Every contract or duty in the code imposes an obligation of good faith in its performance or enforcement.

A claim or right arising out of an alleged breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.

If a provision or clause of the code or application of the clause or provision to a person or circumstances is held invalid, the invalidity does not affect other provisions or applications of the code that can be given effect without the invalid provision or application, and to this end the provisions of the code are severable.

Chapter 114, SLA 1962 being a general act intended as a unified coverage of its subject matter, no part of it may be considered to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided.

Notwithstanding Section 01.05.006 and 01.05.031(b)(2), section headings are parts of the code.

Article 02. GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION

A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher's or inspector's certificate, consular invoice, or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

Unless displaced by the particular provisions of the code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause, supplement the provisions of the code.

A party who, with explicit reservation of rights, performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as 'without prejudice,' 'under protest,' or the like are sufficient. This section does not apply to an accord and satisfaction.

A term providing that one party or a successor in interest may accelerate payment or performance or require collateral or additional collateral 'at will'or 'when the party considers itself insecure' or in words of similar import shall be construed to mean that the party shall have power to do so only if the party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against whom the power has been exercised.

(a) Where the code requires an action to be taken within a reasonable time, a time which is not manifestly unreasonable may be fixed by agreement.

(b) What is a reasonable time for taking an action depends on the nature, purpose, and circumstances of the action.

(c) An action is taken 'seasonably' when it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.

Section 45.01 - Section 45.08, Section 45.12, Section 45.14, and Section 45.29 may be cited as the Uniform Commercial Code.

(a) The remedies provided by the code shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed, but neither consequential or special nor penal damages may be had except as specifically provided in the code or by other rule of law.

(b) A right or obligation declared by the code is enforceable by action unless the provision declaring it specifies a different and limited effect.

(a) Except in the cases described in (b) of this section, a contract for the sale of personal property is not enforceable by action or defense beyond $5,000 in amount or value of remedy unless there is a writing which indicates that a contract for sale has been made between the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the party against whom enforcement is sought or by an authorized agent.

(b) Subsection (a) of this section does not apply to contracts for the sale of goods (Section 45.02.201 ) or securities (Section 45.08.113 ), or to security agreements (Section 45.29.203 ).

(a) The code shall be liberally construed and applied to promote the underlying purposes and policies.

(b) Underlying purposes and policies of the code are:

(1) to simplify, clarify, and modernize the law governing commercial transactions;

(2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties;

(3) to make uniform the law among the various jurisdictions.

(c) The effect of provisions of the code may be varied by agreement, except as otherwise provided in the code and except that the obligations of good faith, diligence, reasonableness, and care prescribed by the code may not be disclaimed by agreement, but the parties may by agreement determine the standards by which the performance of the obligations is to be measured if such standards are not manifestly unreasonable.

(d) The presence in certain provisions of the code of the words 'unless otherwise agreed' or words of similar import does not imply that the effect of other provisions may not be varied by agreement under (c) of this section.

(e) In the code the rules of construction in Section 01.10.050 (b) - (c) apply, unless the context otherwise requires.

(a) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(b) A usage of trade is a practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of the usage are to be proved as facts. If it is established that the usage is embodied in a written trade code or similar writing, the interpretation of the writing is for the court.

(c) A course of dealing between parties and a usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.

(d) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed where reasonable as consistent with each other; but, when the construction is unreasonable, express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.

(e) An applicable usage of trade in the place where a part of performance is to occur shall be used in interpreting the agreement as to that part of the performance.

(f) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party such notice as the court finds sufficient to prevent unfair surprise to the other party.

(a) Except as provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of the other state or nation shall govern their rights and duties. Failing this agreement, the code applies to transactions bearing an appropriate relation to this state.

(b) Where one of the following provisions of the code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law, including the conflict of laws rules, so specified:

(1) Section 45.02.402 (rights of creditors against sold goods);

(2) Section 45.04.102 (applicability of the chapter on bank deposits and collections);

(3) Section 45.05.116 (applicability of the chapter on letters of credit);

(4) Section 45.08.110 (applicability of the chapter on investment securities);

(5) Section 45.12.105 and 45.12.106 (applicability of the chapter on leases);

(6) Section 45.14 (funds transfers); and

(7) Section 45.29.301 - 45.29.307 (law governing the effect of perfection or nonperfection and the priority of security interests and agricultural liens).

Subject to additional definitions contained in the subsequent chapters of the code that are applicable to specific chapters or sections, and unless the context otherwise requires, in the code,

(1) 'action' in the sense of a judicial proceeding includes recoupment, counterclaim, setoff, suit in equity, and any other proceedings in which rights are determined;

(2) 'aggrieved party' means a party entitled to resort to a remedy;

(3) 'agreement' means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in the code (Section 45.01.205 , Section 45.02.208 , and Section 45.12.207 ); whether or not an agreement has legal consequences is determined by the provisions of the code, if applicable; otherwise by the law of contracts (Section 45.01.103 ) (compare 'contract');

(4) 'bank' means a person engaged in the business of banking;

(5) 'bearer' means the person in possession of an instrument, document of title, or certificated security payable to bearer or endorsed in blank;

(6) 'bill of lading' means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods, and includes an airbill; 'airbill' means a document serving for air transportation as a bill of lading does for marine or rail transportation, and includes an air consignment note or air waybill;

(7) 'branch' includes a separately incorporated foreign branch of a bank;

(8) 'burden of establishing' a fact means the burden of persuading the triers of fact that the existence of the fact is more probable than its nonexistence;

(9) 'buyer in ordinary course of business' means a person who buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind; a person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices; a person who sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind; a buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale; only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Section 45.02 may be a buyer in ordinary course of business; a person who acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt is not a buyer in ordinary course of business;

(10) 'code' means Section 45.01 - Section 45.08, Section 45.12, Section 45.14, and Section 45.29;

(11) 'conspicuous': a term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it; a printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING) is conspicuous; language in the body of a form is 'conspicuous' if it is in larger or other contrasting type or color; but in a telegram any stated term is 'conspicuous'; whether a term or clause is 'conspicuous' or not is for decision by the court;

(12) 'contract' means the total legal obligation that results from the parties' agreement as affected by the code and any other applicable rules of law (compare 'agreement');

(13) 'creditor' includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor's or assignor's estate;

(14) 'defendant' includes a person in the position of defendant in a cross action or counterclaim;

(15) 'delivery' with respect to instruments, documents of title, chattel paper, or certificated securities means voluntary transfer of possession;

(16) 'document of title' includes bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers; to be a document of title a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass;

(17) 'fault' means wrongful act, omission, or breach;

(18) 'fungible' with respect to goods or securities means goods or securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit; goods that are not fungible shall be deemed fungible for the purposes of the code to the extent that under a particular agreement or document unlike units are treated as equivalents;

(19) 'genuine' means free of forgery or counterfeiting;

(20) 'good faith' means honesty in fact in the conduct or transaction concerned;

(21) 'holder,' with respect to a negotiable instrument, means the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession; 'holder,' with respect to a document of title, means the person in possession if the goods are deliverable to bearer or to the order of the person in possession;

(22) to 'honor' is to pay or to accept and pay or, where a credit so engages, to purchase or discount a draft complying with the terms of the credit;

(23) 'insolvency proceedings' includes any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate the estate of the person involved;

(24) a person is 'insolvent' who either has ceased to pay the person's debts in the ordinary course of business or cannot pay the person's debts as they become due or is insolvent within the meaning of the federal bankruptcy law;

(25) 'money' means a medium of exchange authorized or adopted by a domestic or foreign government, including a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations;

(26) a person has 'notice' of a fact when (A) the person has actual knowledge of it; (B) the person has received a notice or notification of it; or (C) from all the facts and circumstances known to the person at the time in question the person has reason to know that it exists; a person 'knows' or has 'knowledge' of a fact when the person has actual knowledge of it; 'discover' or 'learn' or a word or phrase of similar import refers to knowledge rather than to reason to know; the time and circumstances under which a notice or notification may cease to be effective are not determined by the code;

(27) a person 'notifies' or 'gives' a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it; a person 'receives' a notice or notification when

(A) it comes to the person's attention; or

(B) it is duly delivered at the place of business through which the contract was made or at any other place held out by the person as the place for receipt of the communications;

(28) notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time when it is brought to the attention of the individual conducting that transaction, and in any event from the time when it would have been brought to that person's attention if the organization had exercised due diligence;

(29) 'organization' includes a corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, two or more persons having a joint or common interest, or any other legal or commercial entity;

(30) 'party,' as distinct from 'third party,' means a person who has engaged in a transaction or made an agreement within this chapter;

(31) 'person' includes an individual or an organization (See Section 45.01.102);

(32) 'presumption' or 'presumed' means that the trier of fact must find the existence of the fact presumed unless evidence is introduced which would support a finding of its nonexistence;

(33) 'purchase' includes taking by sale, discount, negotiation, mortgage, pledge, lien, security interest, issue or re-issue, gift, or any other voluntary transaction creating an interest in property;

(34) 'purchaser' means a person who takes by purchase;

(35) 'remedy' means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal;

(36) 'representative' includes an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate, or any other person empowered to act for another;

(37) 'rights' includes remedies;

(38) 'security interest' means an interest in personal property or fixtures that secures payment or performance of an obligation; the term also includes an interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Section 45.29; the special property interest of a buyer of goods on identification of the goods to a contract for sale under Section 45.02.401 is not a 'security interest,' but a buyer may also acquire a 'security interest' by complying with Section 45.29; except as otherwise provided in Section 45.02.505 , the right of a seller or lessor of goods under Section 45.02 or Section 45.12 to retain or acquire possession of the goods is not a 'security interest,' but a seller or lessor may also acquire a 'security interest' by complying with Section 45.29; the retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (Section 45.02.401 ) is limited in effect to a reservation of a 'security interest'; whether a transaction creates a lease or security interest is determined by the facts of each case; however,

(A) a transaction creates a security interest if the consideration the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee; and

(i) the original term of the lease is equal to or greater than the remaining economic life of the goods;

(ii) the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;

(iii) the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement; or

(iv) the lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement;

(B) a transaction does not create a security interest merely because it provides that

(i) the present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;

(ii) the lessee assumes risk of loss of the goods, or agrees to pay taxes, insurance, filing, recording, or registration fees, or service or maintenance costs with respect to the goods;

(iii) the lessee has an option to renew the lease or to become the owner of the goods;

(iv) the lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or

(v) the lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed;

(C) in this paragraph, additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised; additional consideration is not nominal if

(i) when the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or

(ii) when the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed;

(D) in this paragraph,

(i) 'present value' means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain; the discount is determined by the interest rate specified by the parties if the rate is not manifestly unreasonable at the time the transaction is entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into; and

(ii) 'reasonably predictable' and 'remaining economic life of the goods' are to be determined with reference to the facts and circumstances at the time the transaction is entered into;

(39) 'send' in connection with writing or notice means to deposit in the mail, or deliver for transmission by another usual means of communication, with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified on it or otherwise agreed, or if there is none to an address reasonable under the circumstances; the receipt of a writing or notice within the time at which it would have arrived if properly sent has the effect of a proper sending;

(40) 'signed' includes a symbol executed or adopted by a party with present intention to authenticate a writing;

(41) 'surety' includes guarantor;

(42) 'telegram' includes a message transmitted by radio, teletype, cable, a mechanical method of transmission, or the like;

(43) 'term' means that portion of an agreement which relates to a particular matter;

(44) 'unauthorized' signature means one made without actual, implied, or apparent authority, and includes a forgery;

(45) 'value': except as otherwise provided in Section 45.03.303 with respect to negotiable instruments and in Section 45.04.210 and 45.04.211 with respect to bank collections, a person gives 'value' for rights if the person acquires them

(A) in return for a binding commitment to extend credit or for the extension of immediately available credit whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;

(B) as security for or in total or partial satisfaction of a pre-existing claim;

(C) by accepting delivery under a pre-existing contract for purchase; or

(D) generally, in return for a consideration sufficient to support a simple contract;

(46) 'warehouse receipt' means a receipt issued by a person engaged in the business of storing goods for hire;

(47) 'written' or 'writing' includes printing, typewriting, or any other intentional reduction to tangible form.