US Laws, Codes, Statutes & Cases

1201.  The following definitions apply for purposes of this code,
subject to additional definitions contained in the subsequent
divisions of this code that apply to specific divisions or chapters
thereof, and unless the context otherwise requires:
   (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, usage of trade, and course of
performance as provided in this code (Sections 1205, 2208, and
10207).  Whether an agreement has legal consequences is determined by
the provisions of this code, if applicable, and otherwise by the law
of contracts (Section 1103).  (Compare "contract.")
   (4) "Bank" means any 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 that, by its terms, evidences
the intention of the issuer that the person entitled under the
document (Section 7403(4)) has the right to receive, hold, and
dispose of the document and the goods it covers.  Designation of a
document by the issuer as a "bill of lading" is conclusive evidence
of that intention.  "Bill of lading" 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 that
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 that 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 the 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 Division 2 (commencing with Section 2101) may
be a buyer in ordinary course of business.  A person that 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) "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, except that in a telegram any stated term is
"conspicuous." Whether a term or clause is "conspicuous" or not is
for decision by the court.
   (11) "Contract" means the total legal obligation that results from
the parties' agreement as affected by this code and any other
applicable rules of law.  (Compare "agreement.")
   (12) "Creditor" includes a general creditor, a secured creditor, a
lien creditor, and any representative of creditors, including an
assignee for the benefit of creditors, a trustee in bankruptcy, a
receiver in equity, and an executor or administrator of an insolvent
debtor's or assignor's estate.
   (13) "Defendant" includes a person in the position of defendant in
a cross-action or counterclaim.
   (14) "Delivery," with respect to instruments, documents of title,
chattel paper, or certificated securities, means the voluntary
transfer of possession.
   (15) "Document of title" includes a bill of lading, dock warrant,
dock receipt, warehouse receipt, gin ticket, or compress receipt, and
any other document that, in the regular course of business or
financing, is treated as adequately evidencing that the person
entitled under the document (Section 7403(4)) has the right to
receive, hold, and dispose of the document and the goods it covers.
To be a document of title, a document shall purport to be issued by a
bailee and purport to cover goods in the bailee's possession that
either are identified as or are fungible portions of an identified
mass.
   (16) "Fault" means wrongful act, omission, or breach.
   (17) "Fungible," with respect to goods or securities, means goods
or securities of which any unit is, by nature or usage of trade, the
equivalent of any other like unit.  Goods that are not fungible shall
be deemed fungible for the purposes of this code to the extent that,
under a particular agreement or document, unlike units are treated
as equivalents.
   (18) "Genuine" means free of forgery or counterfeiting.
   (19) "Good faith" means honesty in fact in the conduct or
transaction concerned.
   (20) "Holder," with respect to a negotiable instrument, means the
person in possession if the instrument is payable to bearer or, in
the case of an instrument payable to an identified person, if the
identified person is in possession.  "Holder," with respect to a
document of title, means the person in possession if the goods are
deliverable to bearer or to the order of the person in possession.
   (21) To "honor" is to pay or to accept and pay or, where a credit
so engages, to purchase or discount a draft complying with the terms
of the credit.
   (22) "Insolvency proceedings" includes any assignment for the
benefit of creditors or other proceedings intended to liquidate or
rehabilitate the estate of the person involved.
   (23) A person is "insolvent" who either has ceased to pay his or
her debts in the ordinary course of business, cannot pay his or her
debts as they become due, or is insolvent within the meaning of the
federal bankruptcy law.
   (24) "Money" means a medium of exchange authorized or adopted by a
domestic or foreign government and includes a monetary unit of
account established by an intergovernmental organization or by
agreement between two or more nations.
   (25) A person has "notice" of a fact when any of the following
occurs:
   (a) He or she has actual knowledge of it.
   (b) He or she has received a notice or notification of it.
   (c) From all the facts and circumstances known to him or her at
the time in question, he or she has reason to know that it exists.  A
person "knows" or has "knowledge" of a fact when he or she has
actual knowledge of it.  "Discover" or "learn," or a word or phrase
of similar import, refers to knowledge rather than to reason to know.
  The time and circumstances under which a notice or notification may
cease to be effective are not determined by this code.
   (26) A person "notifies" or "gives" a notice or notification to
another by taking those steps that may be reasonably required to
inform the other in ordinary course whether or not the other actually
comes to know of it.  A person "receives" a notice or notification
when any of the following occurs:
   (a) It comes to his or her attention.
   (b) It is duly delivered at the place of business through which
the contract was made or at any other place held out by him or her as
the place for receipt of these communications.
   (27) Notice, knowledge, or a notice or notification received by an
organization is effective for a particular transaction from the time
it is brought to the attention of the individual conducting that
transaction and, in any event, from the time it would have been
brought to his or her attention if the organization had exercised due
diligence.  An organization exercises due diligence if it maintains
reasonable routines for communicating significant information to the
person conducting the transaction and there is reasonable compliance
with the routines.  Due diligence does not require an individual
acting for the organization to communicate information unless the
communication is part of his or her regular duties, or unless he or
she has reason to know of the transaction and that the transaction
would be materially affected by the information.
   (28) "Organization" includes a corporation, government or
governmental subdivision or agency, business trust, estate, trust,
partnership or association, two or more persons having a joint or
common interest, or any other legal or commercial entity.
   (29) "Party," as distinct from "third party," means a person who
has engaged in a transaction or made an agreement within this
division.
   (30) "Person" includes an individual or an organization.  (See
Section 1102.)
   (31) "Purchase" includes taking by sale, discount, negotiation,
mortgage, pledge, lien, security interest, issue or reissue, gift, or
any other voluntary transaction creating an interest in property.
   (32) "Purchaser" means a person who takes by purchase.
   (33) "Remedy" means any remedial right to which an aggrieved party
is entitled with or without resort to a tribunal.
   (34) "Representative" includes an agent, an officer of a
corporation or association, a trustee, executor, or administrator of
an estate, or any other person empowered to act for another.
   (35) "Rights" includes remedies.
   (36) (a) "Security interest" means an interest in personal
property or fixtures that secures payment or performance of an
obligation.  The term also includes any interest of a cosignor and a
buyer of accounts, chattel paper, a payment intangible, or a
promissory note in a transaction that is subject to Division 9
(commencing with Section 9101).  The special property interest of a
buyer of goods on identification of those goods to a contract for
sale under Section 2401 is not a "security interest," but a buyer may
also acquire a "security interest" by complying with Division 9
(commencing with Section 9101).   Except as otherwise provided in
Section 2505, the right of a seller or lessor of goods under
Division 2 (commencing with Section 2101) or  Division 10 (commencing
with Section 10101) 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 Division 9 (commencing with
Section 9101).  The retention or reservation of title by a seller of
goods notwithstanding shipment or delivery to the buyer (Section
2401) is limited in effect to a reservation of a "security interest."

   (b) Whether a transaction creates a lease or security interest is
determined by the facts of each case.  However, a transaction creates
a security interest if the consideration the lessee is to pay the
lessor for the right to possession and use of the goods is an
obligation for the term of the lease not subject to termination by
the lessee, and any of the following conditions applies:
   (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.
   (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.
   (c) A transaction does not create a security interest merely
because it provides one or more of the following:
   (i) That 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 greater than the fair market
value of the goods at the time the lease is entered into.
   (ii) That the lessee assumes the risk of loss of the goods, or
agrees to pay the taxes, insurance, filing, recording, or
registration fees, or service or maintenance costs with respect to
the goods.
   (iii) That the lessee has an option to renew the lease or to
become the owner of the goods.
   (iv) That 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.
   (v) That 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.
   (vi) In the case of a motor vehicle, as defined in Section 415 of
the Vehicle Code, or a trailer, as defined in  Section 630 of that
code, that is not to be used primarily for personal, family, or
household purposes, that the amount of rental payments may be
increased or decreased by reference to the amount realized by the
lessor upon sale or disposition of the vehicle or trailer.  Nothing
in this subparagraph affects the application or administration of the
Sales and Use Tax Law (Part 1 (commencing with Section 6001),
Division 2, Revenue and Taxation Code).
   (d) For purposes of this subdivision (36), all of the following
apply:
   (i) Additional consideration is not nominal if (A) 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 (B)
when the option to become the owner of the goods is granted to the
lessee, the price is stated to be the fair market value of the goods
determined at the time the option is to be performed.  Additional
consideration is nominal if it is less than the lessee's reasonably
predictable cost of performing under the lease agreement if the
option is not exercised.
   (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.
   (iii) "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.
   (37) "Send," in connection with any writing or notice, means to
deposit in the mail or deliver for transmission by any other usual
means of communication with postage or cost of transmission provided
for and properly addressed and, in the case of an instrument, to an
address specified thereon or otherwise agreed or, if there  is none,
to any address reasonable under the circumstances.  The receipt of
any writing or notice within the time  in which it would have arrived
if properly sent has the effect of a proper sending.  When a writing
or notice is required to be sent by registered or certified mail,
proof of mailing is sufficient, and proof of receipt by the addressee
is not required unless the words "with return receipt requested" are
also used.
   (38) "Signed" includes any symbol executed or adopted by a party
with present intention to authenticate a writing.
   (39) "Surety" includes guarantor.
   (40) "Telegram" includes a message transmitted by radio, teletype,
cable, any mechanical method of transmission, or the like.
   (41) "Term" means that portion of an agreement that relates to a
particular matter.
   (42) "Unauthorized" signature means one made without actual,
implied, or apparent authority, and includes a forgery.
   (43) "Value."  Except as otherwise provided with respect to
negotiable instruments and bank collections (Sections 3303, 4210, and
4211), a person gives "value" for rights if he or she acquires them
in any of the following ways:
   (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 chargeback is provided for in the event of
difficulties in collection.
   (b) As security for, or in total or partial satisfaction of, a
preexisting claim.
   (c) By accepting delivery pursuant to a preexisting contract for
purchase.
   (d) Generally, in return for any consideration sufficient to
support a simple contract.
   (44) "Warehouse receipt" means a document evidencing the receipt
of goods for storage issued by a warehouseman (Section 7102), and
that, by its terms, evidences the intention of the issuer that the
person entitled under the document (Section 7403(4)) has the right to
receive, hold, and dispose of the document and the goods it covers.
Designation of a document by the issuer as a "warehouse receipt" is
conclusive evidence of that intention.
   (45) "Written" or "writing" includes printing, typewriting, or any
other intentional reduction to tangible form.



1202.  (1) 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 admissible as evidence of the facts stated
in the document by the third party in any action arising out of the
contract which authorized or required the document.
   (2) In any action arising out of the contract which authorized or
required the document referred to in subdivision (1):
   (a) A document in due form purporting to be the document referred
to in subdivision (1) is presumed to be authentic and genuine.  This
presumption is a presumption affecting the burden of producing
evidence.
   (b) If the document is found to be authentic and genuine, the
facts stated in the document by the third party are presumed to be
true.  This presumption is a presumption affecting the burden of
proof.


1203.  Every contract or duty within this code imposes an obligation
of good faith in its performance or enforcement.



1204.  (1) Whenever this code requires any action to be taken within
a reasonable time, any time which is not manifestly unreasonable may
be fixed by agreement.
   (2) What is a reasonable time for taking any action depends on the
nature, purpose and circumstances of such action.
   (3) An action is taken "seasonably" when it is taken at or within
the time agreed or if no time is agreed at or within a reasonable
time.



1205.  (1) A course of dealing is a sequence of previous conduct
between the parties to a particular transaction which is fairly to be
regarded as establishing a common basis of understanding for
interpreting their expressions and other conduct.
   (2) A usage of trade is any practice or method of dealing having
such regularity of observance in a place, vocation or trade as to
justify an expectation that it will be observed with respect to the
transaction in question.  The existence and scope of such a usage are
to be proved as facts. If it is established that such a usage is
embodied in a written trade code or similar writing the
interpretation of the writing is for the court.
   (3) A course of dealing between parties and any usage of trade in
the vocation or trade in which they are engaged or of which they are
or should be aware give particular meaning to and supplement or
qualify terms of an agreement.
   (4) The express terms of an agreement and an applicable course of
dealing or usage of trade shall be construed wherever reasonable as
consistent with each other; but when such construction is
unreasonable express terms control both course of dealing and usage
of trade and course of dealing controls usage of trade.
   (5) An applicable usage of trade in the place where any part of
performance is to occur shall be used in interpreting the agreement
as to that part of the performance.
   (6) Evidence of a relevant usage of trade offered by one party is
not admissible unless and until he has given the other party such
notice as the court finds sufficent to prevent unfair surprise to the
latter.



1206.  (1) Except in the cases described in subdivision (2) of this
section a contract for the sale of personal property is not
enforceable by way of action or defense beyond five thousand dollars
($5,000) in amount or value of remedy unless there is some writing
which indicates that a contract for sale has been made between the
parties at a defined or stated price, reasonably identifies the
subject matter, and is signed by the party against whom enforcement
is sought or by his or her authorized agent.
   (2) Subdivision (1) of this section does not apply to contracts
for the sale of goods (Section 2201) nor of securities (Section 8113)
nor to security agreements (Sections 9201 and 9203).
   (3) Subdivision (1) of this section does not apply to a qualified
financial contract as that term is defined in paragraph (2) of
subdivision (b) of Section 1624 of the Civil Code if either (a) there
is, as provided in paragraph (3) of subdivision (b) of Section 1624
of the Civil Code, sufficient evidence to indicate that a contract
has been made or (b) the parties thereto, by means of a prior or
subsequent written contract, have agreed to be bound by the terms of
the qualified financial contract from the time they reach agreement
(by telephone, by exchange of electronic messages, or otherwise) on
those terms.



1207.  (a) 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.
   (b) Subdivision (a) does not apply to an accord and satisfaction.



1208.  A term providing that one party or his successor in interest
may accelerate payment or performance or require collateral or
additional collateral "at will" or "when he deems himself insecure"
or in words of similar import shall be construed to mean that he
shall have power to do so only if he in good faith believes that the
prospect of payment or performance is impaired.  The burden of
establishing lack of good faith is on the party against whom the
power has been exercised.



1209.  An obligation may be issued as subordinated to payment of
another obligation of the person obligated, or a creditor may
subordinate his right to payment of an obligation by agreement with
either the person obligated or another creditor of the person
obligated.  Such a subordination does not create a security interest
as against either the common debtor or a subordinated creditor.  This
section shall be construed as declaring the law as it existed prior
to the enactment of this section and not as modifying it.



1210.  Except as otherwise provided in Section 1202, the
presumptions established by this code are presumptions affecting the
burden of producing evidence.