5  otherwise, the term includes a sublease agreement.

 

 6        (l) "Lease contract" means the total legal obligation that

 

 7  results from the lease agreement as affected by this article and

 

 8  any other applicable rules of law. Unless the context clearly

 

 9  indicates otherwise, the term includes a sublease contract.

 

10        (m) "Leasehold interest" means the interest of the lessor or

 

11  the lessee under a lease contract.

 

12        (n) "Lessee" means a person who acquires the right to

 

13  possession and use of goods under a lease. Unless the context

 

14  clearly indicates otherwise, the term includes a sublessee.

 

15        (o) "Lessee in ordinary course of business" means a person

 

16  who in good faith and without knowledge that the lease to him or

 

17  her is in violation of the ownership rights or security interest

 

18  or leasehold interest of a third party in the goods leases in

 

19  ordinary course from a person in the business of selling or

 

20  leasing goods of that kind but does not include a pawnbroker.

 

21  "Leasing" may be for cash or by exchange of other property or on

 

22  secured or unsecured credit and includes receiving goods or

 

23  documents of title under a pre-existing lease contract but does

 

24  not include a transfer in bulk or as security for or in total or

 

25  partial satisfaction of a money debt.

 

26        (p) "Lessor" means a person who transfers the right to

 

27  possession and use of goods under a lease. Unless the context

 


 1  clearly indicates otherwise, the term includes a sublessor.

 

 2        (q) "Lessor's residual interest" means the lessor's interest

 

 3  in the goods after expiration, termination, or cancellation of

 

 4  the lease contract.

 

 5        (r) "Lien" means a charge against or interest in goods to

 

 6  secure payment of a debt or performance of an obligation, but the

 

 7  term does not include a security interest.

 

 8        (s) "Lot" means a parcel or a single article that is the

 

 9  subject matter of a separate lease or delivery, whether or not it

 

10  is sufficient to perform the lease contract.

 

11        (t) "Merchant lessee" means a lessee that is a merchant with

 

12  respect to goods of the kind subject to the lease.

 

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

 

14  1 or more sums payable in the future, discounted to the date

 

15  certain. The discount is determined by the interest rate

 

16  specified by the parties if the rate was not manifestly

 

17  unreasonable at the time the transaction was entered into;

 

18  otherwise, the discount is determined by a commercially

 

19  reasonable rate that takes into account the facts and

 

20  circumstances of each case at the time the transaction was

 

21  entered into.

 

22        (v) "Purchase" includes taking by sale, lease, mortgage,

 

23  security interest, pledge, gift, or any other voluntary

 

24  transaction creating an interest in goods.

 

25        (w) "Sublease" means a lease of goods the right to

 

26  possession and use of which was acquired by the lessor as a

 

27  lessee under an existing lease.

 


 1        (x) "Supplier" means a person from whom a lessor buys or

 

 2  leases goods to be leased under a finance lease.

 

 3        (y) "Supply contract" means a contract under which a lessor

 

 4  buys or leases goods to be leased.

 

 5        (z) "Termination" occurs when either party pursuant to a

 

 6  power created by agreement or law puts an end to the lease

 

 7  contract otherwise than for default.

 

 8        (2) Other definitions applying to this article and the

 

 9  sections in which they appear are:

 

 

10      "Accessions".                 Section 2A310(1) 2A310.

11      "Construction mortgage".      Section 2A309(1)(d) 2A309.

12      "Encumbrance".                Section 2A309(1)(e) 2A309.

13      "Fixtures".                   Section 2A309(1)(a) 2A309.

14      "Fixture filing".             Section 2A309(1)(b) 2A309.

15      "Purchase money lease".       Section 2A309(1)(c) 2A309.

 

 

16        (3) The following definitions in other articles apply to

 

17  this article:

 

 

18      "Account".                    Section 9102(1)(b) 9102.

19      "Between merchants".          Section 2104(3) 2104.

20      "Buyer".                      Section 2103(1)(a) 2103.

21      "Chattel paper".              Section 9102(1)(k) 9102.

22      "Consumer goods".             Section 9102(1)(w) 9102.

23      "Document".                   Section 9102(1)(dd) 9102.

24      "Entrusting".                 Section 2403(3) 2403.

25     "General intangible".         Section 9102(1)(pp) 9102.

26      "Good faith".                 Section 2103(1)(b) 2103.

27      "Instrument".                 Section 9102(1)(uu) 9102.


     "Merchant".                   Section 2104(1) 2104.

     "Mortgage".                   Section 9102(1)(ccc) 9102.

     "Pursuant to commitment".     Section 9102(1)(sss) 9102.

     "Receipt".                    Section 2103(1)(c) 2103.

     "Sale".                       Section 2106(1) 2106.

     "Sale on approval".           Section 2326.

     "Sale or return".             Section 2326.

     "Seller".                     Section 2103(1)(d) 2103.

 

 

 9        (4) In addition article 1 contains general definitions and

 

10  principles of construction and interpretation applicable

 

11  throughout this article.

 

12        Sec. 2A501. (1) Whether the lessor or the lessee is in

 

13  default under a lease contract is determined by the lease

 

14  agreement and this article.

 

15        (2) If the lessor or the lessee is in default under the

 

16  lease contract, the party seeking enforcement has rights and

 

17  remedies as provided in this article and, except as limited by

 

18  this article, as provided in the lease agreement.

 

19        (3) If the lessor or the lessee is in default under the

 

20  lease contract, the party seeking enforcement may reduce the

 

21  party's claim to judgment, or otherwise enforce the lease

 

22  contract by self-help or any available judicial procedure or

 

23  nonjudicial procedure, including administrative proceeding,

 

24  arbitration, or the like, in accordance with this article.

 

25        (4) Except as otherwise provided in section 1106(1) or

 

26  1305(1) or this article or the lease agreement, the rights and

 

27  remedies referred to in subsections (2) and (3) are cumulative.

 


 1        (5) If the lease agreement covers both real property and

 

 2  goods, the party seeking enforcement may proceed under this part

 

 3  as to the goods, or under other applicable law as to both the

 

 4  real property and the goods in accordance with that party's

 

 5  rights and remedies in respect of the real property, in which

 

 6  case this part does not apply.

 

 7        Sec. 2A518. (1) After default by a lessor under the lease

 

 8  contract of the type described in section 2A508(1) or, if agreed,

 

 9  after other default by the lessor, the lessee may cover by making

 

10  any purchase or lease of or contract to purchase or lease goods

 

11  in substitution for those due from the lessor.

 

12        (2) Except as otherwise provided with respect to damages

 

13  liquidated in the lease agreement under ( section 2A504 ) or

 

14  otherwise determined pursuant to agreement of the parties under (

 

15  sections 1102(3) 1302 and 2A503, ), if a lessee's cover is by a

 

16  lease agreement substantially similar to the original lease

 

17  agreement and the new lease agreement is made in good faith and

 

18  in a commercially reasonable manner, the lessee may recover from

 

19  the lessor as damages (i) the present value, as of the date of the

 

20  commencement of the term of the new lease agreement, of the rent

 

21  under the new lease agreement applicable to that period of the

 

22  new lease term which is comparable to the then remaining term of

 

23  the original lease agreement minus the present value as of the

 

24  same date of the total rent for the then remaining lease term of

 

25  the original lease agreement and (ii) any incidental or

 

26  consequential damages less expenses saved in consequence of the

 

27  lessor's default.

 


 1        (3) If a lessee's cover is by lease agreement that for any

 

 2  reason does not qualify for treatment under subsection (2), or is

 

 3  by purchase or otherwise, the lessee may recover from the lessor

 

 4  as if the lessee had elected not to cover and section 2A519

 

 5  governs.

 

 6        Sec. 2A519. (1) Except as otherwise provided with respect to

 

 7  damages liquidated in the lease agreement under ( section 2A504 )

 

 8  or otherwise determined pursuant to agreement of the parties

 

 9  under ( sections 1102(3) 1302 and 2A503, ), if a lessee elects

 

10  not to cover or a lessee elects to cover and the cover is by

 

11  lease agreement that for any reason does not qualify for

 

12  treatment under section 2A518(2), or is by purchase or otherwise,

 

13  the measure of damages for nondelivery or repudiation by the

 

14  lessor or for rejection or revocation of acceptance by the lessee

 

15  is the present value, as of the date of the default, of the then

 

16  market rent minus the present value as of the same date of the

 

17  original rent, computed for the remaining lease term of the

 

18  original lease agreement together with incidental and

 

19  consequential damages, less expenses saved in consequence of the

 

20  lessor's default.

 

21        (2) Market rent is to be determined as of the place for

 

22  tender or, in cases of rejection after arrival or revocation of

 

23  acceptance, as of the place of arrival.

 

24        (3) Except as otherwise agreed, if the lessee has accepted

 

25  goods and given notification under ( section 2A516(3), ), the

 

26  measure of damages for nonconforming tender or delivery or other

 

27  default by a lessor is the loss resulting in the ordinary course

 


 1  of events from the lessor's default as determined in any manner

 

 2  that is reasonable together with incidental and consequential

 

 3  damages, less expenses saved in consequence of the lessor's

 

 4  default.

 

 5        (4) Except as otherwise agreed, the measure of damages for

 

 6  breach of warranty is the present value at the time and place of

 

 7  acceptance of the difference between the value of the use of the

 

 8  goods accepted and the value if they had been as warranted for

 

 9  the lease term, unless special circumstances show proximate

 

10  damages of a different amount, together with incidental and

 

11  consequential damages, less expenses saved in consequence of the

 

12  lessor's default or breach of warranty.

 

13        Sec. 2A527. (1) After a default by a lessee under the lease

 

14  contract of the type described in section 2A523(1) or 2A523(3)(a)

 

15  2A523(3), or after the lessor refuses to deliver or takes

 

16  possession of goods under ( section 2A525 or 2A526, ), or, if

 

17  agreed, after other default by a lessee, the lessor may dispose

 

18  of the goods concerned or the undelivered balance thereof by

 

19  lease, sale, or otherwise.

 

20        (2) Except as otherwise provided with respect to damages

 

21  liquidated in the lease agreement under ( section 2A504 ) or

 

22  otherwise determined pursuant to agreement of the parties under (

 

23  sections 1102(3) 1302 and 2A503, ), if the disposition is by

 

24  lease agreement substantially similar to the original lease

 

25  agreement and the new lease agreement is made in good faith and

 

26  in a commercially reasonable manner, the lessor may recover from

 

27  the lessee as damages (i) accrued and unpaid rent as of the date

 


 1  of the commencement of the term of the new lease agreement, (ii)

 

 2  the present value, as of the same date, of the total rent for the

 

 3  then remaining lease term of the original lease agreement minus

 

 4  the present value, as of the same date, of the rent under the new

 

 5  lease agreement applicable to that period of the new lease term

 

 6  which is comparable to the then remaining term of the original

 

 7  lease agreement, and (iii) any incidental damages allowed under

 

 8  section 2A530, less expenses saved in consequence of the lessee's

 

 9  default.

 

10        (3) If the lessor's disposition is by lease agreement that

 

11  for any reason does not qualify for treatment under subsection

 

12  (2), or is by sale or otherwise, the lessor may recover from the

 

13  lessee as if the lessor had elected not to dispose of the goods

 

14  and section 2A528 governs.

 

15        (4) A subsequent buyer or lessee who buys or leases from the

 

16  lessor in good faith for value as a result of a disposition under

 

17  this section takes the goods free of the original lease contract

 

18  and any rights of the original lessee even though the lessor

 

19  fails to comply with 1 or more of the requirements of this

 

20  article.

 

21        (5) The lessor is not accountable to the lessee for any

 

22  profit made on any disposition. A lessee who has rightfully

 

23  rejected or justifiably revoked acceptance shall account to the

 

24  lessor for any excess over the amount of the lessee's security

 

25  interest (section 2A508(5)).

 

26        Sec. 2A528. (1) Except as otherwise provided with respect to

 

27  damages liquidated in the lease agreement under ( section 2A504 )

 


 1  or otherwise determined pursuant to agreement of the parties

 

 2  under ( sections 1102(3) 1302 and 2A503, ), if a lessor elects to

 

 3  retain the goods or a lessor elects to dispose of the goods and

 

 4  disposition is by lease agreement that for any reason does not

 

 5  qualify for treatment under section 2A527(2), or is by sale or

 

 6  otherwise, the lessor may recover from the lessee as damages for

 

 7  a default of the type described in section 2A523(1) or

 

 8  2A523(3)(a), or, if agreed, for other default of the lessee, (i)

 

 9  accrued and unpaid rent as of the date of default if the lessee

 

10  has never taken possession of the goods, or, if the lessee has

 

11  taken possession of the goods, as of the date the lessor

 

12  repossesses the goods or an earlier date on which the lessee

 

13  makes a tender of the goods to the lessor, (ii) the present value

 

14  as of the date determined under this subsection of the total rent

 

15  for the then remaining lease term of the original lease agreement

 

16  minus the present value as of the same date of the market rent at

 

17  the place where the goods are located computed for the same lease

 

18  term, and any incidental damages allowed under section 2A530,

 

19  less expenses saved in consequence of the lessee's default.

 

20        (2) If the measure of damages provided in subsection (1) is

 

21  inadequate to put a lessor in as good a position as performance

 

22  would have, the measure of damages is the present value of the

 

23  profit, including reasonable overhead, the lessor would have made

 

24  from full performance by the lessee, together with any incidental

 

25  damages allowed under section 2A530, due allowance for costs

 

26  reasonably incurred and due credit for payments or proceeds of

 

27  disposition.

 


 1        Sec. 3103. (1) As used in this article:

 

 2        (a) "Acceptor" means a drawee who has accepted a draft.

 

 3        (b) "Drawee" means a person ordered in a draft to make

 

 4  payment.

 

 5        (c) "Drawer" means a person who signs or is identified in a

 

 6  draft as a person ordering payment.

 

 7        (d) "Good faith" means honesty in fact and the observance of

 

 8  reasonable commercial standards of fair dealing.

 

 9        (d) (e) "Maker" means a person who signs or is identified in

 

10  a note as a person undertaking to pay.

 

11        (e) (f) "Order" means a written instruction to pay money

 

12  signed by the person giving the instruction. The instruction may

 

13  be addressed to any person, including the person giving the

 

14  instruction, or to 1 or more persons jointly or in the alterative

 

15  but not in succession. An authorization to pay is not an order

 

16  unless the person authorized to pay is also instructed to pay.

 

17        (f) (g) "Ordinary care" in the case of a person engaged in

 

18  business means observance of reasonable commercial standards,

 

19  prevailing in the area in which the person is located, with

 

20  respect to the business in which the person is engaged. In the

 

21  case of a bank that takes an instrument for processing for

 

22  collection or payment by automated means, reasonable commercial

 

23  standards do not require the bank to examine the instrument if

 

24  the failure to examine does not violate the bank's prescribed

 

25  procedures and the bank's procedures do not vary unreasonably

 

26  from general banking usage not disapproved by this article or

 

27  article 4.

 


 1        (g) (h) "Party" means a party to an instrument.

 

 2        (h) (i) "Promise" means a written undertaking to pay money

 

 3  signed by the person undertaking to pay. An acknowledgment of an

 

 4  obligation by the obligor is not a promise unless the obligor

 

 5  also undertakes to pay the obligation.

 

 6        (i) (j) "Prove" with respect to a fact means to meet the

 

 7  burden of establishing the fact (section 1201(8)) under section

 

 8  1201(2)(h).

 

 9        (j) (k) "Remitter" means a person who purchases an

 

10  instrument from its issuer if the instrument is payable to an

 

11  identified person other than the purchaser.

 

12        (2) Other definitions applying to this article and the

 

13  sections in which they appear are as follows:

 

 

14 "Acceptance"                                       section 3409.

15 "Accommodated party"                               section 3419.

16 "Accommodation party"                              section 3419.

17 "Alteration"                                       section 3407.

18 "Anomalous endorsement"                            section 3205.

19 "Blank endorsement"                                section 3205.

20 "Cashier's check"                                  section 3104.

21 "Certificate of deposit"                           section 3104.

22 "Certified check"                                  section 3409.

23 "Check"                                            section 3104.

24 "Consideration"                                    section 3303.

25 "Draft"                                            section 3104.

26 "Endorsement"                                      section 3204.

27 "Endorser"                                         section 3204.

28 "Holder in due course"                             section 3304.


"Incomplete instrument"                            section 3115.

"Instrument"                                       section 3104.

"Issue"                                            section 3105.

"Issuer"                                           section 3105.

"Negotiable instrument"                            section 3104.

"Negotiation"                                      section 3201.

"Note"                                             section 3104.

"Payable at a definite time"                       section 3108.

"Payable on demand"                                section 3108.

10 "Payable to bearer"                                section 3109.

11 "Payable to order"                                 section 3109.

12 "Payment"                                          section 3602.

13 "Person entitled to enforce"                       section 3301.

14 "Presentment"                                      section 3501.

15 "Reacquisition"                                    section 3207.

16 "Special endorsement"                              section 3205.

17 "Teller's check"                                   section 3104.

18 "Transfer of instrument"                           section 3203.

19 "Traveler's check"                                 section 3104.

20 "Value"                                            section 3303.

 

 

21        (3) The following definitions in other articles apply to

 

22  this article:

 

 

23 "Bank"                                             section 4105.

24 "Banking day"                                      section 4104.

25 "Clearing house"                                   section 4104.

26 "Collecting bank"                                  section 4105.

27 "Depositary bank"                                  section 4105.

28 "Documentary draft"                                section 4104.

29 "Intermediary bank"                                section 4105.


"Item"                                             section 4104.

"Payor bank"                                       section 4105.

"Suspends payments"                                section 4104.

 

 

 4        (4) In addition, article 1 contains general definitions and

 

 5  principles of construction and interpretation applicable

 

 6  throughout this article.

 

 7        Sec. 4104. (1) As used in this article unless the context

 

 8  otherwise requires:

 

 9        (a) "Account" means any depositor credit account with a

 

10  bank, including a demand, time, savings, passbook, share draft,

 

11  or like account, other than an account evidenced by a certificate

 

12  of deposit.

 

13        (b) "Afternoon" means the period of a day between noon and

 

14  midnight.

 

15        (c) "Banking day" means the part of a day on which a bank is

 

16  open to the public for carrying on substantially all of its

 

17  banking functions.

 

18        (d) "Clearing-house" means an association of banks or other

 

19  payors regularly clearing items.

 

20        (e) "Customer" means any person having an account with a

 

21  bank or for whom a bank has agreed to collect items, including a

 

22  bank that maintains an account at another bank.

 

23        (f) "Documentary draft" means a draft to be presented for

 

24  acceptance or payment if specified documents, certificated

 

25  securities , as defined in ( section 8102 ) or instructions for

 

26  uncertificated securities as defined in ( section 8102, ), or

 

27  other certificates, statements, or the like are to be received by


 

 1  the drawee or other payor before acceptance or payment of the

 

 2  draft.

 

 3        (g) "Draft" means a draft as defined in section 3104 or an

 

 4  item, other than an instrument, that is an order.

 

 5        (h) "Drawee" means a person ordered in a draft to make

 

 6  payment.

 

 7        (i) "Item" means an instrument or a promise or order to pay

 

 8  money handled by a bank for collection or pay. The term does not

 

 9  include a payment order governed by article 2a or a credit or

 

10  debit card slip.

 

11        (j) "Midnight deadline" with respect to a bank is midnight

 

12  on its next banking day following the banking day on which it

 

13  receives the relevant item or notice or from which the time for

 

14  taking action commences to run, whichever is later.

 

15        (k) "Settle" means to pay in cash, by clearing-house

 

16  settlement, in a charge or credit or by remittance, or otherwise

 

17  as agreed. A settlement may be either provisional or final.

 

18        (l) "Suspends payments" with respect to a bank means that it

 

19  has been closed by order of the supervisory authorities, that a

 

20  public officer has been appointed to take it over or that it

 

21  ceases or refuses to make payments in the ordinary course of

 

22  business.

 

23        (2) Other definitions applying to this article and the

 

24  sections in which they appear are:

 

 

25      "Agreement for electronic presentment".     Section  4110.

26      "Bank".                                     Section  4105.


     "Collecting bank".                          Section  4105.

     "Depositary bank".                          Section  4105.

     "Intermediary bank".                        Section  4105.

     "Payor bank".                               Section  4105.

     "Presenting bank".                          Section  4105.

     "Presentment notice".                       Section  4110.

 

 

 7        (3) The following definitions in other articles apply to

 

 8  this article:

 

 

     "Acceptance".                               Section  3409.

10      "Alteration".                               Section  3409.

11      "Certificate of deposit".                   Section  3104.

12      "Cashier's check".                          Section  3104.

13      "Certified check".                          Section  3409.

14      "Check".                                    Section  3104.

15      "Draft".                                    Section  3104.

16      "Good faith".                               Section  3103.

17      "Holder in due course".                     Section  3302.

18      "Instrument".                               Section  3104.

19      "Notice of dishonor".                       Section  3503.

20      "Order".                                    Section  3103.

21      "Ordinary care".                            Section  3103.

22      "Person entitled to enforce".               Section  3301.

23      "Presentment".                              Section  3501.

24      "Promise".                                  Section  3103.

25      "Prove".                                    Section  3103.

26      "Teller's check".                           Section  3104.

27      "Unauthorized signature".                   Section  3403.

 

 

28        (4) In addition article 1 contains general definitions and

 


 1  principles of construction and interpretation applicable

 

 2  throughout this article.

 

 3        Sec. 4A105. (1) As used in this article:

 

 4        (a) "Authorized account" means a deposit account of a

 

 5  customer in a bank designated by the customer as a source of

 

 6  payment of payment orders issued by the customer to the bank. If

 

 7  a customer does not so designate an account, any account of the

 

 8  customer is an authorized account if payment of a payment order

 

 9  from that account is not inconsistent with a restriction on the

 

10  use of that account.

 

11        (b) "Bank" means a person engaged in the business of banking

 

12  and includes a savings bank, savings and loan association, credit

 

13  union, and trust company. A branch or separate office of a bank

 

14  is a separate bank for purposes of this article.

 

15        (c) "Customer" means a person, including a bank, having an

 

16  account with a bank or from whom a bank has agreed to receive

 

17  payment orders.

 

18        (d) "Funds-transfer business day" of a receiving bank means

 

19  the part of a day during which the receiving bank is open for the

 

20  receipt, processing, and transmittal of payment orders and

 

21  cancellations and amendments of payment orders.

 

22        (e) "Funds-transfer system" means a wire transfer network,

 

23  automated clearinghouse, or other communication system of a

 

24  clearinghouse or other association of banks through which a

 

25  payment order by a bank may be transmitted to the bank to which

 

26  the order is addressed.

 

27        (f) "Good faith" means honesty in fact and the observance of

 


 1  reasonable commercial standards of fair dealing.

 

 2        (f) (g) "Prove" with respect to a fact means to meet the

 

 3  burden of establishing the fact as defined in ( section 1201(8))

 

 4  1201(2)(h).

 

 5        (2) Other definitions applying to this article and the

 

 6  sections in which they appear are as follows:

 

 

     "Acceptance".                                    Section 4A209.

     "Beneficiary".                                   Section 4A103.

     "Beneficiary's bank".                            Section 4A103.

10      "Executed".                                      Section 4A301.

11      "Execution date".                                Section 4A301.

12      "Funds transfer".                                Section 4A104.

13      "Funds-transfer system rule".                    Section 4A501.

14      "Intermediary bank".                             Section 4A104.

15      "Originator".                                    Section 4A104.

16      "Originator's bank".                             Section 4A104.

17      "Payment by beneficiary's bank to beneficiary".  Section 4A405.

18      "Payment by originator to beneficiary".          Section 4A406.

19      "Payment by sender to receiving bank".           Section 4A403.

20      "Payment date".                                  Section 4A401.

21      "Payment order".                                 Section 4A103.

22      "Receiving bank".                                Section 4A103.

23      "Security procedure".                            Section 4A201.

24      "Sender".                                        Section 4A103.

 

 

25        (3) The following definitions in article 4 apply to this

 

26  article:

 

 

27      "Clearinghouse".                                 Section 4104.


     "Item".                                          Section 4104.

     "Suspends payments".                             Section 4104.

 

 

 3        (4) In addition, article 1 contains general definitions and

 

 4  principles of construction and interpretation applicable

 

 5  throughout this article.

 

 6        Sec. 4A106. (1) The time of receipt of a payment order or

 

 7  communication canceling or amending a payment order is determined

 

 8  by the rules applicable to receipt of a notice stated in section

 

 9  1201(27) 1202. A receiving bank may fix a cutoff cut off time or

 

10  times on a funds-transfer funds transfer business day for the

 

11  receipt and processing of payment orders and communications

 

12  canceling or amending payment orders. Different cutoff cut off

 

13  times may apply to payment orders, cancellations, or amendments,

 

14  or to different categories of payment orders, cancellations, or

 

15  amendments. A cutoff cut off time may apply to senders generally

 

16  or different cutoff cut off times may apply to different senders

 

17  or categories of payment orders. If a payment order or

 

18  communication canceling or amending a payment order is received

 

19  after the close of a funds-transfer funds transfer business day

 

20  or after the appropriate cutoff cut off time on a funds-transfer

 

21  funds transfer business day, the receiving bank may treat the

 

22  payment order or communication as received at the opening of the

 

23  next funds-transfer funds transfer business day.

 

24        (2) If this article refers to an execution date or payment

 

25  date or states a day on which a receiving bank is required to

 

26  take action, and the date or day does not fall on a funds-

 


 1  transfer funds transfer business day, the next day that is a

 

 2  funds-transfer funds transfer business day is treated as the date

 

 3  or day stated, unless the contrary is stated in this article.

 

 4        Sec. 4A204. (1) If a receiving bank accepts a payment order

 

 5  issued in the name of its customer as sender which is (i) not

 

 6  authorized and not effective as the order of the customer under

 

 7  section 4A202, or (ii) not enforceable, in whole or in part,

 

 8  against the customer under section 4A203, the bank shall refund

 

 9  any payment of the payment order received from the customer to

 

10  the extent the bank is not entitled to enforce payment and shall

 

11  pay interest on the refundable amount calculated from the date

 

12  the bank received payment to the date of the refund. However, the

 

13  customer is not entitled to interest from the bank on the amount

 

14  to be refunded if the customer fails to exercise ordinary care to

 

15  determine that the order was not authorized by the customer and

 

16  to notify the bank of the relevant facts within a reasonable time

 

17  not exceeding 90 days after the date the customer received

 

18  notification from the bank that the order was accepted or that

 

19  the customer's account was debited with respect to the order. The

 

20  bank is not entitled to any recovery from the customer on account

 

21  of a failure by the customer to give notification as stated in

 

22  this section.

 

23        (2) Reasonable time under subsection (1) may be fixed by

 

24  agreement as stated in section 1204(1) 1302(2), but the

 

25  obligation of a receiving bank to refund payment as stated in

 

26  subsection (1) may not otherwise be varied by agreement.

 

27        Sec. 5103. (1) This article applies to letters of credit and

 


 1  to certain rights and obligations arising out of transactions

 

 2  involving letters of credit.

 

 3        (2) The statement of a rule in this article does not by

 

 4  itself require, imply, or negate application of the same or a

 

 5  different rule to a situation not provided for, or to a person

 

 6  not specified, in this article.

 

 7        (3) With the exception of this subsection, subsections (1)

 

 8  and (4), sections 5102(1)(i) and (j), 5106(4), and 5114(4), and

 

 9  except to the extent prohibited in sections 1102(3) 1302 and

 

10  5117(4), the effect of this article may be varied by agreement or

 

11  by a provision stated or incorporated by reference in an

 

12  undertaking. A term in an agreement or undertaking generally

 

13  excusing liability or generally limiting remedies for failure to

 

14  perform obligations is not sufficient to vary obligations

 

15  prescribed by this article.

 

16        (4) Rights and obligations of an issuer to a beneficiary or

 

17  a nominated person under a letter of credit are independent of

 

18  the existence, performance, or nonperformance of a contract or

 

19  arrangement out of which the letter of credit arises or which

 

20  underlies it, including contracts or arrangements between the

 

21  issuer and the applicant and between the applicant and the

 

22  beneficiary.

 

23        Sec. 8102. (1) As used in this article:

 

24        (a) "Adverse claim" means a claim that a claimant has a

 

25  property interest in a financial asset and that it is a violation

 

26  of the rights of the claimant for another person to hold,

 

27  transfer, or deal with the financial asset.

 


 1        (b) "Bearer form", as applied to a certificated security,

 

 2  means a form in which the security is payable to the bearer of

 

 3  the security certificate according to its terms but not by reason

 

 4  of an indorsement.

 

 5        (c) "Broker" means a person defined as a broker or dealer

 

 6  under the federal securities laws, but without excluding a bank

 

 7  acting in that capacity.

 

 8        (d) "Certificated security" means a security that is

 

 9  represented by a certificate.

 

10        (e) "Clearing corporation" means 1 or more of the following:

 

11        (i) A person that is registered as a clearing agency under

 

12  the federal securities laws.

 

13        (ii) A federal reserve bank.

 

14        (iii) Any other person that provides clearance or settlement

 

15  services with respect to financial assets that would require it

 

16  to register as a clearing agency under the federal securities

 

17  laws but for an exclusion or exemption from the registration

 

18  requirement, if its activities as a clearing corporation,

 

19  including promulgation of rules, are subject to regulation by a

 

20  federal or state governmental authority.

 

21        (f) "Communicate" means either of the following:

 

22        (i) Send a signed writing.

 

23        (ii) Transmit information by any mechanism agreed upon by the

 

24  persons transmitting and receiving the information.

 

25        (g) "Entitlement holder" means a person identified in the

 

26  records of a securities intermediary as the person having a

 

27  security entitlement against the securities intermediary. If a

 


 1  person acquires a security entitlement under section 8501(2)(b)

 

 2  or (c), that person is the entitlement holder.

 

 3        (h) "Entitlement order" means a notification communicated to

 

 4  a securities intermediary directing transfer or redemption of a

 

 5  financial asset to which the entitlement holder has a security

 

 6  entitlement.

 

 7        (i) "Financial asset", except as otherwise provided in

 

 8  section 8103, means 1 or more of the following:

 

 9        (i) A security.

 

10        (ii) An obligation of a person or a share, participation, or

 

11  other interest in a person or in property or an enterprise of a

 

12  person, which is, or is of a type, dealt in or traded on

 

13  financial markets, or which is recognized in any area in which it

 

14  is issued or dealt in as a medium for investment.

 

15        (iii) Any property that is held by a securities intermediary

 

16  for another person in a securities account if the securities

 

17  intermediary has expressly agreed with the other person that the

 

18  property is to be treated as a financial asset under this

 

19  article. As context requires, the term means either the interest

 

20  itself or the means by which a person's claim to it is evidenced,

 

21  including a certificated or uncertificated security, a security

 

22  certificate, or a security entitlement.

 

23        (j) "Good faith", for purposes of the obligation of good

 

24  faith in the performance or enforcement of contracts or duties

 

25  within this article, means honesty in fact and the observance of

 

26  reasonable commercial standards of fair dealing.

 

27        (j) (k) "Indorsement" means a signature that alone or

 


 1  accompanied by other words is made on a security certificate in

 

 2  registered form or on a separate document for the purpose of

 

 3  assigning, transferring, or redeeming the security or granting a

 

 4  power to assign, transfer, or redeem the security.

 

 5        (k) (l) "Instruction" means a notification communicated to

 

 6  the issuer of an uncertificated security which directs that the

 

 7  transfer of the security be registered or that the security be

 

 8  redeemed.

 

 9        (l) (m) "Registered form", as applied to a certificated

 

10  security, means a form containing both of the following:

 

11        (i) The security certificate specifies a person entitled to

 

12  the security.

 

13        (ii) A transfer of the security may be registered upon books

 

14  maintained for that purpose by or on behalf of the issuer, or the

 

15  security certificate so states.

 

16        (m) (n) "Securities intermediary" means either of the

 

17  following:

 

18        (i) A clearing corporation.

 

19        (ii) A person, including a bank or broker, that in the

 

20  ordinary course of its business maintains securities accounts for

 

21  others and is acting in that capacity.

 

22        (n) (o) "Security", except as otherwise provided in section

 

23  8103, means an obligation of an issuer or a share, participation,

 

24  or other interest in an issuer or in property or an enterprise of

 

25  an issuer and is all of the following:

 

26        (i) Represented by a security certificate in bearer or

 

27  registered form, or the transfer of which may be registered upon

 


 1  books maintained for that purpose by or on behalf of the issuer.

 

 2        (ii) One of a class or series or by its terms is divisible

 

 3  into a class or series of shares, participations, interests, or

 

 4  obligations.

 

 5        (iii) Either of the following:

 

 6        (A) Is, or is of a type, dealt in or traded on securities

 

 7  exchanges or securities markets.

 

 8        (B) Is a medium for investment and by its terms expressly

 

 9  provides that it is a security governed by this article.

 

10        (o) (p) "Security certificate" means a certificate

 

11  representing a security.

 

12        (p) (q) "Security entitlement" means the rights and property

 

13  interest of an entitlement holder with respect to a financial

 

14  asset specified in part 5.

 

15        (q) (r) "Uncertificated security" means a security that is

 

16  not represented by a certificate.

 

17        (2) Other definitions applying to this article and the

 

18  sections in which they appear are:

 

 

19       Appropriate person                    Section 8107

20       Control                               Section 8106

21       Delivery                              Section 8301

22       Investment company security           Section 8103

23       Issuer                                Section 8201

24       Overissue                             Section 8210

25       Protected purchaser                   Section 8303

26       Securities account                    Section 8501

 

 

27        (3) In addition, article 1 contains general definitions and


 

 1  principles of construction and interpretation applicable

 

 2  throughout this article.

 

 3        (4) The characterization of a person, business, or

 

 4  transaction for purposes of this article does not determine the

 

 5  characterization of the person, business, or transaction for

 

 6  purposes of any other law, regulation, or rule.

 

 7        Sec. 9102. (1) As used in this article:

 

 8        (a) "Accession" means goods that are physically united with

 

 9  other goods in such a manner that the identity of the original

 

10  goods is not lost.

 

11        (b) "Account", except as used in "account for", means a

 

12  right to payment of a monetary obligation, whether or not earned

 

13  by performance, for property that has been or is to be sold,

 

14  leased, licensed, assigned, or otherwise disposed of, for

 

15  services rendered or to be rendered, for a policy of insurance

 

16  issued or to be issued, for a secondary obligation incurred or to

 

17  be incurred, for energy provided or to be provided, for the use

 

18  or hire of a vessel under a charter or other contract, arising

 

19  out of the use of a credit or charge card or information

 

20  contained on or for use with the card, or as winnings in a

 

21  lottery or other game of chance operated or sponsored by a state,

 

22  governmental unit of a state, or person licensed or authorized to

 

23  operate the game by a state or governmental unit of a state. The

 

24  term includes health-care-insurance receivables. The term does

 

25  not include rights to payment evidenced by chattel paper or an

 

26  instrument, commercial tort claims, deposit accounts, investment

 

27  property, letter-of-credit rights or letters of credit, or rights


 

 1  to payment for money or funds advanced or sold, other than rights

 

 2  arising out of the use of a credit or charge card or information

 

 3  contained on or for use with the card.

 

 4        (c) "Account debtor" means a person obligated on an account,

 

 5  chattel paper, or general intangible. The term does not include

 

 6  persons obligated to pay a negotiable instrument, even if the

 

 7  instrument constitutes part of chattel paper.

 

 8        (d) "Accounting", except as used in "accounting for", means

 

 9  a record that meets all of the following requirements:

 

10        (i) Authenticated by a secured party.

 

11        (ii) Indicating the aggregate unpaid secured obligations as

 

12  of a date not more than 35 days earlier or 35 days later than the

 

13  date of the record.

 

14        (iii) Identifying the components of the obligations in

 

15  reasonable detail.

 

16        (e) "Agricultural lien" means an interest, other than a

 

17  security interest, in farm products that meets all of the

 

18  following requirements:

 

19        (i) The interest secures payment or performance of an

 

20  obligation for 1 or more of the following:

 

21        (A) Goods or services furnished in connection with a

 

22  debtor's farming operation.

 

23        (B) Rent on real property leased by a debtor in connection

 

24  with its farming operation.

 

25        (ii) The interest is created by statute in favor of a person

 

26  that did 1 or more of the following:

 

27        (A) In the ordinary course of its business furnished goods


 

 1  or services to a debtor in connection with a debtor's farming

 

 2  operation.

 

 3        (B) Leased real property to a debtor in connection with the

 

 4  debtor's farming operation.

 

 5        (iii) The effectiveness of the interest does not depend on the

 

 6  person's possession of the personal property.

 

 7        (f) "As-extracted collateral" means 1 or more of the

 

 8  following:

 

 9        (i) Oil, gas, or other minerals that are subject to a

 

10  security interest that is created by a debtor having an interest

 

11  in the minerals before extraction and attaches to the minerals as

 

12  extracted.

 

13        (ii) Accounts arising out of the sale at the wellhead or

 

14  minehead of oil, gas, or other minerals in which the debtor had

 

15  an interest before extraction.

 

16        (g) "Authenticate" means 1 of the following:

 

17        (i) To sign.

 

18        (ii) To execute or otherwise adopt a symbol, or encrypt or

 

19  similarly process a record in whole or in part, with the present

 

20  intent of the authenticating person to identify the person and

 

21  adopt or accept a record.

 

22        (h) "Bank" means an organization that is engaged in the

 

23  business of banking. The term includes savings banks, savings and

 

24  loan associations, credit unions, and trust companies.

 

25        (i) "Cash proceeds" means proceeds that are money, checks,

 

26  deposit accounts, or the like.

 

27        (j) "Certificate of title" means a certificate of title with


 

 1  respect to which a statute provides for the security interest in

 

 2  question to be indicated on the certificate as a condition or

 

 3  result of the security interest's obtaining priority over the

 

 4  rights of a lien creditor with respect to the collateral.

 

 5        (k) "Chattel paper" means a record or records that evidence

 

 6  both a monetary obligation and a security interest in specific

 

 7  goods, a security interest in specific goods and software used in

 

 8  the goods, a security interest in specific goods and license of

 

 9  software used in the goods, a lease of specific goods, or a lease

 

10  of specific goods and license of software used in the goods. As

 

11  used in this subdivision, "monetary obligation" means a monetary

 

12  obligation secured by the goods or owed under a lease of the

 

13  goods and includes a monetary obligation with respect to software

 

14  used in the goods. The term does not include charters or other

 

15  contracts involving the use or hire of a vessel, or records that

 

16  evidence a right to payment arising out of the use of a credit or

 

17  charge card or information contained on or for use with the card.

 

18  If a transaction is evidenced by records that include an

 

19  instrument or series of instruments, the group of records taken

 

20  together constitutes chattel paper.

 

21        (l) "Collateral" means the property subject to a security

 

22  interest or agricultural lien. The term includes 1 or more of the

 

23  following:

 

24        (i) Proceeds to which a security interest attaches.

 

25        (ii) Accounts, chattel paper, payment intangibles, and

 

26  promissory notes that have been sold.

 

27        (iii) Goods that are the subject of a consignment.


 

 1        (m) "Commercial tort claim" means a claim arising in tort

 

 2  with respect to which 1 of the following applies:

 

 3        (i) The claimant is an organization.

 

 4        (ii) The claimant is an individual and the claim arose in the

 

 5  course of the claimant's business or profession and does not

 

 6  include damages arising out of personal injury to or the death of

 

 7  an individual.

 

 8        (n) "Commodity account" means an account maintained by a

 

 9  commodity intermediary in which a commodity contract is carried

 

10  for a commodity customer.

 

11        (o) "Commodity contract" means a commodity futures contract,

 

12  an option on a commodity futures contract, a commodity option, or

 

13  another contract if the contract or option is 1 of the following:

 

14        (i) Traded on or subject to the rules of a board of trade

 

15  that has been designated as a contract market for such a contract

 

16  pursuant to federal commodities laws.

 

17        (ii) Traded on a foreign commodity board of trade, exchange,

 

18  or market, and is carried on the books of a commodity

 

19  intermediary for a commodity customer.

 

20        (p) "Commodity customer" means a person for which a

 

21  commodity intermediary carries a commodity contract on its books.

 

22        (q) "Commodity intermediary" means 1 of the following:

 

23        (i) A person that is registered as a futures commission

 

24  merchant under federal commodities law.

 

25        (ii) A person that in the ordinary course of its business

 

26  provides clearance or settlement services for a board of trade

 

27  that has been designated as a contract market pursuant to federal


 

 1  commodities law.

 

 2        (r) "Communicate" means 1 or more of the following:

 

 3        (i) To send a written or other tangible record.

 

 4        (ii) To transmit a record by any means agreed upon by the

 

 5  persons sending and receiving the record.

 

 6        (iii) In the case of transmission of a record to or by a

 

 7  filing office, to transmit a record by any means prescribed by

 

 8  filing-office rule.

 

 9        (s) "Consignee" means a merchant to which goods are

 

10  delivered in a consignment.

 

11        (t) "Consignment" means a transaction, regardless of its

 

12  form, in which a person delivers goods to a merchant for the

 

13  purpose of sale and that meets all of the following:

 

14        (i) The merchant deals in goods of that kind under a name

 

15  other than the name of the person making delivery, is not an

 

16  auctioneer, and is not generally known by its creditors to be

 

17  substantially engaged in selling the goods of others.

 

18        (ii) With respect to each delivery, the aggregate value of

 

19  the goods is $1,000.00 or more at the time of delivery.

 

20        (iii) The goods are not consumer goods immediately before

 

21  delivery.

 

22        (iv) The transaction does not create a security interest that

 

23  secures an obligation.

 

24        (u) "Consignor" means a person that delivers goods to a

 

25  consignee in a consignment.

 

26        (v) "Consumer debtor" means a debtor in a consumer

 

27  transaction.


 

 1        (w) "Consumer goods" means goods that are used or bought for

 

 2  use primarily for personal, family, or household purposes.

 

 3        (x) "Consumer-goods transaction" means a consumer

 

 4  transaction in which an individual incurs an obligation primarily

 

 5  for personal, family, or household purposes and a security

 

 6  interest in consumer goods secures the obligation.

 

 7        (y) "Consumer obligor" means an obligor who is an individual

 

 8  and who incurred the obligation as part of a transaction entered

 

 9  into primarily for personal, family, or household purposes.

 

10        (z) "Consumer transaction" means a transaction in which an

 

11  individual incurs an obligation primarily for personal, family,

 

12  or household purposes, a security interest secures the

 

13  obligation, and the collateral is held or acquired primarily for

 

14  personal, family, or household purposes. The term includes

 

15  consumer-goods transactions.

 

16        (aa) "Continuation statement" means an amendment of a

 

17  financing statement which identifies, by its file number, the

 

18  initial financing statement to which it relates and indicates

 

19  that it is a continuation statement for, or that it is filed to

 

20  continue the effectiveness of, the identified financing

 

21  statement.

 

22        (bb) "Debtor" means 1 of the following:

 

23        (i) A person having an interest, other than a security

 

24  interest or other lien, in the collateral, whether or not the

 

25  person is an obligor.

 

26        (ii) A seller of accounts, chattel paper, payment

 

27  intangibles, or promissory notes.


 

 1        (iii) A consignee.

 

 2        (cc) "Deposit account" means a demand, time, savings,

 

 3  passbook, or similar account maintained with a bank. The term

 

 4  does not include investment property or accounts evidenced by an

 

 5  instrument.

 

 6        (dd) "Document" means a document of title or a receipt of

 

 7  the type described in section 7201(2).

 

 8        (ee) "Electronic chattel paper" means chattel paper

 

 9  evidenced by a record or records consisting of information stored

 

10  in an electronic medium.

 

11        (ff) "Encumbrance" means a right, other than an ownership

 

12  interest, in real property. The term includes mortgages and other

 

13  liens on real property.

 

14        (gg) "Equipment" means goods other than inventory, farm

 

15  products, or consumer goods.

 

16        (hh) "Farm products" means goods, other than standing

 

17  timber, with respect to which the debtor is engaged in a farming

 

18  operation and which are 1 of the following:

 

19        (i) Crops grown, growing, or to be grown, including crops

 

20  produced on trees, vines, and bushes, and aquatic goods produced

 

21  in aquacultural operations.

 

22        (ii) Livestock, born or unborn, including aquatic goods

 

23  produced in aquacultural operations.

 

24        (iii) Supplies used or produced in a farming operation.

 

25        (iv) Products of crops or livestock in their unmanufactured

 

26  states.

 

27        (ii) "Farming operation" means raising, cultivating,


 

 1  propagating, fattening, grazing, or any other farming, livestock,

 

 2  or aquacultural operation.

 

 3        (jj) "File number" means the number assigned to an initial

 

 4  financing statement pursuant to section 9519(1).

 

 5        (kk) "Filing office" means an office designated in section

 

 6  9501 as the place to file a financing statement.

 

 7        (ll) "Filing-office rule" means a rule adopted pursuant to

 

 8  section 9526.

 

 9        (mm) "Financing statement" means a record or records

 

10  composed of an initial financing statement and any filed record

 

11  relating to the initial financing statement.

 

12        (nn) "Fixture filing" means the filing of a financing

 

13  statement covering goods that are or are to become fixtures and

 

14  satisfying section 9502(1) and (2). The term includes the filing

 

15  of a financing statement covering goods of a transmitting utility

 

16  which are or are to become fixtures.

 

17        (oo) "Fixtures" means goods that have become so related to

 

18  particular real property that an interest in them arises under

 

19  real property law.

 

20        (pp) "General intangible" means any personal property,

 

21  including things in action, other than accounts, chattel paper,

 

22  commercial tort claims, deposit accounts, documents, goods,

 

23  instruments, investment property, letter-of-credit rights,

 

24  letters of credit, money, and oil, gas, or other minerals before

 

25  extraction. The term includes payment intangibles and software.

 

26        (qq) "Good faith" means honesty in fact and the observance

 

27  of reasonable commercial standards of fair dealing.


 

 1        (qq) (rr) "Goods" means all things that are movable when a

 

 2  security interest attaches. The term includes fixtures, standing

 

 3  timber that is to be cut and removed under a conveyance or

 

 4  contract for sale, the unborn young of animals, crops grown,

 

 5  growing, or to be grown, even if the crops are produced on trees,

 

 6  vines, or bushes, and manufactured homes. The term also includes

 

 7  a computer program embedded in goods and any supporting

 

 8  information provided in connection with a transaction relating to

 

 9  the program if the program is associated with the goods in such a

 

10  manner that it customarily is considered part of the goods, or by

 

11  becoming the owner of the goods, a person acquires a right to use

 

12  the program in connection with the goods. The term does not

 

13  include a computer program embedded in goods that consist solely

 

14  of the medium in which the program is embedded. The term also

 

15  does not include accounts, chattel paper, commercial tort claims,

 

16  deposit accounts, documents, general intangibles, instruments,

 

17  investment property, letter-of-credit rights, letters of credit,

 

18  money, or oil, gas, or other minerals before extraction.

 

19        (rr) (ss) "Governmental unit" means a subdivision, agency,

 

20  department, county, parish, municipality, or other unit of the

 

21  government of the United States, a state, or a foreign country.

 

22  The term includes an organization having a separate corporate

 

23  existence if the organization is eligible to issue debt on which

 

24  interest is exempt from income taxation under the laws of the

 

25  United States.

 

26        (ss) (tt) "Health-care-insurance receivable" means an

 

27  interest in or claim under a policy of insurance which is a right


 

 1  to payment of a monetary obligation for health-care goods or

 

 2  services provided.

 

 3        (tt) (uu) "Instrument" means a negotiable instrument or any

 

 4  other writing that evidences a right to the payment of a monetary

 

 5  obligation, is not itself a security agreement or lease, and is

 

 6  of a type that in ordinary course of business is transferred by

 

 7  delivery with any necessary indorsement or assignment. The term

 

 8  does not include investment property, letters of credit, or

 

 9  writings that evidence a right to payment arising out of the use

 

10  of a credit or charge card or information contained on or for use

 

11  with the card.

 

12        (uu) (vv) "Inventory" means goods, other than farm products,

 

13  that meet 1 of the following:

 

14        (i) Are leased by a person as lessor.

 

15        (ii) Are held by a person for sale or lease or to be

 

16  furnished under a contract of service.

 

17        (iii) Are furnished by a person under a contract of service.

 

18        (iv) Consist of raw materials, work in process, or materials

 

19  used or consumed in a business.

 

20        (vv) (ww) "Investment property" means a security, whether

 

21  certificated or uncertificated, security entitlement, securities

 

22  account, commodity contract, or commodity account.

 

23        (ww) (xx) "Jurisdiction of organization", with respect to a

 

24  registered organization, means the jurisdiction under whose law

 

25  the organization is organized.

 

26        (xx) (yy) "Letter-of-credit right" means a right to payment

 

27  or performance under a letter of credit, whether or not the


 

 1  beneficiary has demanded or is at the time entitled to demand

 

 2  payment or performance. The term does not include the right of a

 

 3  beneficiary to demand payment or performance under a letter of

 

 4  credit.

 

 5        (yy) (zz) "Lien creditor" means 1 or more of the following:

 

 6        (i) A creditor that has acquired a lien on the property

 

 7  involved by attachment, levy, or the like.

 

 8        (ii) An assignee for benefit of creditors from the time of

 

 9  assignment.

 

10        (iii) A trustee in bankruptcy from the date of the filing of

 

11  the petition.

 

12        (iv) A receiver in equity from the time of appointment.

 

13        (zz) (aaa) "Manufactured home" means a structure,

 

14  transportable in 1 or more sections, which, in the traveling

 

15  mode, is 8 body feet or more in width or 40 body feet or more in

 

16  length, or when erected on site, is 320 or more square feet, and

 

17  which is built on a permanent chassis and designed to be used as

 

18  a dwelling with or without a permanent foundation when connected

 

19  to the required utilities, and includes the plumbing, heating,

 

20  air-conditioning, and electrical systems contained therein. The

 

21  term includes any structure that meets all of the requirements of

 

22  this paragraph except the size requirements and with respect to

 

23  which the manufacturer voluntarily files a certification required

 

24  by the secretary of the department of housing and urban

 

25  development and complies with the standards established under

 

26  title 42 of the United States Code.

 

27        (aaa) (bbb) "Manufactured-home transaction" means a secured


 

 1  transaction that creates a purchase-money security interest in a

 

 2  manufactured home, other than a manufactured home held as

 

 3  inventory, or in which a manufactured home, other than a

 

 4  manufactured home held as inventory, is the primary collateral.

 

 5        (bbb) (ccc) "Mortgage" means a consensual interest in real

 

 6  property, including fixtures, which secures payment or

 

 7  performance of an obligation.

 

 8        (ccc) (ddd) "New debtor" means a person that becomes bound

 

 9  as debtor under section 9203(4) by a security agreement

 

10  previously entered into by another person.

 

11        (ddd) (eee) "New value" means money, money's worth in

 

12  property, services, or new credit, or release by a transferee of

 

13  an interest in property previously transferred to the transferee.

 

14  The term does not include an obligation substituted for another

 

15  obligation.

 

16        (eee) (fff) "Noncash proceeds" means proceeds other than

 

17  cash proceeds.

 

18        (fff) (ggg) "Obligor" means a person that, with respect to

 

19  an obligation secured by a security interest in or an

 

20  agricultural lien on the collateral, owes payment or other

 

21  performance of the obligation, has provided property other than

 

22  the collateral to secure payment or other performance of the

 

23  obligation, or is otherwise accountable in whole or in part for

 

24  payment or other performance of the obligation. The term does not

 

25  include issuers or nominated persons under a letter of credit.

 

26        (ggg) (hhh) "Original debtor" means, except as used in

 

27  section 9310(3), a person that, as debtor, entered into a


 

 1  security agreement to which a new debtor has become bound under

 

 2  section 9203(4).

 

 3        (hhh) (iii) "Payment intangible" means a general intangible

 

 4  under which the account debtor's principal obligation is a

 

 5  monetary obligation.

 

 6        (iii) (jjj) "Person related to", with respect to an

 

 7  individual, means 1 or more of the following:

 

 8        (i) The spouse of the individual.

 

 9        (ii) A brother, brother-in-law, sister, or sister-in-law of

 

10  the individual.

 

11        (iii) An ancestor or lineal descendant of the individual or

 

12  the individual's spouse.

 

13        (iv) Any other relative, by blood or marriage, of the

 

14  individual or the individual's spouse who shares the same home

 

15  with the individual.

 

16        (jjj) (kkk) "Person related to", with respect to an

 

17  organization, means 1 or more of the following:

 

18        (i) A person directly or indirectly controlling, controlled

 

19  by, or under common control with the organization.

 

20        (ii) An officer or director of, or a person performing

 

21  similar functions with respect to, the organization.

 

22        (iii) An officer or director of, or a person performing

 

23  similar functions with respect to, a person described in

 

24  subparagraph (i).

 

25        (iv) The spouse of an individual described in subparagraph

 

26  (i), (ii), or (iii).

 

27        (v) An individual who is related by blood or marriage to an


 

 1  individual described in subparagraph (i), (ii), (iii), or (iv) and

 

 2  shares the same home with the individual.

 

 3        (kkk) (lll) "Proceeds" means, except as used in section

 

 4  9609(2), 1 or more of the following property:

 

 5        (i) Whatever is acquired upon the sale, lease, license,

 

 6  exchange, or other disposition of collateral.

 

 7        (ii) Whatever is collected on, or distributed on account of,

 

 8  collateral.

 

 9        (iii) Rights arising out of collateral.

 

10        (iv) To the extent of the value of collateral, claims arising

 

11  out of the loss, nonconformity, or interference with the use of,

 

12  defects or infringement of rights in, or damage to, the

 

13  collateral.

 

14        (v) To the extent of the value of collateral and to the

 

15  extent payable to the debtor or the secured party, insurance

 

16  payable by reason of the loss or nonconformity of, defects or

 

17  infringement of rights in, or damage to, the collateral.

 

18        (lll) (mmm) "Promissory note" means an instrument that

 

19  evidences a promise to pay a monetary obligation, does not

 

20  evidence an order to pay, and does not contain an acknowledgment

 

21  by a bank that the bank has received for deposit a sum of money

 

22  or funds.

 

23        (mmm) (nnn) "Proposal" means a record authenticated by a

 

24  secured party which includes the terms on which the secured party

 

25  is willing to accept collateral in full or partial satisfaction

 

26  of the obligation it secures pursuant to sections 9620, 9621, and

 

27  9622.


 

 1        (nnn) (ooo) "Pursuant to commitment", with respect to an

 

 2  advance made or other value given by a secured party, means

 

 3  pursuant to the secured party's obligation, whether or not a

 

 4  subsequent event of default or other event not within the secured

 

 5  party's control has relieved or may relieve the secured party

 

 6  from its obligation.

 

 7        (ooo) (ppp) "Record", except as used in "for record", "of

 

 8  record", "record or legal title", and "record owner", means

 

 9  information that is inscribed on a tangible medium or which is

 

10  stored in an electronic or other medium and is retrievable in

 

11  perceivable form.

 

12        (ppp) (qqq) "Registered organization" means an organization

 

13  organized solely under the law of a single state or the United

 

14  States and as to which the state or the United States must

 

15  maintain a public record showing the organization to have been

 

16  organized.

 

17        (qqq) (rrr) "Secondary obligor" means an obligor to the

 

18  extent that the obligor's obligation is secondary or the obligor

 

19  has a right of recourse with respect to an obligation secured by

 

20  collateral against the debtor, another obligor, or property of

 

21  either.

 

22        (rrr) (sss) "Secured party" means 1 or more of the

 

23  following:

 

24        (i) A person in whose favor a security interest is created or

 

25  provided for under a security agreement, whether or not any

 

26  obligation to be secured is outstanding.

 

27        (ii) A person that holds an agricultural lien.


 

 1        (iii) A consignor.

 

 2        (iv) A person to which accounts, chattel paper, payment

 

 3  intangibles, or promissory notes have been sold.

 

 4        (v) A trustee, indenture trustee, agent, collateral agent,

 

 5  or other representative in whose favor a security interest or

 

 6  agricultural lien is created or provided for.

 

 7        (vi) A person that holds a security interest arising under

 

 8  section 2401, 2505, 2711(3), 2A508(5), 4210, or 5118.

 

 9        (sss) (ttt) "Security agreement" means an agreement that

 

10  creates or provides for a security interest.

 

11        (ttt) (uuu) "Send", in connection with a record or

 

12  notification, means 1 of the following:

 

13        (i) To deposit in the mail, deliver for transmission, or

 

14  transmit by any other usual means of communication, with postage

 

15  or cost of transmission provided for, addressed to any address

 

16  reasonable under the circumstances.

 

17        (ii) To cause the record or notification to be received

 

18  within the time that it would have been received if properly sent

 

19  under subparagraph (i).

 

20        (uuu) (vvv) "Software" means a computer program and any

 

21  supporting information provided in connection with a transaction

 

22  relating to the program. The term does not include a computer

 

23  program that is included in the definition of goods.

 

24        (vvv) (www) "State" means a state of the United States, the

 

25  District of Columbia, Puerto Rico, the United States Virgin

 

26  Islands, or any territory or insular possession subject to the

 

27  jurisdiction of the United States.


 

 1        (www) (xxx) "Supporting obligation" means a letter-of-credit

 

 2  right or secondary obligation that supports the payment or

 

 3  performance of an account, chattel paper, a document, a general

 

 4  intangible, an instrument, or investment property.

 

 5        (xxx) (yyy) "Tangible chattel paper" means chattel paper

 

 6  evidenced by a record or records consisting of information that

 

 7  is inscribed on a tangible medium.

 

 8        (yyy) (zzz) "Termination statement" means an amendment of a

 

 9  financing statement that identifies, by its file number, the

 

10  initial financing statement to which it relates and indicates

 

11  either that it is a termination statement or that the identified

 

12  financing statement is no longer effective.

 

13        (zzz) (aaaa) "Transmitting utility" means a person primarily

 

14  engaged in the business of 1 of the following:

 

15        (i) Operating a railroad, subway, street railway, or trolley

 

16  bus.

 

17        (ii) Transmitting communications electrically,

 

18  electromagnetically, or by light.

 

19        (iii) Transmitting goods by pipeline or sewer.

 

20        (iv) Transmitting or producing and transmitting electricity,

 

21  steam, gas, or water.

 

22        (2) The following definitions in other articles apply to

 

23  this article:

 

 

24      "Applicant"                                    Section 5102

25      "Beneficiary"                                  Section 5102

26      "Broker"                                       Section 8102


     "Certificated security"                        Section 8102

     "Check"                                        Section 3104

     "Clearing corporation"                         Section 8102

     "Contract for sale"                            Section 2106

     "Customer"                                     Section 4104

     "Entitlement holder"                           Section 8102

     "Financial asset"                              Section 8102

     "Holder in due course"                         Section 3302

     "Issuer" (with respect to a letter            

10        of credit or letter-of-credit right)         Section 5102

11      "Issuer" (with respect to a security)          Section 8201

12      "Lease"                                        Section 2A103

13      "Lease agreement"                              Section 2A103

14      "Lease contract"                               Section 2A103

15      "Leasehold interest"                           Section 2A103

16      "Lessee"                                       Section 2A103

17      "Lessee in ordinary course of business"        Section 2A103

18      "Lessor"                                       Section 2A103

19      "Lessor's residual interest"                   Section 2A103

20      "Letter of credit"                             Section 5102

21      "Merchant"                                     Section 2104

22      "Negotiable instrument"                        Section 3104

23      "Nominated person"                             Section 5102

24      "Note"                                         Section 3104

25      "Proceeds of a letter of credit"               Section 5114

26      "Prove"                                        Section 3103

27      "Sale"                                         Section 2106

28      "Securities account"                           Section 8501

29      "Securities intermediary"                      Section 8102

30      "Security"                                     Section 8102

31      "Security certificate"                         Section 8102


     "Security entitlement"                         Section 8102

     "Uncertificated security"                      Section 8102.

 

 

 3        (3) Article 1 contains general definitions and principles of

 

 4  construction and interpretation applicable throughout this

 

 5  article.

 

 6        Enacting section 1. Sections 1105, 1107, 1207, 1208, 1209,

 

 7  1210, 1211, 2208, and 2A207 of the uniform commercial code, 1962

 

 8  PA 174, MCL 440.1105, 440.1107, 440.1207, 440.1208, 440.1209,

 

 9  440.1210, 440.1211, 440.2208, and 440.2857, are repealed.

 

10        Enacting section 2. This amendatory act takes effect July 1,

 

11  2013.