2009 California Commercial Code - Section 1201-1206 :: Chapter 2. General Definitions And Principles Of Interpretation

1201.  (a) Unless the context otherwise requires, words or phrases
defined in this section, or in the additional definitions contained
in other divisions of this code that apply to particular divisions or
chapters thereof, have the meanings stated.
   (b) Subject to definitions contained in other divisions of this
code that apply to particular divisions or chapters thereof:
   (1) "Action," in the sense of a judicial proceeding, includes
recoupment, counterclaim, setoff, suit in equity, and any other
proceeding in which rights are determined.
   (2) "Aggrieved party" means a party entitled to pursue a remedy.
   (3) "Agreement," as distinguished from "contract," means the
bargain of the parties in fact, as found in their language or
inferred from other circumstances, including course of performance,
course of dealing, or usage of trade as provided in Section 1303.
   (4) "Bank" means a person engaged in the business of banking, and
includes a savings bank, savings and loan association, credit union,
and trust company.
   (5) "Bearer" means a person in possession of a negotiable
instrument, document of title, or certificated security that is
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.
   (7) "Branch" includes a separately incorporated foreign branch of
a bank.
   (8) "Burden of establishing" a fact means the burden of persuading
the trier 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 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. "Buyer in ordinary course of
business" does not include a person that acquires goods in a transfer
in bulk or as security for or in total or partial satisfaction of a
money debt.
   (10) "Conspicuous," with reference to a term, means so written,
displayed, or presented that a reasonable person against whom it is
to operate ought to have noticed it. Whether a term is "conspicuous"
or not is a decision for the court. Conspicuous terms include the
following:
   (A) a heading in capitals equal to or greater in size than the
surrounding text, or in contrasting type, font, or color to the
surrounding text of the same or lesser size; and
   (B) language in the body of a record or display in larger type
than the surrounding text, or in contrasting type, font, or color to
the surrounding text of the same size, or set off from surrounding
text of the same size by symbols or other marks that call attention
to the language.
   (11) [Reserved]
   (12) "Contract," as distinguished from "agreement," means the
total legal obligation that results from the parties' agreement as
determined by this code and as supplemented by any other applicable
laws.
   (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 counterclaim, cross-claim, or third-party claim.
   (15) "Delivery," with respect to an instrument, document of title,
or chattel paper means voluntary transfer of possession.
   (16) "Document of title" includes a 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 a default, breach, or wrongful act or omission.
   (18) "Fungible goods" means:
   (A) Goods of which any unit, by nature or usage of trade, is the
equivalent of any other like unit; or
   (B) Goods that by agreement are treated as equivalent.
   (19) "Genuine" means free of forgery or counterfeiting.
   (20) "Good faith," except as otherwise provided in Division 5
(commencing with Section 5101), means honesty in fact and the
observance of reasonable commercial standards of fair dealing.
   (21) "Holder," means:
   (A) the person in possession of a negotiable instrument that is
payable either to bearer or, to an identified person that is the
person in possession; or
   (B) the person in possession of a document of title if the goods
are deliverable either to bearer or to the order of the person in
possession.
   (22) "Insolvency proceeding" includes an assignment for the
benefit of creditors or other proceeding intended to liquidate or
rehabilitate the estate of the person involved.
   (23) "Insolvent" means:
   (A) having generally ceased to pay debts in the ordinary course of
business other than as a result of bona fide dispute;
   (B) being unable to pay debts as they become due; or
   (C) being insolvent within the meaning of federal bankruptcy law.
   (24) "Money" means a medium of exchange currently authorized or
adopted by a domestic or foreign government. The term includes a
monetary unit of account established by an intergovernmental
organization or by agreement between two or more countries.
   (25) "Organization" means a person other than an individual.
   (26) "Party," as distinguished from "third party," means a person
that has engaged in a transaction or made an agreement subject to
this code.
   (27) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, government, governmental subdivision, agency, or
instrumentality, public corporation, or any other legal or commercial
entity.
   (28) "Present value" means the amount as of a date certain of one
or more sums payable in the future, discounted to the date certain by
use of either an interest rate specified by the parties if that rate
is not manifestly unreasonable at the time the transaction is
entered into or, if an interest rate is not so specified, a
commercially reasonable rate that takes into account the facts and
circumstances at the time the transaction is entered into.
   (29) "Purchase" means taking by sale, lease, discount,
negotiation, mortgage, pledge, lien, security interest, issue or
reissue, gift, or any other voluntary transaction creating an
interest in property.
   (30) "Purchaser" means a person that takes by purchase.
   (31) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
   (32) "Remedy" means any remedial right to which an aggrieved party
is entitled with or without resort to a tribunal.
   (33) "Representative" means a person empowered to act for another,
including an agent, an officer of a corporation or association, and
a trustee, executor, or administrator of an estate.
   (34) "Right" includes remedy.
   (35) "Security interest" means an interest in personal property or
fixtures which secures payment or performance of an obligation.
"Security interest" includes any 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 Division 9 (commencing with
Section 9101). "Security interest" does not include the special
property interest of a buyer of goods on identification of those
goods to a contract for sale under Section 2401, 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 under Section
2401 is limited in effect to a reservation of a "security interest."
   Whether a transaction in the form of a lease creates a "security
interest" is determined pursuant to Section 1203.
   (36) "Send," in connection with a writing, record, or notice
means:
   (A) 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; or
   (B) in any other way to cause to be received any record or notice
within the time it would have arrived if properly sent.
   (37) "Signed" includes using any symbol executed or adopted with
present intention to adopt or accept a writing.
   (38) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
   (39) "Surety" includes a guarantor or other secondary obligor.
   (40) "Term" means a portion of an agreement that relates to a
particular matter.
   (41) "Unauthorized signature" means a signature made without
actual, implied, or apparent authority. The term includes a forgery.
   (42) "Warehouse receipt" means a receipt issued by a person
engaged in the business of storing goods for hire.
   (43) "Writing" includes printing, typewriting, or any other
intentional reduction to tangible form. "Written" has a corresponding
meaning.

1202.  (a) Subject to subdivision (f), a person has "notice" of a
fact if the person:
   (1) has actual knowledge of it;
   (2) has received a notice or notification of it; or
   (3) from all the facts and circumstances known to the person at
the time in question, has reason to know that it exists.
   (b) "Knowledge" means actual knowledge. "Knows" has a
corresponding meaning.
   (c) "Discover," "learn," or words of similar import refer to
knowledge rather than to reason to know.
   (d) A person "notifies" or "gives" a notice or notification to
another person by taking such steps as may be reasonably required to
inform the other person in ordinary course, whether or not the other
person actually comes to know of it.
   (e) Subject to subdivision (f), a person "receives" a notice or
notification when:
   (1) it comes to that person's attention; or
   (2) it is duly delivered in a form reasonable under the
circumstances at the place of business through which the contract was
made or at another location held out by that person as the place for
receipt of such communications.
   (f) 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 the individual's 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 the individual's
regular duties or the individual has reason to know of the
transaction and that the transaction would be materially affected by
the information.

1203.  (a) Whether a transaction in the form of a lease creates a
lease or security interest is determined by the facts of each case.
   (b) A transaction in the form of a lease creates a security
interest if the consideration that 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 and is not subject to termination by the
lessee, and:
   (1) the original term of the lease is equal to or greater than the
remaining economic life of the goods;
   (2) 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;
   (3) the lessee has an option to renew the lease for the remaining
economic life of the goods for no additional consideration or for
nominal additional consideration upon compliance with the lease
agreement; or
   (4) the lessee has an option to become the owner of the goods for
no additional consideration or for nominal additional consideration
upon compliance with the lease agreement.
   (c) A transaction in the form of a lease does not create a
security interest merely because:
   (1) 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;
   (2) the lessee assumes risk of loss of the goods;
   (3) the lessee agrees to pay, with respect to the goods, taxes,
insurance, filing, recording, or registration fees, or service or
maintenance costs;
   (4) the lessee has an option to renew the lease or to become the
owner of the goods;
   (5) 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
   (6) 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.
   (7) 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 paragraph affects the application or administration of the
Sales and Use Tax Law (Part 1 (commencing with Section 6001) of
Division 2 of the Revenue and Taxation Code).
   (d) 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:
   (1) when the option to renew the lease is granted to the lessee,
the rent is stated to be the fair market rent for the use of the
goods for the term of the renewal determined at the time the option
is to be performed; or
   (2) 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.
   (e) The "remaining economic life of the goods" and "reasonably
predictable" fair market rent, fair market value, or cost of
performing under the lease agreement must be determined with
reference to the facts and circumstances at the time the transaction
is entered into.

1204.  Except as otherwise provided in Divisions 3, 4, 5, and 6, a
person gives value for rights if the person acquires them:
   (1) 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;
   (2) as security for, or in total or partial satisfaction of, a
preexisting claim;
   (3) by accepting delivery under a preexisting contract for
purchase; or
   (4) in return for any consideration sufficient to support a simple
contract.

1205.  (a) Whether a time for taking an action required by this code
is reasonable depends on the nature, purpose, and circumstances of
the action.
   (b) An action is taken "seasonably" if it is taken at or within
the time agreed or, if no time is agreed, at or within a reasonable
time.

1206.  Whenever this code creates a "presumption" with respect to a
fact, or provides that a fact is "presumed," the trier of fact must
find the existence of the fact unless and until evidence is
introduced that supports a finding of its nonexistence.