2013 Oklahoma Statutes
Title 12A - Commercial Code


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<html> <head> <STYLE type="text/css"> body {padding-left:90pt;width:612pt} p {margin-top:0pt;margin-bottom:0pt} .cls0 {font-size:12pt;font-family:'Courier New', monospace;} .cls3 {margin-left:100pt;} .cls4 {margin-left:136pt;} .cls5 {margin-left:172pt;} .cls11 {margin-left:208pt;} .cls8 {margin-left:28pt;} .cls7 {margin-left:36pt;} .cls6 {margin-left:64pt;} .cls1 {text-align:center;} .cls10 {text-align:center;margin-left:100pt;} .cls9 {text-align:center;margin-left:208pt;} .cls2 {text-align:justify;} </STYLE> <title>&sect;12A-1-9-101</title> </head> <body> <p><span class="cls0">&sect;12A-1-9-101. Short title.&nbsp;</span></p> <p class="cls1"><span class="cls0">SHORT TITLE&nbsp;</span></p> <p><span class="cls0">This article, Sections 1 through 144 of this act, may be cited as Uniform Commercial Code &ndash; Secured Transactions.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 1, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-102. Definitions and index of definitions.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFINITIONS AND INDEX OF DEFINITIONS&nbsp;</span></p> <p><span class="cls0">(a) In this article:&nbsp;</span></p> <p><span class="cls0">(1) &ldquo;Accession&rdquo; means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;Account&rdquo;, except as used in &ldquo;account for&rdquo;, means a right to payment of a monetary obligation, whether or not earned by performance:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;for services rendered or to be rendered;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;for a policy of insurance issued or to be issued;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;for a secondary obligation incurred or to be incurred;&nbsp;</span></p> <p class="cls4"><span class="cls0">(v)&nbsp;&nbsp;for energy provided or to be provided;&nbsp;</span></p> <p class="cls4"><span class="cls0">(vi)&nbsp;&nbsp;for the use or hire of a vessel under a charter or other contract;&nbsp;</span></p> <p class="cls4"><span class="cls0">(vii)&nbsp;&nbsp;arising out of the use of a credit or charge card or information contained on or for use with the card; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(viii)&nbsp;&nbsp;as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or a person licensed or authorized to operate the game by a state or governmental unit of a state.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;The term includes health-care-insurance receivables.&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;The term does not include:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;rights to payment evidenced by chattel paper or an instrument;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;commercial tort claims;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;deposit accounts;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;investment property;&nbsp;</span></p> <p class="cls4"><span class="cls0">(v)&nbsp;&nbsp;letter-of-credit rights or letters of credit; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(vi)&nbsp;&nbsp;rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.&nbsp;</span></p> <p><span class="cls0">(3) &ldquo;Account debtor&rdquo; means a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.&nbsp;</span></p> <p><span class="cls0">(4) &ldquo;Accounting&rdquo;, except as used in &ldquo;accounting for&rdquo;, means a record:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;authenticated by a secured party;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;indicating the aggregate unpaid secured obligations as of a date not more than thirty-five (35) days earlier or thirty-five (35) days later than the date of the record; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;identifying the components of the obligations in reasonable detail.&nbsp;</span></p> <p><span class="cls0">(5) &ldquo;Agricultural lien&rdquo; means an interest in farm products:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;which secures payment or performance of an obligation for:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;goods or services furnished in connection with a debtor&rsquo;s farming operation; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;rent on real property leased by a debtor in connection with its farming operation;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;which is created by statute in favor of a person that:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;in the ordinary course of its business furnished goods or services to a debtor in connection with a debtor&rsquo;s farming operation; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;leased real property to a debtor in connection with the debtor&rsquo;s farming operation; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;whose effectiveness does not depend on the person&rsquo;s possession of the personal property.&nbsp;</span></p> <p><span class="cls0">(6) &ldquo;As-extracted collateral&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;oil, gas, or other minerals that are subject to a security interest that:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;is created by a debtor having an interest in the minerals before extraction; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;attaches to the minerals as extracted; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.&nbsp;</span></p> <p><span class="cls0">(7) &ldquo;Authenticate&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to sign; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record.&nbsp;</span></p> <p><span class="cls0">(8) &ldquo;Bank&rdquo; means an organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions, and trust companies.&nbsp;</span></p> <p><span class="cls0">(9) &ldquo;Cash proceeds&rdquo; means proceeds that are money, checks, deposit accounts, or the like.&nbsp;</span></p> <p><span class="cls0">(10) &ldquo;Certificate of title&rdquo; means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest&rsquo;s obtaining priority over the rights of a lien creditor with respect to the collateral.&nbsp;</span></p> <p><span class="cls0">(11) &ldquo;Chattel paper&rdquo; means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this paragraph, &ldquo;monetary obligation&rdquo; means a monetary obligation secured by the goods or owed under a lease of goods and includes a monetary obligation with respect to software used in the goods. The term does not include charters or other contracts involving the use or hire of a vessel. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.&nbsp;</span></p> <p><span class="cls0">(12) &ldquo;Collateral&rdquo; means the property subject to a security interest or agricultural lien. The term includes:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;proceeds to which a security interest attaches;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;goods that are the subject of a consignment.&nbsp;</span></p> <p><span class="cls0">(13) &ldquo;Commercial tort claim&rdquo; means a claim arising in tort with respect to which:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the claimant is an organization; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the claimant is an individual and the claim:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;arose in the course of the claimant&rsquo;s business or profession; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;does not include damages arising out of personal injury to or the death of an individual.&nbsp;</span></p> <p><span class="cls0">(14) &ldquo;Commodity account&rdquo; means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.&nbsp;</span></p> <p><span class="cls0">(15) &ldquo;Commodity contract&rdquo; means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.&nbsp;</span></p> <p><span class="cls0">(16) &ldquo;Commodity customer&rdquo; means a person for which a commodity intermediary carries a commodity contract on its books.&nbsp;</span></p> <p><span class="cls0">(17) &ldquo;Commodity intermediary&rdquo; means a person that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;is registered as a futures commission merchant under federal commodities law; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.&nbsp;</span></p> <p><span class="cls0">(18) &ldquo;Communicate&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to send a written or other tangible record;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;to transmit a record by any means agreed upon by the persons sending and receiving the record; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;in the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing-office rule.&nbsp;</span></p> <p><span class="cls0">(19) &ldquo;Consignee&rdquo; means a merchant to which goods are delivered in a consignment.&nbsp;</span></p> <p><span class="cls0">(20) &ldquo;Consignment&rdquo; means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the merchant:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;deals in goods of that kind under a name other than the name of the person making delivery;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;is not an auctioneer; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;is not generally known by its creditors to be substantially engaged in selling the goods of others;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;with respect to each delivery, the aggregate value of the goods is One Thousand Dollars ($1,000.00) or more at the time of delivery;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the goods are not consumer goods immediately before delivery; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;the transaction does not create a security interest that secures an obligation.&nbsp;</span></p> <p><span class="cls0">(21) &ldquo;Consignor&rdquo; means a person that delivers goods to a consignee in a consignment.&nbsp;</span></p> <p><span class="cls0">(22) &ldquo;Consumer debtor&rdquo; means a debtor in a consumer transaction.&nbsp;</span></p> <p><span class="cls0">(23) &ldquo;Consumer goods&rdquo; means goods that are used or bought for use primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(24) &ldquo;Consumer-goods transaction&rdquo; means a consumer transaction in which:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;an individual incurs an obligation primarily for personal, family, or household purposes; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;a security interest in consumer goods secures the obligation.&nbsp;</span></p> <p><span class="cls0">(25) &ldquo;Consumer obligor&rdquo; means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(26) &ldquo;Consumer transaction&rdquo; means a transaction in which (i) an individual incurs an obligation primarily for personal, family, or household purposes, (ii) a security interest secures the obligation, and (iii) the collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transactions.&nbsp;</span></p> <p><span class="cls0">(27) &ldquo;Continuation statement&rdquo; means an amendment of a financing statement which:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;identifies, by its file number, the initial financing statement to which it relates; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.&nbsp;</span></p> <p><span class="cls0">(28) &ldquo;Debtor&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;a seller of accounts, chattel paper, payment intangibles, or promissory notes; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;a consignee.&nbsp;</span></p> <p><span class="cls0">(29) &ldquo;Deposit account&rdquo; means a demand, time, savings, passbook, or similar account maintained with a bank as defined in paragraph (8) of this subsection. The term does not include investment property or a deposit account evidenced by an instrument.&nbsp;</span></p> <p><span class="cls0">(30) &ldquo;Document&rdquo; means a document of title or a receipt of the type described in subsection (b) of Section 7201 of this title.&nbsp;</span></p> <p><span class="cls0">(31) &ldquo;Electronic chattel paper&rdquo; means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.&nbsp;</span></p> <p><span class="cls0">(32) &ldquo;Encumbrance&rdquo; means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.&nbsp;</span></p> <p><span class="cls0">(33) &ldquo;Equipment&rdquo; means goods other than inventory, farm products, or consumer goods.&nbsp;</span></p> <p><span class="cls0">(34) &ldquo;Farm products&rdquo; means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;crops grown, growing, or to be grown, including:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;crops produced on trees, vines, and bushes; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;aquatic goods produced in aquacultural operations;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;livestock, born or unborn, including aquatic goods produced in aquacultural operations;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;supplies used or produced in a farming operation; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;products of crops or livestock in their unmanufactured states.&nbsp;</span></p> <p><span class="cls0">(35) &ldquo;Farming operation&rdquo; means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.&nbsp;</span></p> <p><span class="cls0">(36) &ldquo;File number&rdquo; means the number assigned to an initial financing statement pursuant to subsection (a) of Section 19519 of this title.&nbsp;</span></p> <p><span class="cls0">(37) &ldquo;Filing office&rdquo; means an office designated in Section 19501 as the place to file a financing statement.&nbsp;</span></p> <p><span class="cls0">(38) &ldquo;Filing-office rule&rdquo; means a rule adopted pursuant to Section 19526 and 19526.1 of this title.&nbsp;</span></p> <p><span class="cls0">(39) &ldquo;Financing statement&rdquo; means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement.&nbsp;</span></p> <p><span class="cls0">(40) &ldquo;Fixture filing&rdquo; means the filing of a financing statement covering goods that are or are to become fixtures and satisfying subsections (a) and (b) of Section 19502 of this title. The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.&nbsp;</span></p> <p><span class="cls0">(41) &ldquo;Fixtures&rdquo; means goods that have become so related to particular real property that an interest in them arises under real property law.&nbsp;</span></p> <p><span class="cls0">(42) &ldquo;General intangible&rdquo; means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.&nbsp;</span></p> <p><span class="cls0">(43) &ldquo;Good faith&rdquo; means honesty in fact and the observance of reasonable commercial standards of fair dealing.&nbsp;</span></p> <p class="cls3"><span class="cls0">(44)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;Goods&rdquo; means all things that are movable when a security interest attaches.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;The term includes:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;fixtures;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;standing timber that is to be cut and removed under a conveyance or contract for sale;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;the unborn young of animals;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(v)&nbsp;&nbsp;manufactured homes.&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;the program is associated with the goods in such a manner that it customarily is considered part of the goods; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods.&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;The term does not include a computer program which is embedded in goods and that consist solely of the medium in which the program is embedded.&nbsp;</span></p> <p class="cls3"><span class="cls0">(E)&nbsp;&nbsp;The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.&nbsp;</span></p> <p><span class="cls0">(45) &ldquo;Governmental unit&rdquo; means a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States.&nbsp;</span></p> <p><span class="cls0">(46) &ldquo;Health-care-insurance receivable&rdquo; means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health-care goods or services provided or to be provided.&nbsp;</span></p> <p class="cls3"><span class="cls0">(47)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;Instrument&rdquo; means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;&ldquo;Instrument&rdquo; includes:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;an instrument as defined in subparagraph (A) of this paragraph, whether the instrument is subject to Section 3-104 of this title because it is not payable to order; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;a writing that contains both an acknowledgment by a bank as defined in paragraph (8) of this subsection that a sum of money has been received by the bank and its promise to repay the sum of money, which is considered a certificate of deposit by the bank issuing it, even if the writing provides that it is nontransferable or uses similar language.&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;The term does not include:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;investment property;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;letters of credit; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.&nbsp;</span></p> <p><span class="cls0">(48) &ldquo;Inventory&rdquo; means goods, other than farm products, which:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;are leased by a person as lessor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;are held by a person for sale or lease or to be furnished under a contract of service;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;are furnished by a person under a contract of service; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;consist of raw materials, work in process, or materials used or consumed in a business.&nbsp;</span></p> <p><span class="cls0">(49) &ldquo;Investment property&rdquo; means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.&nbsp;</span></p> <p><span class="cls0">(50) &ldquo;Jurisdiction of organization&rdquo;, with respect to a registered organization, means the jurisdiction under whose law the organization is organized.&nbsp;</span></p> <p><span class="cls0">(51) &ldquo;Letter-of-credit right&rdquo; means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.&nbsp;</span></p> <p><span class="cls0">(52) &ldquo;Lien creditor&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a creditor that has acquired a lien on the property involved by attachment, levy, or the like;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;an assignee for benefit of creditors from the time of assignment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;a trustee in bankruptcy from the date of the filing of the petition; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;a receiver in equity from the time of appointment.&nbsp;</span></p> <p class="cls3"><span class="cls0">(53)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;Manufactured home&rdquo; means a structure, transportable in one or more sections, which:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;in the traveling mode, is eight body feet or more in width or forty (40) body feet or more in length, or, when erected on site, is three hundred twenty (320) or more square feet,&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;is built on a permanent chassis,&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;is designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;includes the plumbing, heating, air-conditioning, and electrical systems contained therein.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;The term includes any structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States Secretary of Housing and Urban Development and complies with the standards established under Title 42 of the United States Code.&nbsp;</span></p> <p><span class="cls0">(54) &ldquo;Manufactured-home transaction&rdquo; means a secured transaction:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;that creates a purchase-money security interest in a manufactured home, other than a manufactured home held as inventory; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.&nbsp;</span></p> <p><span class="cls0">(55) &ldquo;Mortgage&rdquo; means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.&nbsp;</span></p> <p><span class="cls0">(56) &ldquo;New debtor&rdquo; means a person that becomes bound as a debtor under subsection (d) of Section 19203 of this title by a security agreement previously entered into by another person.&nbsp;</span></p> <p class="cls3"><span class="cls0">(57)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;New value&rdquo; means:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;money;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;money&rsquo;s worth in property, services, or new credit; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;release by a transferee of an interest in property previously transferred to the transferee.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;The term does not include an obligation substituted for another obligation.&nbsp;</span></p> <p><span class="cls0">(58) &ldquo;Noncash proceeds&rdquo; means proceeds other than cash proceeds.&nbsp;</span></p> <p class="cls3"><span class="cls0">(59)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;Obligor&rdquo; means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;owes payment or other performance of the obligation;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;has provided property other than the collateral to secure payment or other performance of the obligation; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;is otherwise accountable in whole or in part for payment or other performance of the obligation.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;The term does not include issuers or nominated persons under a letter of credit.&nbsp;</span></p> <p><span class="cls0">(60) &ldquo;Original debtor&rdquo; means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under subsection (d) of Section 19203 of this title.&nbsp;</span></p> <p><span class="cls0">(61) &ldquo;Payment intangible&rdquo; means a general intangible under which the account debtor&rsquo;s principal obligation is a monetary obligation.&nbsp;</span></p> <p><span class="cls0">(62) &ldquo;Person related to&rdquo;, with respect to an individual, means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the spouse of the individual;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;a brother, brother-in-law, sister, or sister-in-law of the individual;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;an ancestor or lineal descendant of the individual or the individual&rsquo;s spouse; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;any other relative, by blood or marriage, of the individual or the individual&rsquo;s spouse who shares the same home with the individual.&nbsp;</span></p> <p><span class="cls0">(63) &ldquo;Person related to&rdquo;, with respect to an organization, means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a person directly or indirectly controlling, controlled by, or under common control with the organization;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;an officer or director of, or a person performing similar functions with respect to, the organization;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;an officer or director of, or a person performing similar functions with respect to, a person described in subparagraph (A);&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;the spouse of an individual described in subparagraph (A), (B), or (C) of this paragraph; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(E)&nbsp;&nbsp;an individual who is related by blood or marriage to an individual described in subparagraph (A), (B), (C), or (D) of this paragraph and who shares the same home with the individual.&nbsp;</span></p> <p><span class="cls0">(64) &ldquo;Proceeds&rdquo; means the following property:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;whatever is collected on, or distributed on account of, collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;rights arising out of collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;to the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(E)&nbsp;&nbsp;to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.&nbsp;</span></p> <p><span class="cls0">(65) &ldquo;Promissory note&rdquo; means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.&nbsp;</span></p> <p><span class="cls0">(66) &ldquo;Proposal&rdquo; means a record authenticated by a secured party which includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to Sections 19620, 19621, and 19622 of this title.&nbsp;</span></p> <p><span class="cls0">(67) &ldquo;Public-finance transaction&rdquo; means a secured transaction in connection with which:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;debt securities are issued;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;all or a portion of the securities issued have an initial stated maturity of at least twenty (20) years; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.&nbsp;</span></p> <p><span class="cls0">(68) &ldquo;Pursuant to commitment&rdquo;, with respect to an advance made or other value given by a secured party, means pursuant to the secured party&rsquo;s obligation, whether or not a subsequent event of default or other event not within the secured party&rsquo;s control has relieved or may relieve the secured party from its obligation.&nbsp;</span></p> <p><span class="cls0">(69) &ldquo;Record&rdquo;, except as used in &ldquo;for record&rdquo;, &ldquo;of record&rdquo;, &ldquo;record or legal title&rdquo;, and &ldquo;record owner&rdquo;, means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.&nbsp;</span></p> <p><span class="cls0">(70) &ldquo;Registered organization&rdquo; means an organization organized solely under the law of a single state or the United States and as to which the state or the United States must maintain a public record showing the organization to have been organized.&nbsp;</span></p> <p><span class="cls0">(71) &ldquo;Secondary obligor&rdquo; means an obligor to the extent that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the obligor&rsquo;s obligation is secondary; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.&nbsp;</span></p> <p><span class="cls0">(72) &ldquo;Secured party&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;a person that holds an agricultural lien;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;a consignor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;&nbsp;</span></p> <p class="cls3"><span class="cls0">(E)&nbsp;&nbsp;a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(F)&nbsp;&nbsp;a person that holds a security interest arising under Section 2401, 2505, paragraph (3) of Section 2711, paragraph (5) of Section 2A508, 4210, or 5118 of this title.&nbsp;</span></p> <p><span class="cls0">(73) &ldquo;Security agreement&rdquo; means an agreement that creates or provides for a security interest.&nbsp;</span></p> <p><span class="cls0">(74) &ldquo;Send&rdquo;, in connection with a record or notification, means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;to cause the record or notification to be received within the time that it would have been received if properly sent under subparagraph (A) of this paragraph.&nbsp;</span></p> <p><span class="cls0">(75) &ldquo;Software&rdquo; means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.&nbsp;</span></p> <p><span class="cls0">(76) &ldquo;State&rdquo; 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.&nbsp;</span></p> <p><span class="cls0">(77) &ldquo;Supporting obligation&rdquo; means a letter-of-credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property.&nbsp;</span></p> <p><span class="cls0">(78) &ldquo;Tangible chattel paper&rdquo; means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.&nbsp;</span></p> <p><span class="cls0">(79) &ldquo;Termination statement&rdquo; means an amendment of a financing statement which:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;identifies, by its file number, the initial financing statement to which it relates; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;indicates either that it is a termination statement or that the identified financing statement is no longer effective.&nbsp;</span></p> <p><span class="cls0">(80) &ldquo;Transmitting utility&rdquo; means a person primarily engaged in the business of:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;operating a railroad, subway, street railway, or trolley bus;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;transmitting communications electrically, electromagnetically, or by light;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;transmitting goods by pipeline or sewer; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;transmitting or producing and transmitting electricity, steam, gas, or water.&nbsp;</span></p> <p><span class="cls0">(b) &ldquo;Control&rdquo; as provided in Section 7-106 of this title and the following definitions in other articles of this title apply to this article:&nbsp;</span></p> <p><span class="cls0">&ldquo;Applicant&rdquo; - Section 5102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Beneficiary&rdquo; - Section 5102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Broker&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Certificated security&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Check&rdquo; - Section 3104 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Clearing corporation&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Contract for sale&rdquo; - Section 2106 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Customer&rdquo; - Section 4104 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Entitlement holder&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Financial asset&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Holder in due course&rdquo; - Section 3302 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Issuer&rdquo; (with respect to a letter of credit or letter-of-credit right)- Section 5102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Issuer&rdquo; &ndash; (with respect to a security) &ndash; Section 8-201 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Issuer&rdquo; &ndash; (with respect to documents of title) &ndash; Section 7-102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lease&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lease agreement&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lease contract&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Leasehold interest&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lessee&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lessee in ordinary course of business&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lessor&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Lessor&rsquo;s residual interest&rdquo; - Section 2A103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Letter of credit&rdquo; - Section 5102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Merchant&rdquo; - Section 2104 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Negotiable instrument&rdquo; - Section 3104 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Nominated person&rdquo; - Section 5102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Note&rdquo; - Section 3104 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Proceeds of a letter of credit&rdquo; - Section 5114 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Prove&rdquo; - Section 3103 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Sale&rdquo; - Section 2106 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Securities account&rdquo; - Section 8501 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Securities intermediary&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Security&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Security certificate&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Security entitlement&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">&ldquo;Uncertificated security&rdquo; - Section 8102 of this title.&nbsp;</span></p> <p><span class="cls0">(c) Article 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 2, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 1, eff. Nov. 1, 2004; Laws 2005, c. 140, &sect; 59, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-103. Purchase-money security interest; application of payments; burden of establishing.&nbsp;</span></p> <p class="cls1"><span class="cls0">PURCHASE-MONEY SECURITY INTEREST; APPLICATION OF PAYMENTS;&nbsp;</span></p> <p class="cls1"><span class="cls0">BURDEN OF ESTABLISHING&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p><span class="cls0">(1) &ldquo;purchase-money collateral&rdquo; means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and&nbsp;</span></p> <p><span class="cls0">(2) &ldquo;purchase-money obligation&rdquo; means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.&nbsp;</span></p> <p><span class="cls0">(b) A security interest in goods is a purchase-money security interest:&nbsp;</span></p> <p><span class="cls0">(1) to the extent that the goods are purchase-money collateral with respect to that security interest;&nbsp;</span></p> <p><span class="cls0">(2) if the security interest is in inventory that is or was purchase-money collateral, to the extent that the security interest secures a purchase-money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and&nbsp;</span></p> <p><span class="cls0">(3) to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.&nbsp;</span></p> <p><span class="cls0">(c) A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:&nbsp;</span></p> <p><span class="cls0">(1) the debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and&nbsp;</span></p> <p><span class="cls0">(2) the debtor acquired its interest in the software for the principal purpose of using the software in the goods.&nbsp;</span></p> <p><span class="cls0">(d) The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.&nbsp;</span></p> <p><span class="cls0">(e) In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:&nbsp;</span></p> <p><span class="cls0">(1) in accordance with any reasonable method of application to which the parties agree;&nbsp;</span></p> <p><span class="cls0">(2) in the absence of the parties&rsquo; agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or&nbsp;</span></p> <p><span class="cls0">(3) in the absence of an agreement to a reasonable method and a timely manifestation of the obligor&rsquo;s intention, in the following order:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to obligations that are not secured; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if more than one obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.&nbsp;</span></p> <p><span class="cls0">(f) In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:&nbsp;</span></p> <p><span class="cls0">(1) the purchase-money collateral also secures an obligation that is not a purchase-money obligation;&nbsp;</span></p> <p><span class="cls0">(2) collateral that is not purchase-money collateral also secures the purchase-money obligation; or&nbsp;</span></p> <p><span class="cls0">(3) the purchase-money obligation has been renewed, refinanced, consolidated, or restructured.&nbsp;</span></p> <p><span class="cls0">(g) In a transaction other than a consumer-goods transaction, a secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.&nbsp;</span></p> <p><span class="cls0">(h) The limitation of the rules in subsections (e), (f), and (g) of this section to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 3, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-104. Control of deposit account.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTROL OF DEPOSIT ACCOUNT&nbsp;</span></p> <p><span class="cls0">(a) A secured party has control of a deposit account if:&nbsp;</span></p> <p><span class="cls0">(1) the secured party is the bank with which the deposit account is maintained;&nbsp;</span></p> <p><span class="cls0">(2) the debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or&nbsp;</span></p> <p><span class="cls0">(3) the secured party becomes the bank&rsquo;s customer with respect to the deposit account.&nbsp;</span></p> <p><span class="cls0">(b) A secured party that has satisfied subsection (a) of this section has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 4, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-105. Control of electronic chattel paper.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTROL OF ELECTRONIC CHATTEL PAPER&nbsp;</span></p> <p><span class="cls0">A secured party has control of electronic chattel paper if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:&nbsp;</span></p> <p><span class="cls0">(1) a single authoritative copy of the record or records exists which is unique, identifiable and, except as otherwise provided in paragraphs (4), (5), and (6) of this section, unalterable;&nbsp;</span></p> <p><span class="cls0">(2) the authoritative copy identifies the secured party as the assignee of the record or records;&nbsp;</span></p> <p><span class="cls0">(3) the authoritative copy is communicated to and maintained by the secured party or its designated custodian;&nbsp;</span></p> <p><span class="cls0">(4) copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the participation of the secured party;&nbsp;</span></p> <p><span class="cls0">(5) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and&nbsp;</span></p> <p><span class="cls0">(6) any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 5, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-106. Control of investment property.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTROL OF INVESTMENT PROPERTY&nbsp;</span></p> <p><span class="cls0">(a) A person has control of a certificated security, uncertificated security, or security entitlement as provided in Section 8106 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A secured party has control of a commodity contract if:&nbsp;</span></p> <p><span class="cls0">(1) the secured party is the commodity intermediary with which the commodity contract is carried; or&nbsp;</span></p> <p><span class="cls0">(2) the commodity customer, secured party, and commodity intermediary have agreed that the commodity intermediary will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer.&nbsp;</span></p> <p><span class="cls0">(c) A secured party having control of all security entitlements or commodity contracts carried in a securities account or commodity account has control over the securities account or commodity account.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 6, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-107. Control of letter-of-credit right.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTROL OF LETTER-OF-CREDIT RIGHT&nbsp;</span></p> <p><span class="cls0">A secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer or any nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under subsection (c) of Section 5114 of this title or otherwise applicable law or practice.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 7, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-108. Sufficiency of description.&nbsp;</span></p> <p class="cls1"><span class="cls0">SUFFICIENCY OF DESCRIPTION&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsections (c), (d), and (e) of this section, a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (d) of this section, a description of collateral reasonably identifies the collateral if it identifies the collateral by:&nbsp;</span></p> <p><span class="cls0">(1) specific listing;&nbsp;</span></p> <p><span class="cls0">(2) category;&nbsp;</span></p> <p><span class="cls0">(3) except as otherwise provided in subsection (e) of this section, a type of collateral defined in this title;&nbsp;</span></p> <p><span class="cls0">(4) quantity;&nbsp;</span></p> <p><span class="cls0">(5) computational or allocational formula or procedure; or&nbsp;</span></p> <p><span class="cls0">(6) except as otherwise provided in subsection (c) of this section, any other method, if the identity of the collateral is objectively determinable.&nbsp;</span></p> <p><span class="cls0">(c) A description of collateral as &ldquo;all the debtor&rsquo;s assets&rdquo; or &ldquo;all the debtor&rsquo;s personal property&rdquo; or using words of similar import does not reasonably identify the collateral.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in subsection (e) of this section, a description of a security entitlement, securities account, or commodity account is sufficient if it describes:&nbsp;</span></p> <p><span class="cls0">(1) the collateral by those terms or as investment property; or&nbsp;</span></p> <p><span class="cls0">(2) the underlying financial asset or commodity contract.&nbsp;</span></p> <p><span class="cls0">(e) A description only by type of collateral defined in this title is an insufficient description of:&nbsp;</span></p> <p><span class="cls0">(1) a commercial tort claim; or&nbsp;</span></p> <p><span class="cls0">(2) in a consumer transaction, consumer goods, a security entitlement, a securities account, or a commodity account.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 8, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-109. Scope of article.&nbsp;</span></p> <p class="cls1"><span class="cls0">SCOPE OF ARTICLE&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsections (c) and (d) of this section, this article applies to:&nbsp;</span></p> <p><span class="cls0">(1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;&nbsp;</span></p> <p><span class="cls0">(2) an agricultural lien;&nbsp;</span></p> <p><span class="cls0">(3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;&nbsp;</span></p> <p><span class="cls0">(4) a consignment;&nbsp;</span></p> <p><span class="cls0">(5) a security interest arising under Section 2401, Section 2505, paragraph (3) of Section 2711, or paragraph (5) of Section 2A508 of this title, as provided in Section 19110 of this title; and&nbsp;</span></p> <p><span class="cls0">(6) a security interest arising under Section 4210 or 5118 of this title.&nbsp;</span></p> <p><span class="cls0">(b) The application of this article to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this article does not apply.&nbsp;</span></p> <p><span class="cls0">(c) This article does not apply to the extent that:&nbsp;</span></p> <p><span class="cls0">(1) a statute, regulation, or treaty of the United States preempts this article;&nbsp;</span></p> <p><span class="cls0">(2) another statute of this state expressly governs the creation, perfection, priority, or enforcement of a security interest created by this state or a governmental unit of this state;&nbsp;</span></p> <p><span class="cls0">(3) a statute of another state, a foreign country, or a governmental unit of another state or a foreign country, other than a statute generally applicable to security interests, expressly governs creation, perfection, priority, or enforcement of a security interest created by the state, country, or governmental unit; or&nbsp;</span></p> <p><span class="cls0">(4) the rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under Section 5-114 of this title.&nbsp;</span></p> <p><span class="cls0">(d) This article does not apply to:&nbsp;</span></p> <p><span class="cls0">(1) a landlord&rsquo;s lien, other than an agricultural lien;&nbsp;</span></p> <p><span class="cls0">(2) a lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but Section 19333 of this title applies with respect to priority of the lien;&nbsp;</span></p> <p><span class="cls0">(3) an assignment of a claim for wages, salary, or other compensation of an employee;&nbsp;</span></p> <p><span class="cls0">(4) a sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose;&nbsp;</span></p> <p><span class="cls0">(5) an assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only;&nbsp;</span></p> <p><span class="cls0">(6) an assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;&nbsp;</span></p> <p><span class="cls0">(7) an assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness;&nbsp;</span></p> <p><span class="cls0">(8) a transfer of an interest in or an assignment of a claim under a policy of insurance, other than an assignment by or to a health-care provider of a health-care-insurance receivable and any subsequent assignment of the right to payment, but Sections 19315 and 19322 of this title apply with respect to proceeds and priorities in proceeds;&nbsp;</span></p> <p><span class="cls0">(9) an assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;&nbsp;</span></p> <p><span class="cls0">(10) a right of recoupment or set-off, but:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;Section 19340 of this title applies with respect to the effectiveness of rights of recoupment or set-off against deposit accounts; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;Section 19404 of this title applies with respect to defenses or claims of an account debtor;&nbsp;</span></p> <p><span class="cls0">(11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;liens on real property in Sections 19203 and 19308 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;fixtures in Section 19334 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;fixture filings in Sections 19501, 19502, 19512, 19516, and 19519 of this title; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;security agreements covering personal and real property in Section 19604 of this title; or&nbsp;</span></p> <p><span class="cls0">(12) an assignment of a claim arising in tort, other than a commercial tort claim, but Sections 19315 and 19322 of this title apply with respect to proceeds and priorities in proceeds.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 9, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 2, eff. Nov. 1, 2004.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-110. Security interests arising under article 2 or 2a.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTERESTS ARISING UNDER ARTICLE 2 OR 2A&nbsp;</span></p> <p><span class="cls0">A security interest arising under Section 2401, 2505, paragraph (3) of Section 2711, or paragraph (5) of Section 2A508 of this title is subject to this article. However, until the debtor obtains possession of the goods:&nbsp;</span></p> <p><span class="cls0">(1) the security interest is enforceable, even if paragraph (3) of subsection (b) of Section 19203 of this title has not been satisfied;&nbsp;</span></p> <p><span class="cls0">(2) filing is not required to perfect the security interest;&nbsp;</span></p> <p><span class="cls0">(3) the rights of the secured party after default by the debtor are governed by Article 2 or 2A of this title; and&nbsp;</span></p> <p><span class="cls0">(4) the security interest has priority over a conflicting security interest created by the debtor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 10, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-201. General effectiveness of security agreement.&nbsp;</span></p> <p class="cls1"><span class="cls0">GENERAL EFFECTIVENESS OF SECURITY AGREEMENT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this title, a security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.&nbsp;</span></p> <p><span class="cls0">(b) A transaction subject to this article is subject to any applicable rule of law which establishes a different rule for consumers, and any other statute or regulation that regulates the rates, charges, agreements and practices for loans, credit sales or other extensions of credit.&nbsp;</span></p> <p><span class="cls0">(c) In case of conflict between this article and a rule of law, statute, or regulation described in subsection (b) of this section, the rule of law, statute, or regulation controls. Failure to comply with a statute or regulation described in subsection (b) of this section has only the effect the statute or regulation specifies.&nbsp;</span></p> <p><span class="cls0">(d) This article does not:&nbsp;</span></p> <p><span class="cls0">(1) validate any rate, charge, agreement, or practice that violates a rule of law, statute, or regulation described in subsection (b) of this section; or&nbsp;</span></p> <p><span class="cls0">(2) extend the application of the rule of law, statute, or regulation to a transaction not otherwise subject to it.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 11, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-202. Title to collateral immaterial.&nbsp;</span></p> <p class="cls1"><span class="cls0">TITLE TO COLLATERAL IMMATERIAL&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of this article with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 12, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-203. Attachment and enforceability of security interest &ndash; Proceeds - Supporting obligations - Formal requisites.&nbsp;</span></p> <p class="cls1"><span class="cls0">ATTACHMENT AND ENFORCEABILITY OF SECURITY INTEREST;&nbsp;</span></p> <p class="cls1"><span class="cls0">PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES&nbsp;</span></p> <p><span class="cls0">(a) A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsections (c) through (i) of this section, a security interest is enforceable against the debtor and third parties with respect to the collateral only if:&nbsp;</span></p> <p><span class="cls0">(1) value has been given;&nbsp;</span></p> <p><span class="cls0">(2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and&nbsp;</span></p> <p><span class="cls0">(3) one of the following conditions is met:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the debtor has authenticated a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the collateral is not a certificated security and is in the possession of the secured party under Section 19313 of this title pursuant to the debtor&rsquo;s security agreement;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under Section 8301 of this title pursuant to the debtor&rsquo;s security agreement; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;the collateral is deposit accounts, electronic chattel paper, investment property, letter-of-credit rights, or electronic documents, and the secured party has control under Section 7-106, 19104, 19105, 19106, or 19107 of this title pursuant to the debtor&rsquo;s security agreement.&nbsp;</span></p> <p><span class="cls0">(c) Subsection (b) of this section is subject to Section 4210 of this title on the security interest of a collecting bank, Section 5118 of this title on the security interest of a letter-of-credit issuer or nominated person, Section 19110 of this title on a security interest arising under Article 2 or 2A of this title, and Section 19206 of this title on security interests in investment property.&nbsp;</span></p> <p><span class="cls0">(d) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this article or by contract:&nbsp;</span></p> <p><span class="cls0">(1) the security agreement becomes effective to create a security interest in the person&rsquo;s property; or&nbsp;</span></p> <p><span class="cls0">(2) the person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.&nbsp;</span></p> <p><span class="cls0">(e) If a new debtor becomes bound as debtor by a security agreement entered into by another person:&nbsp;</span></p> <p><span class="cls0">(1) the agreement satisfies paragraph (3) of subsection (b) of this section with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and&nbsp;</span></p> <p><span class="cls0">(2) another agreement is not necessary to make a security interest in the property enforceable.&nbsp;</span></p> <p><span class="cls0">(f) The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by Section 19315 of this title and is also attachment of a security interest in a supporting obligation for the collateral.&nbsp;</span></p> <p><span class="cls0">(g) The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.&nbsp;</span></p> <p><span class="cls0">(h) The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.&nbsp;</span></p> <p><span class="cls0">(i) The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 13, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 60, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-204. After-acquired property; future advances.&nbsp;</span></p> <p class="cls1"><span class="cls0">AFTER-ACQUIRED PROPERTY; FUTURE ADVANCES&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, a security agreement may create or provide for a security interest in after-acquired collateral.&nbsp;</span></p> <p><span class="cls0">(b) A security interest does not attach under a term constituting an afteracquired property clause to:&nbsp;</span></p> <p><span class="cls0">(1) consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within ten (10) days after the secured party gives value; or&nbsp;</span></p> <p><span class="cls0">(2) a commercial tort claim.&nbsp;</span></p> <p><span class="cls0">(c) A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles, or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 14, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-205. Use or disposition of collateral permissible.&nbsp;</span></p> <p class="cls1"><span class="cls0">USE OR DISPOSITION OF COLLATERAL PERMISSIBLE&nbsp;</span></p> <p><span class="cls0">(a) A security interest is not invalid or fraudulent against creditors solely because:&nbsp;</span></p> <p><span class="cls0">(1) the debtor has the right or ability to:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;collect, compromise, enforce, or otherwise deal with collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;accept the return of collateral or make repossessions; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;use, commingle, or dispose of proceeds; or&nbsp;</span></p> <p><span class="cls0">(2) the secured party fails to require the debtor to account for proceeds or replace collateral.&nbsp;</span></p> <p><span class="cls0">(b) This section does not relax the requirements of possession if attachment, perfection, or enforcement of a security interest depends upon possession of the collateral by the secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 15, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-206. Security interest arising in purchase or delivery of financial asset.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTEREST ARISING IN PURCHASE&nbsp;</span></p> <p class="cls1"><span class="cls0">OR DELIVERY OF FINANCIAL ASSET&nbsp;</span></p> <p><span class="cls0">(a) A security interest in favor of a securities intermediary attaches to a person&rsquo;s security entitlement if:&nbsp;</span></p> <p><span class="cls0">(1) the person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and&nbsp;</span></p> <p><span class="cls0">(2) the securities intermediary credits the financial asset to the buyer&rsquo;s securities account before the buyer pays the securities intermediary.&nbsp;</span></p> <p><span class="cls0">(b) The security interest described in subsection (a) of this section secures the person&rsquo;s obligation to pay for the financial asset.&nbsp;</span></p> <p><span class="cls0">(c) A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if:&nbsp;</span></p> <p><span class="cls0">(1) the security or other financial asset:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and&nbsp;</span></p> <p><span class="cls0">(2) the agreement calls for delivery against payment.&nbsp;</span></p> <p><span class="cls0">(d) The security interest described in subsection (c) of this section secures the obligation to make payment for the delivery.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 16, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-207. Rights and duties of secured party having possession or control of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS AND DUTIES OF SECURED PARTY&nbsp;</span></p> <p class="cls1"><span class="cls0">HAVING POSSESSION OR CONTROL OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (d) of this section, a secured party shall use reasonable care in the custody and preservation of collateral in the secured party&rsquo;s possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (d) of this section, if a secured party has possession of collateral:&nbsp;</span></p> <p><span class="cls0">(1) reasonable expenses, including the cost of insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral;&nbsp;</span></p> <p><span class="cls0">(2) the risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;&nbsp;</span></p> <p><span class="cls0">(3) the secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and&nbsp;</span></p> <p><span class="cls0">(4) the secured party may use or operate the collateral:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;for the purpose of preserving the collateral or its value;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;as permitted by an order of a court having competent jurisdiction; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;except in the case of consumer goods, in the manner and to the extent agreed by the debtor.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsection (d) of this section, a secured party having possession of collateral or control of collateral under Section 7-106, 19104, 19105, 19106, or 19107 of this title:&nbsp;</span></p> <p><span class="cls0">(1) may hold as additional security any proceeds, except money or funds, received from the collateral;&nbsp;</span></p> <p><span class="cls0">(2) shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and&nbsp;</span></p> <p><span class="cls0">(3) may create a security interest in the collateral.&nbsp;</span></p> <p><span class="cls0">(d) If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:&nbsp;</span></p> <p><span class="cls0">(1) subsection (a) of this section does not apply unless the secured party is entitled under an agreement:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to charge back uncollected collateral; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and&nbsp;</span></p> <p><span class="cls0">(2) subsections (b) and (c) of this section do not apply.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 17, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 61, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-208. Additional duties of secured party having control of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">ADDITIONAL DUTIES OF SECURED PARTY&nbsp;</span></p> <p class="cls1"><span class="cls0">HAVING CONTROL OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.&nbsp;</span></p> <p><span class="cls0">(b) Within ten (10) days after receiving an authenticated demand by the debtor:&nbsp;</span></p> <p><span class="cls0">(1) a secured party having control of a deposit account under paragraph (2) of subsection (a) of Section 19104 of this title shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;&nbsp;</span></p> <p><span class="cls0">(2) a secured party having control of a deposit account under paragraph (3) of subsection (a) of Section 19104 of this title shall:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;pay the debtor the balance on deposit in the deposit account; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;transfer the balance on deposit into a deposit account in the debtor&rsquo;s name;&nbsp;</span></p> <p><span class="cls0">(3) a secured party, other than a buyer, having control of electronic chattel paper under Section 19105 of this title shall:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;&nbsp;</span></p> <p><span class="cls0">(4) a secured party having control of investment property under paragraph (2) of subsection (d) of Section 8106 of this title or subsection (b) of Section 19106 of this title shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party;&nbsp;</span></p> <p><span class="cls0">(5) a secured party having control of a letter-of-credit right under Section 19107 of this title shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party; and&nbsp;</span></p> <p><span class="cls0">(6) a secured party having control of an electronic document shall:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;give control of the electronic document to the debtor or its designated custodian;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 18, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 62, eff. Jan 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-209. Duties of secured party if account debtor has been notified of assignment.&nbsp;</span></p> <p class="cls1"><span class="cls0">DUTIES OF SECURED PARTY IF ACCOUNT&nbsp;</span></p> <p class="cls1"><span class="cls0">DEBTOR HAS BEEN NOTIFIED OF ASSIGNMENT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (c) of this section, this section applies if:&nbsp;</span></p> <p><span class="cls0">(1) there is no outstanding secured obligation; and&nbsp;</span></p> <p><span class="cls0">(2) the secured party is not committed to make advances, incur obligations, or otherwise give value.&nbsp;</span></p> <p><span class="cls0">(b) Within ten (10) days after receiving an authenticated demand by the debtor, a secured party shall send to an account debtor that has received notification of an assignment to the secured party as assignee under subsection (a) of Section 19406 of this title an authenticated record that releases the account debtor from any further obligation to the secured party.&nbsp;</span></p> <p><span class="cls0">(c) This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 19, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-210. Request for accounting; request regarding list of collateral or statement of account.&nbsp;</span></p> <p class="cls1"><span class="cls0">REQUEST FOR ACCOUNTING; REQUEST REGARDING&nbsp;</span></p> <p class="cls1"><span class="cls0">LIST OF COLLATERAL OR STATEMENT OF ACCOUNT&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p><span class="cls0">(1) &ldquo;Request&rdquo; means a record of a type described in paragraph (2), (3), or (4) of this subsection.&nbsp;</span></p> <p><span class="cls0">(2) &ldquo;Request for an accounting&rdquo; means a record authenticated by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request.&nbsp;</span></p> <p><span class="cls0">(3) &ldquo;Request regarding a list of collateral&rdquo; means a record authenticated by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request.&nbsp;</span></p> <p><span class="cls0">(4) &ldquo;Request regarding a statement of account&rdquo; means a record authenticated by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsections (c), (d), (e), and (f) of this section, a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, shall comply with a request within fourteen (14) days after receipt:&nbsp;</span></p> <p><span class="cls0">(1) in the case of a request for an accounting, by authenticating and sending to the debtor an accounting; and&nbsp;</span></p> <p><span class="cls0">(2) in the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.&nbsp;</span></p> <p><span class="cls0">(c) A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor an authenticated record including a statement to that effect within fourteen (14) days after receipt.&nbsp;</span></p> <p><span class="cls0">(d) A person that receives a request regarding a list of collateral, claims no interest in the collateral when it receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within fourteen (14) days after receipt by sending to the debtor an authenticated record:&nbsp;</span></p> <p><span class="cls0">(1) disclaiming any interest in the collateral; and&nbsp;</span></p> <p><span class="cls0">(2) if known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient&rsquo;s interest in the collateral.&nbsp;</span></p> <p><span class="cls0">(e) A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier time shall comply with the request within fourteen (14) days after receipt by sending to the debtor an authenticated record:&nbsp;</span></p> <p><span class="cls0">(1) disclaiming any interest in the obligations; and&nbsp;</span></p> <p><span class="cls0">(2) if known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient&rsquo;s interest in the obligations.&nbsp;</span></p> <p><span class="cls0">(f) A debtor is entitled without charge to one response to a request under this section during any six-month period. The secured party may require payment of a charge not exceeding Twenty-five Dollars ($25.00) for each additional response.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 20, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-301. Law governing perfection and priority of security interests.&nbsp;</span></p> <p class="cls1"><span class="cls0">LAW GOVERNING PERFECTION AND&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in Sections 1-9-303 through 1-9-306 of this title, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.&nbsp;</span></p> <p><span class="cls0">(2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.&nbsp;</span></p> <p><span class="cls0">(3) Except as otherwise provided in paragraph (4) of this section, while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;perfection of a security interest in the goods by filing a fixture filing;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;perfection of a security interest in timber to be cut; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.&nbsp;</span></p> <p><span class="cls0">(4) The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 21, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 63, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-302. Law governing perfection and priority of agricultural liens.&nbsp;</span></p> <p class="cls1"><span class="cls0">LAW GOVERNING PERFECTION AND PRIORITY OF AGRICULTURAL LIENS&nbsp;</span></p> <p><span class="cls0">While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 22, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-303. Law governing perfection and priority of security interests in goods covered by a certificate of title.&nbsp;</span></p> <p class="cls1"><span class="cls0">LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY&nbsp;</span></p> <p class="cls1"><span class="cls0">INTERESTS IN GOODS COVERED BY A CERTIFICATE OF TITLE&nbsp;</span></p> <p><span class="cls0">(a) This section applies to goods covered by a certificate of title, even if there is no other relationship between the jurisdiction under whose certificate of title the goods are covered and the goods or the debtor.&nbsp;</span></p> <p><span class="cls0">(b) Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority. Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.&nbsp;</span></p> <p><span class="cls0">(c) The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 23, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-304. Law governing perfection and priority of security interests in deposit accounts.&nbsp;</span></p> <p class="cls1"><span class="cls0">LAW GOVERNING PERFECTION AND PRIORITY OF&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTERESTS IN DEPOSIT ACCOUNTS&nbsp;</span></p> <p><span class="cls0">(a) The local law of a bank&rsquo;s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.&nbsp;</span></p> <p><span class="cls0">(b) The following rules determine a bank&rsquo;s jurisdiction for purposes of this part:&nbsp;</span></p> <p><span class="cls0">(1) If an agreement between the bank and its customer governing the deposit account expressly provides that a particular jurisdiction is the bank&rsquo;s jurisdiction for purposes of this part, this article, or the Uniform Commercial Code, that jurisdiction is the bank&rsquo;s jurisdiction.&nbsp;</span></p> <p><span class="cls0">(2) If paragraph (1) of this subsection does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank&rsquo;s jurisdiction.&nbsp;</span></p> <p><span class="cls0">(3) If neither paragraph (1) nor paragraph (2) of this subsection applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank&rsquo;s jurisdiction.&nbsp;</span></p> <p><span class="cls0">(4) If none of the preceding paragraphs of this subsection applies, the bank&rsquo;s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer&rsquo;s account is located.&nbsp;</span></p> <p><span class="cls0">(5) If none of the preceding paragraphs applies, the bank&rsquo;s jurisdiction is the jurisdiction in which the chief executive office of the bank is located.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 24, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 3, eff. Nov. 1, 2004.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-305. Law governing perfection and priority of security interests in investment property.&nbsp;</span></p> <p class="cls1"><span class="cls0">LAW GOVERNING PERFECTION AND PRIORITY&nbsp;</span></p> <p class="cls1"><span class="cls0">OF SECURITY INTERESTS IN INVESTMENT PROPERTY&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (c) of this section, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.&nbsp;</span></p> <p><span class="cls0">(2) The local law of the issuer&rsquo;s jurisdiction as specified in subsection (d) of Section 8110 of this title governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.&nbsp;</span></p> <p><span class="cls0">(3) The local law of the securities intermediary&rsquo;s jurisdiction as specified in subsection (e) of Section 8110 of this title governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account.&nbsp;</span></p> <p><span class="cls0">(4) The local law of the commodity intermediary&rsquo;s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.&nbsp;</span></p> <p><span class="cls0">(b) The following rules determine a commodity intermediary&rsquo;s jurisdiction for purposes of this part:&nbsp;</span></p> <p><span class="cls0">(1) If an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary&rsquo;s jurisdiction for purposes of this part, this article, or this title, that jurisdiction is the commodity intermediary&rsquo;s jurisdiction.&nbsp;</span></p> <p><span class="cls0">(2) If paragraph (1) of this subsection does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary&rsquo;s jurisdiction.&nbsp;</span></p> <p><span class="cls0">(3) If neither paragraph (1) nor paragraph (2) of this subsection applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary&rsquo;s jurisdiction.&nbsp;</span></p> <p><span class="cls0">(4) If none of the preceding paragraphs of this section applies, the commodity intermediary&rsquo;s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer&rsquo;s account is located.&nbsp;</span></p> <p><span class="cls0">(5) If none of the preceding paragraphs of this section applies, the commodity intermediary&rsquo;s jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.&nbsp;</span></p> <p><span class="cls0">(c) The local law of the jurisdiction in which the debtor is located governs:&nbsp;</span></p> <p><span class="cls0">(1) perfection of a security interest in investment property by filing;&nbsp;</span></p> <p><span class="cls0">(2) automatic perfection of a security interest in investment property created by a broker or securities intermediary; and&nbsp;</span></p> <p><span class="cls0">(3) automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 25, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-306. Law governing perfection and priority of security interests in letter-of-credit rights.&nbsp;</span></p> <p class="cls1"><span class="cls0">LAW GOVERNING PERFECTION AND PRIORITY&nbsp;</span></p> <p class="cls1"><span class="cls0">OF SECURITY INTERESTS IN LETTER-OF-CREDIT RIGHTS&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (c) of this section, the local law of the issuer&rsquo;s jurisdiction or a nominated person&rsquo;s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a letter-of-credit right if the issuer&rsquo;s jurisdiction or nominated person&rsquo;s jurisdiction is a state.&nbsp;</span></p> <p><span class="cls0">(b) For purposes of this part, an issuer&rsquo;s jurisdiction or nominated person&rsquo;s jurisdiction is the jurisdiction whose law governs the liability of the issuer or nominated person with respect to the letter-of-credit right as provided in Section 5116 of this title.&nbsp;</span></p> <p><span class="cls0">(c) This section does not apply to a security interest that is perfected only under subsection (d) of Section 19308 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 26, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-307. Location of debtor.&nbsp;</span></p> <p class="cls1"><span class="cls0">LOCATION OF DEBTOR&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;place of business&rdquo; means a place where a debtor conducts its affairs.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in this section, the following rules determine a debtor&rsquo;s location:&nbsp;</span></p> <p><span class="cls0">(1) A debtor who is an individual is located at the individual&rsquo;s principal residence;&nbsp;</span></p> <p><span class="cls0">(2) A debtor that is an organization and has only one place of business is located at its place of business; and&nbsp;</span></p> <p><span class="cls0">(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.&nbsp;</span></p> <p><span class="cls0">(c) Subsection (b) of this section of this section applies only if a debtor&rsquo;s residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest&rsquo;s obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) of this section does not apply, the debtor is located in the District of Columbia.&nbsp;</span></p> <p><span class="cls0">(d) A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c) of this section.&nbsp;</span></p> <p><span class="cls0">(e) A registered organization that is organized under the law of a state is located in that state.&nbsp;</span></p> <p><span class="cls0">(f) Except as otherwise provided in subsection (i) of this section, a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located:&nbsp;</span></p> <p><span class="cls0">(1) in the state that the law of the United States designates, if the law designates a state of location;&nbsp;</span></p> <p><span class="cls0">(2) in the state that the registered organization, branch, or agency designates, if the law of the United States authorizes the registered organization, branch, or agency to designate its state of location; or&nbsp;</span></p> <p><span class="cls0">(3) in the District of Columbia, if neither paragraph (1) nor paragraph (2) of this subsection applies.&nbsp;</span></p> <p><span class="cls0">(g) A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) of this section notwithstanding:&nbsp;</span></p> <p><span class="cls0">(1) the suspension, revocation, forfeiture, or lapse of the registered organization&rsquo;s status as such in its jurisdiction of organization; or&nbsp;</span></p> <p><span class="cls0">(2) the dissolution, winding up, or cancellation of the existence of the registered organization.&nbsp;</span></p> <p><span class="cls0">(h) The United States is located in the District of Columbia.&nbsp;</span></p> <p><span class="cls0">(i) A branch or agency of a bank that is not organized under the law of the United States or a state is located in the state in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one state.&nbsp;</span></p> <p><span class="cls0">(j) A foreign air carrier under the Federal Aviation Act of 1958, as amended, is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.&nbsp;</span></p> <p><span class="cls0">(k) This section applies only for purposes of this part.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 27, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-308. When security interest or agricultural lien is perfected; continuity of perfection.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN SECURITY INTEREST OR AGRICULTURAL&nbsp;</span></p> <p class="cls1"><span class="cls0">LIEN IS PERFECTED; CONTINUITY OF PERFECTION&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this section and Section 19309 of this title, a security interest is perfected if it has attached and all of the applicable requirements for perfection in Sections 19310 through 19316 of this title have been satisfied. A security interest is perfected when it attaches if the applicable requirements are satisfied before the security interest attaches.&nbsp;</span></p> <p><span class="cls0">(b) An agricultural lien is perfected if it has become effective and all of the applicable requirements for perfection in Section 19310 of this title have been satisfied. An agricultural lien is perfected when it becomes effective if the applicable requirements are satisfied before the agricultural lien becomes effective.&nbsp;</span></p> <p><span class="cls0">(c) A security interest or agricultural lien is perfected continuously if it is originally perfected by one method under this article and is later perfected by another method under this article, without an intermediate period when it was unperfected.&nbsp;</span></p> <p><span class="cls0">(d) Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.&nbsp;</span></p> <p><span class="cls0">(e) Perfection of a security interest in a right to payment or performance also perfects a security interest in a security interest, mortgage, or other lien on personal or real property securing the right.&nbsp;</span></p> <p><span class="cls0">(f) Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account.&nbsp;</span></p> <p><span class="cls0">(g) Perfection of a security interest in a commodity account also perfects a security interest in the commodity contracts carried in the commodity account.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 28, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-309. Security interest perfected upon attachment.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTEREST PERFECTED UPON ATTACHMENT&nbsp;</span></p> <p><span class="cls0">The following security interests are perfected when they attach:&nbsp;</span></p> <p><span class="cls0">(1) a purchase-money security interest in consumer goods, except as otherwise provided in subsection (b) of Section 19311 of this title with respect to consumer goods that are subject to a statute or treaty described in subsection (a) of Section 19311 of this title;&nbsp;</span></p> <p><span class="cls0">(2) an assignment of accounts or payment intangibles which does not by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor&rsquo;s outstanding accounts or payment intangibles;&nbsp;</span></p> <p><span class="cls0">(3) a sale of a payment intangible;&nbsp;</span></p> <p><span class="cls0">(4) a sale of a promissory note;&nbsp;</span></p> <p><span class="cls0">(5) a security interest created by the assignment of a health-care-insurance receivable to the provider of the health-care goods or services;&nbsp;</span></p> <p><span class="cls0">(6) a security interest arising under Section 2401, 2505, paragraph (3) of Section 2711, or paragraph (5) of Section 2A508 of this title, until the debtor obtains possession of the collateral;&nbsp;</span></p> <p><span class="cls0">(7) a security interest of a collecting bank arising under Section 4210 of this title;&nbsp;</span></p> <p><span class="cls0">(8) a security interest of an issuer or nominated person arising under Section 5118 of this title;&nbsp;</span></p> <p><span class="cls0">(9) a security interest arising in the delivery of a financial asset under subsection (c) of Section 19206 of this title;&nbsp;</span></p> <p><span class="cls0">(10) a security interest in investment property created by a broker or securities intermediary;&nbsp;</span></p> <p><span class="cls0">(11) a security interest in a commodity contract or a commodity account created by a commodity intermediary;&nbsp;</span></p> <p><span class="cls0">(12) an assignment for the benefit of all creditors of the transferor and subsequent transfers by the assignee thereunder;&nbsp;</span></p> <p><span class="cls0">(13) a security interest created by an assignment of a beneficial interest in a decedent&rsquo;s estate; and&nbsp;</span></p> <p><span class="cls0">(14) a sale by an individual of an account that is a right to payment of winnings in a lottery or other game of chance.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 29, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 4, eff. Nov. 1, 2004.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-310. When filing required to perfect security interest or agricultural lien - Security interests and agricultural liens to which filing provisions do not apply.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN FILING REQUIRED TO PERFECT SECURITY INTEREST OR&nbsp;</span></p> <p class="cls1"><span class="cls0">AGRICULTURAL LIEN; SECURITY INTERESTS AND AGRICULTURAL&nbsp;</span></p> <p class="cls1"><span class="cls0">LIENS TO WHICH FILING PROVISIONS DO NOT APPLY&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section and Section 19312 of this title, a financing statement must be filed to perfect all security interests and agricultural liens.&nbsp;</span></p> <p><span class="cls0">(b) The filing of a financing statement is not necessary to perfect a security interest:&nbsp;</span></p> <p><span class="cls0">(1) that is perfected under subsection (d), (e), (f), or (g) of Section 19308 of this title;&nbsp;</span></p> <p><span class="cls0">(2) that is perfected under Section 19309 of this title when it attaches;&nbsp;</span></p> <p><span class="cls0">(3) in property subject to a statute, regulation, or treaty described in subsection (a) of Section 19311 of this title;&nbsp;</span></p> <p><span class="cls0">(4) in goods in possession of a bailee which is perfected under paragraph (1) or (2) of subsection (d) of Section 19312 of this title;&nbsp;</span></p> <p><span class="cls0">(5) in certificated securities, documents, goods, or instruments which is perfected without filing, control, or possession under subsection (e), (f), or (g) of Section 19312 of this title;&nbsp;</span></p> <p><span class="cls0">(6) in collateral in the secured party&rsquo;s possession under Section 19313 of this title;&nbsp;</span></p> <p><span class="cls0">(7) in a certificated security which is perfected by delivery of the security certificate to the secured party under Section 19313 of this title;&nbsp;</span></p> <p><span class="cls0">(8) in deposit accounts, electronic chattel paper, investment property, or letter-of-credit rights which is perfected by control under Section 19314 of this title;&nbsp;</span></p> <p><span class="cls0">(9) in proceeds which is perfected under Section 19315 of this title; or&nbsp;</span></p> <p><span class="cls0">(10) that is perfected under Section 19316 of this title.&nbsp;</span></p> <p><span class="cls0">(c) If a secured party assigns a perfected security interest or agricultural lien, a filing under this article is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 30, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 64, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-311. Perfection of security interests in property subject to certain statutes, regulations, and treaties.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERFECTION OF SECURITY INTERESTS IN PROPERTY&nbsp;</span></p> <p class="cls1"><span class="cls0">SUBJECT TO CERTAIN STATUTES, REGULATIONS, AND TREATIES&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (d) of this section, the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:&nbsp;</span></p> <p><span class="cls0">(1) a statute, regulation, or treaty of the United States whose requirements for a security interest&rsquo;s obtaining priority over the rights of a lien creditor with respect to the property preempt subsection (a) of Section 19310 of this title;&nbsp;</span></p> <p><span class="cls0">(2) another statute of this state that provides for central filing of, or that requires indication on or delivery for indication on a certificate of title of, any security interest in the property as a condition or result of perfection, including, but not limited to, Section 1110 of Title 47 and Section 4013 of Title 63 of the Oklahoma Statutes;&nbsp;</span></p> <p><span class="cls0">(3) a certificate-of-title statute of another jurisdiction which provides for a security interest to be indicated on the certificate as a condition or result of the security interest&rsquo;s obtaining priority over the rights of a lien creditor with respect to the property; or&nbsp;</span></p> <p><span class="cls0">(4) the law or procedure of a federally recognized Indian tribe, if the security interest is in a vehicle registered or to be registered by the federally recognized Indian tribe and if within thirty (30) days after the security interest attaches, it is noted on the face of a certificate of title issued by the Indian tribe or, notwithstanding subsection G of Section 1110 of Title 47 of the Oklahoma Statutes, the security interest is otherwise perfected under an applicable law or procedure of that tribe.&nbsp;</span></p> <p><span class="cls0">(b) Compliance with the requirements of a statute, regulation, or treaty described in subsection (a) of this section for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under this article. Except as otherwise provided in subsection (d) of this section and Section 19313 and subsections (d) and (e) of Section 19316 of this title for goods covered by a certificate of title, a security interest in property subject to a statute, regulation, or treaty described in subsection (a) of this section may be perfected only by compliance with those requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsection (d) of this section and subsections (d) and (e) of Section 19316 of this title, duration and renewal of perfection of a security interest perfected by compliance with the requirements prescribed by a statute, regulation, or treaty described in subsection (a) of this section are governed by the statute, regulation, or treaty. In other respects, the security interest is subject to this article.&nbsp;</span></p> <p><span class="cls0">(d) During any period in which collateral, described in Section 1110 of Title 47 and Section 4013 of Title 63 of the Oklahoma Statutes, is inventory held for sale or lease by a person or leased by that person as lessor and that person is in the business of selling goods of that kind, this section does not apply to a security interest in that collateral created by that person as debtor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 31, eff. July 1, 2001. Amended by Laws 2001, c. 354, &sect; 1, eff. July 1, 2001; Laws 2005, c. 139, &sect; 37, emerg. eff. May 5, 2005.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-312. Perfection of security interests in chattel paper, deposit accounts, documents, goods covered by documents, instruments, investment property, letter-of-credit rights, and money - Perfection by permissive filing - Temporary perfection without filing or transfer of possession.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERFECTION OF SECURITY INTERESTS IN CHATTEL PAPER, DEPOSIT&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCOUNTS, DOCUMENTS, GOODS COVERED BY DOCUMENTS, INSTRUMENTS,&nbsp;</span></p> <p class="cls1"><span class="cls0">INVESTMENT PROPERTY, LETTER-OF-CREDIT RIGHTS, AND MONEY;&nbsp;</span></p> <p class="cls1"><span class="cls0">PERFECTION BY PERMISSIVE FILING; TEMPORARY PERFECTION WITHOUT&nbsp;</span></p> <p class="cls1"><span class="cls0">FILING OR TRANSFER OF POSSESSION&nbsp;</span></p> <p><span class="cls0">(a) A security interest in chattel paper, negotiable documents, instruments, or investment property may be perfected by filing.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsections (c) and (d) of Section 19315 of this title for proceeds:&nbsp;</span></p> <p><span class="cls0">(1) a security interest in a deposit account may be perfected only by control under Section 19314 of this title;&nbsp;</span></p> <p><span class="cls0">(2) and except as otherwise provided in subsection (d) of Section 19308 of this title, a security interest in a letter-of-credit right may be perfected only by control under Section 19314 of this title; and&nbsp;</span></p> <p><span class="cls0">(3) a security interest in money may be perfected only by the secured party&rsquo;s taking possession under Section 19313 of this title.&nbsp;</span></p> <p><span class="cls0">(c) While goods are in the possession of a bailee that has issued a negotiable document covering the goods:&nbsp;</span></p> <p><span class="cls0">(1) a security interest in the goods may be perfected by perfecting a security interest in the document; and&nbsp;</span></p> <p><span class="cls0">(2) a security interest perfected in the document has priority over any security interest that becomes perfected in the goods by another method during that time.&nbsp;</span></p> <p><span class="cls0">(d) While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by:&nbsp;</span></p> <p><span class="cls0">(1) issuance of a document in the name of the secured party;&nbsp;</span></p> <p><span class="cls0">(2) the bailee&rsquo;s receipt of notification of the secured party&rsquo;s interest; or&nbsp;</span></p> <p><span class="cls0">(3) filing as to the goods.&nbsp;</span></p> <p><span class="cls0">(e) A security interest in certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of twenty (20) days from the time it attaches to the extent that it arises for new value given under an authenticated security agreement.&nbsp;</span></p> <p><span class="cls0">(f) A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for twenty (20) days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of:&nbsp;</span></p> <p><span class="cls0">(1) ultimate sale or exchange; or&nbsp;</span></p> <p><span class="cls0">(2) loading, unloading, storing, shipping, transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange.&nbsp;</span></p> <p><span class="cls0">(g) A perfected security interest in a certificated security or instrument remains perfected for twenty (20) days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of:&nbsp;</span></p> <p><span class="cls0">(1) ultimate sale or exchange; or&nbsp;</span></p> <p><span class="cls0">(2) presentation, collection, enforcement, renewal, or registration of transfer.&nbsp;</span></p> <p><span class="cls0">(h) After the twentyday period specified in subsection (e), (f), or (g) of this section expires, perfection depends upon compliance with this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 32, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 65, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-313. When possession by or delivery to secured party perfects security interest without filing.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN POSSESSION BY OR DELIVERY TO SECURED PARTY&nbsp;</span></p> <p class="cls1"><span class="cls0">PERFECTS SECURITY INTEREST WITHOUT FILING&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under Section 8301 of this title.&nbsp;</span></p> <p><span class="cls0">(b) With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in subsection (d) of Section 19316 of this title.&nbsp;</span></p> <p><span class="cls0">(c) With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor&rsquo;s business, when:&nbsp;</span></p> <p><span class="cls0">(1) the person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party&rsquo;s benefit; or&nbsp;</span></p> <p><span class="cls0">(2) the person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party&rsquo;s benefit.&nbsp;</span></p> <p><span class="cls0">(d) If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.&nbsp;</span></p> <p><span class="cls0">(e) A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under Section 8301 of this title and remains perfected by delivery until the debtor obtains possession of the security certificate.&nbsp;</span></p> <p><span class="cls0">(f) A person in possession of collateral is not required to acknowledge that it holds possession for a secured party&rsquo;s benefit.&nbsp;</span></p> <p><span class="cls0">(g) If a person acknowledges that it holds possession for the secured party&rsquo;s benefit:&nbsp;</span></p> <p><span class="cls0">(1) the acknowledgment is effective under subsection (c) of this section or subsection (a) of Section 8301 of this title, even if the acknowledgment violates the rights of a debtor; and&nbsp;</span></p> <p><span class="cls0">(2) unless the person otherwise agrees or law other than this article otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.&nbsp;</span></p> <p><span class="cls0">(h) A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor&rsquo;s business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:&nbsp;</span></p> <p><span class="cls0">(1) to hold possession of the collateral for the secured party&rsquo;s benefit; or&nbsp;</span></p> <p><span class="cls0">(2) to redeliver the collateral to the secured party.&nbsp;</span></p> <p><span class="cls0">(i) A secured party does not relinquish possession, even if a delivery under subsection (h) of this section violates the rights of a debtor. A person to which collateral is delivered under subsection (h) of this section does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees or law other than this article otherwise provides.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 33, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 66, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-314. Perfection by control.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERFECTION BY CONTROL&nbsp;</span></p> <p><span class="cls0">(a) A security interest in investment property, deposit accounts, letter-of-credit rights, electronic chattel paper, or electronic documents may be perfected by control of the collateral under Section 7-106, 19104, 19105, 19106, or 19107 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A security interest in deposit accounts, electronic chattel paper, letter-of-credit rights, or electronic documents is perfected by control under Section 19104, 19105, or 19107 of this title when the secured party obtains control and remains perfected by control only while the secured party retains control.&nbsp;</span></p> <p><span class="cls0">(c) A security interest in investment property is perfected by control under Section 19106 of this title from the time the secured party obtains control and remains perfected by control until:&nbsp;</span></p> <p><span class="cls0">(1) the secured party does not have control; and&nbsp;</span></p> <p><span class="cls0">(2) one of the following occurs:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;if the collateral is a certificated security, the debtor has or acquires possession of the security certificate;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;if the collateral is a security entitlement, the debtor is or becomes the entitlement holder.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 34, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 67, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-315. Secured party&rsquo;s rights on disposition of collateral and in proceeds.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURED PARTY&rsquo;S RIGHTS ON DISPOSITION&nbsp;</span></p> <p class="cls1"><span class="cls0">OF COLLATERAL AND IN PROCEEDS&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this article and in paragraph (2) of Section 2403 of this title:&nbsp;</span></p> <p><span class="cls0">(1) a security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange, or other disposition thereof unless the secured party authorized the disposition free of the security interest or agricultural lien; and&nbsp;</span></p> <p><span class="cls0">(2) a security interest attaches to any identifiable proceeds of collateral.&nbsp;</span></p> <p><span class="cls0">(b) Proceeds that are commingled with other property are identifiable proceeds:&nbsp;</span></p> <p><span class="cls0">(1) if the proceeds are goods, to the extent provided by Section 19336 of this title; and&nbsp;</span></p> <p><span class="cls0">(2) if the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing, including application of equitable principles, that is permitted under law other than this article with respect to commingled property of the type involved.&nbsp;</span></p> <p><span class="cls0">(c) A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.&nbsp;</span></p> <p><span class="cls0">(d) A perfected security interest in proceeds becomes unperfected on the twenty-first day after the security interest attaches to the proceeds unless:&nbsp;</span></p> <p><span class="cls0">(1) the following conditions are satisfied:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a filed financing statement covers the original collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the proceeds are not acquired with cash proceeds;&nbsp;</span></p> <p><span class="cls0">(2) the proceeds are identifiable cash proceeds; or&nbsp;</span></p> <p><span class="cls0">(3) the security interest in the proceeds is perfected other than under subsection (c) of this section when the security interest attaches to the proceeds or within twenty (20) days thereafter.&nbsp;</span></p> <p><span class="cls0">(e) If a filed financing statement covers the original collateral, a security interest in proceeds which remains perfected under paragraph (1) of subsection (d) of this section becomes unperfected at the later of:&nbsp;</span></p> <p><span class="cls0">(1) when the effectiveness of the filed financing statement lapses under Section 19515 of this title or is terminated under Section 19513 of this title; or&nbsp;</span></p> <p><span class="cls0">(2) the twenty-first day after the security interest attaches to the proceeds.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 35, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-316. Continued perfection of security interest following change in governing law.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTINUED PERFECTION OF SECURITY INTEREST&nbsp;</span></p> <p class="cls1"><span class="cls0">FOLLOWING CHANGE IN GOVERNING LAW&nbsp;</span></p> <p><span class="cls0">(a) A security interest perfected pursuant to the law of the jurisdiction designated in paragraph (1) of Section 19301 or subsection (c) of Section 19305 of this title remains perfected until the earliest of:&nbsp;</span></p> <p><span class="cls0">(1) the time perfection would have ceased under the law of that jurisdiction;&nbsp;</span></p> <p><span class="cls0">(2) the expiration of four (4) months after a change of the debtor&rsquo;s location to another jurisdiction; or&nbsp;</span></p> <p><span class="cls0">(3) the expiration of one (1) year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.&nbsp;</span></p> <p><span class="cls0">(b) If a security interest described in subsection (a) of this section becomes perfected under the law of the other jurisdiction before the earliest time or event described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.&nbsp;</span></p> <p><span class="cls0">(c) A possessory security interest in collateral, other than goods covered by a certificate of title and as-extracted collateral consisting of goods, remains continuously perfected if:&nbsp;</span></p> <p><span class="cls0">(1) the collateral is located in one jurisdiction and subject to a security interest perfected under the law of that jurisdiction;&nbsp;</span></p> <p><span class="cls0">(2) thereafter the collateral is brought into another jurisdiction; and&nbsp;</span></p> <p><span class="cls0">(3) upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in subsection (e) of this section, a security interest in goods covered by a certificate of title which is perfected by any method under the law of another jurisdiction when the goods become covered by a certificate of title from this state remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.&nbsp;</span></p> <p><span class="cls0">(e) A security interest described in subsection (d) of this section becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under subsection (b) of Section 19311 or Section 19313 of this title are not satisfied before the earlier of:&nbsp;</span></p> <p><span class="cls0">(1) the time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this state; or&nbsp;</span></p> <p><span class="cls0">(2) the expiration of four (4) months after the goods had become so covered.&nbsp;</span></p> <p><span class="cls0">(f) A security interest in deposit accounts, letter-of-credit rights, or investment property which is perfected under the law of the bank&rsquo;s jurisdiction, the issuer&rsquo;s jurisdiction, a nominated person&rsquo;s jurisdiction, the securities intermediary&rsquo;s jurisdiction, or the commodity intermediary&rsquo;s jurisdiction, as applicable, remains perfected until the earlier of:&nbsp;</span></p> <p><span class="cls0">(1) the time the security interest would have become unperfected under the law of that jurisdiction; or&nbsp;</span></p> <p><span class="cls0">(2) the expiration of four (4) months after a change of the applicable jurisdiction to another jurisdiction.&nbsp;</span></p> <p><span class="cls0">(g) If a security interest described in subsection (f) of this section becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 36, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-317. Interests that take priority over or take free of security interest or agricultural lien.&nbsp;</span></p> <p class="cls1"><span class="cls0">INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE&nbsp;</span></p> <p class="cls1"><span class="cls0">OF SECURITY INTEREST OR AGRICULTURAL LIEN&nbsp;</span></p> <p><span class="cls0">(a) A security interest or agricultural lien is subordinate to the rights of:&nbsp;</span></p> <p><span class="cls0">(1) a person entitled to priority under Section 19322 of this title; and&nbsp;</span></p> <p><span class="cls0">(2) except as otherwise provided in subsection (e) of this section, a person that becomes a lien creditor before the earlier of the time:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the security interest or agricultural lien is perfected; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;one of the conditions specified in paragraph (3) of subsection (b) of Section 1-9-203 of this title is met and a financing statement covering the collateral is filed.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (e) of this section, a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a security certificate takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsection (e) of this section, a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.&nbsp;</span></p> <p><span class="cls0">(d) A licensee of a general intangible or a buyer, other than a secured party, of accounts, electronic chattel paper, electronic documents, general intangibles, or investment property other than a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.&nbsp;</span></p> <p><span class="cls0">(e) Except as otherwise provided in Sections 1-9-320 and 1-9-321 of this title, if a person files a financing statement with respect to a purchase-money security interest before or within twenty (20) days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 37, eff. July 1, 2001. Amended by Laws 2001, c. 354, &sect; 2, eff. July 1, 2001; Laws 2005, c. 140, &sect; 68, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-318. Rights and title of seller of account or chattel paper with respect to creditors and purchasers.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS AND TITLE OF SELLER OF ACCOUNT OR CHATTEL&nbsp;</span></p> <p class="cls1"><span class="cls0">PAPER WITH RESPECT TO CREDITORS AND PURCHASERS&nbsp;</span></p> <p><span class="cls0">(a) A debtor that has sold an account, chattel paper, payment intangible, or promissory note does not retain a legal or equitable interest in the collateral sold.&nbsp;</span></p> <p><span class="cls0">(b) For purposes of determining the rights of creditors of, and purchasers for value of an account or chattel paper from, a debtor that has sold an account or chattel paper, while the buyer&rsquo;s security interest is unperfected, the debtor is deemed to have rights and title to the account or chattel paper identical to those the debtor sold.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 38, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-319. Rights and title of consignee with respect to creditors and purchasers.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS AND TITLE OF CONSIGNEE WITH&nbsp;</span></p> <p class="cls1"><span class="cls0">RESPECT TO CREDITORS AND PURCHASERS&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, for purposes of determining the rights of creditors of, and purchasers for value of goods from, a consignee, while the goods are in the possession of the consignee, the consignee is deemed to have rights and title to the goods identical to those the consignor had or had power to transfer.&nbsp;</span></p> <p><span class="cls0">(b) For purposes of determining the rights of a creditor of a consignee, law other than this article determines the rights and title of a consignee while goods are in the consignee&rsquo;s possession if, under this part, a perfected security interest held by the consignor would have priority over the rights of the creditor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 39, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.1. Purpose.&nbsp;</span></p> <p class="cls1"><span class="cls0">PURPOSE&nbsp;</span></p> <p><span class="cls0">The purpose of Sections 19320.1 through 19320.7 of this title is to make the laws governing protection of buyers of farm products, commission merchants, and selling agents comply with the provisions of Section 1324 of the Food Security Act of 1985 as codified at Section 1631 of Title 7 of the United States Code.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 1. Amended by Laws 2000, c. 371, &sect; 41, eff. July 1, 2001. Renumbered from &sect; 9-307.1 of this title by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.2. Definitions; requisites of an effective financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFINITIONS; REQUISITES OF AN&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECTIVE FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">As used in this section and Sections 1-9-320.1 through 1-9-320.7 of this title:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;"Buyer in the ordinary course of business" means a person who, in the ordinary course of business, buys farm products from a person engaged in farming operations who is in the business of selling farm products.&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;"Central filing system" means a system for filing effective financing statements on a statewide basis and which has been certified by the Secretary of the United States Department of Agriculture.&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;"Commission merchant" means any person engaged in the business of receiving any farm product for sale, on commission, or for or on behalf of another person.&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;"Effective financing statement" means a statement that:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;is an original or reproduced form consistent with the provisions of this act and approved by the Secretary of State;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;is signed and filed with the Secretary of State by the secured party;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;is signed by the debtor;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;contains:&nbsp;</span></p> <p class="cls5"><span class="cls0">(A)&nbsp;&nbsp;the name and address of the secured party,&nbsp;</span></p> <p class="cls5"><span class="cls0">(B)&nbsp;&nbsp;the name and address of the person indebted to the secured party,&nbsp;</span></p> <p class="cls5"><span class="cls0">(C)&nbsp;&nbsp;the social security number of the debtor or, in the case of a debtor doing business other than as an individual, the Internal Revenue Service taxpayer identification number of such debtor,&nbsp;</span></p> <p class="cls5"><span class="cls0">(D)&nbsp;&nbsp;the farm product name,&nbsp;</span></p> <p class="cls5"><span class="cls0">(E)&nbsp;&nbsp;each county in this state where the farm product is produced or to be produced or a blanket code covering all 77 Oklahoma counties,&nbsp;</span></p> <p class="cls5"><span class="cls0">(F)&nbsp;&nbsp;a description of the farm products subject to the security interest only if needed to distinguish it from other such farm products owned by the same person or persons but not subject to the particular interest; and&nbsp;</span></p> <p class="cls5"><span class="cls0">(G)&nbsp;&nbsp;the crop year, unless every crop of the farm product in question, for the duration of the effective financing statement, is to be subject to the particular security interest.&nbsp;</span></p> <p class="cls4"><span class="cls0">(v)&nbsp;&nbsp;must be amended in writing, within three (3) months, similarly signed and filed, to reflect material changes;&nbsp;</span></p> <p class="cls4"><span class="cls0">(vi)&nbsp;&nbsp;remains effective for a period of five (5) years from the date of filing, subject to extensions for additional periods of five (5) years each by refiling or filing a continuation statement within six (6) months before the expiration of the initial five-year period;&nbsp;</span></p> <p class="cls4"><span class="cls0">(vii)&nbsp;&nbsp;is removed from the active files when the statement lapses on the expiration of the effective period of the statement or when a termination statement from the secured party is accepted, whichever occurs first;&nbsp;</span></p> <p class="cls4"><span class="cls0">(viii)&nbsp;&nbsp;is accompanied by the requisite filing fee provided for in Section 111 of Title 28 of the Oklahoma Statutes; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(ix)&nbsp;&nbsp;substantially complies with the requirements of this paragraph even though it contains minor errors that are not seriously misleading.&nbsp;</span></p> <p class="cls4"><span class="cls0">(x)&nbsp;&nbsp;may reflect multiple products or products in multiple counties.&nbsp;</span></p> <p class="cls3"><span class="cls0">(e)&nbsp;&nbsp;"Farm product" means an agricultural commodity such as wheat, corn, soybeans, or a species of livestock such as cattle, hogs, sheep, horses, or poultry used or produced in farming operations, or a product of such crop or livestock in its unmanufactured state (such as ginned cotton, wool-clip, maple syrup, milk, and eggs), that is in the possession of a person engaged in farming operations.&nbsp;</span></p> <p class="cls3"><span class="cls0">(f)&nbsp;&nbsp;"Knows" or "knowledge" means actual knowledge.&nbsp;</span></p> <p class="cls3"><span class="cls0">(g)&nbsp;&nbsp;"Person" means any individual, partnership, corporation, limited liability company, trust, or any other business entity.&nbsp;</span></p> <p class="cls3"><span class="cls0">(h)&nbsp;&nbsp;"Security interest" means an interest in farm products that secures payment or performance of an obligation.&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;"Selling agent" means any person, other than a commission merchant, who is engaged in the business of negotiating the sale and purchase of any farm product on behalf of a person engaged in farming operations.&nbsp;</span></p> <p><span class="cls0">(2) Unless otherwise provided for in this act, for purposes of this section and Sections 4 and 6 of this act, receipt of notice shall be presumed if notice is sent by first-class mail, postage prepaid.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 2. Amended by Laws 2000, c. 371, &sect; 42, eff. July 1, 2001. Renumbered from Title 12A, &sect; 9-307.2 by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.3. Forms - Duty of Secretary of State.&nbsp;</span></p> <p class="cls1"><span class="cls0">FORMS; DUTY OF SECRETARY OF STATE&nbsp;</span></p> <p><span class="cls0">The Secretary of State shall develop and maintain a standard form for an effective financing statement and for a statement of continuation, partial release, amendment, or assignment thereof, which shall be consistent with the provisions of Sections 19320.1 through 19320.7 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 3. Amended by Laws 2000, c. 371, &sect; 43, eff. July 1, 2001. Renumbered from &sect; 9-307.3 of this title by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001; Laws 2001, c. 406, &sect; 1, emerg. eff. June 4, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.4. Protection of buyers of farm products, commission merchants and selling agents.&nbsp;</span></p> <p class="cls1"><span class="cls0">PROTECTION OF BUYERS OF FARM PRODUCTS,&nbsp;</span></p> <p class="cls1"><span class="cls0">COMMISSION MERCHANTS AND SELLING AGENTS&nbsp;</span></p> <p><span class="cls0">A buyer of farm products, commission merchant, or selling agent who purchases or sells farm products in the ordinary course of business from or for a person engaged in farming operations takes subject to a security interest in the farm products if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;(i)&nbsp;&nbsp;the buyer of the farm products, commission merchant, or selling agent has failed to register with the Secretary of State prior to the purchase of the farm products and the secured party has filed an effective financing statement that covers the farm products being sold; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(ii)&nbsp;&nbsp;the buyer of farm products, commission merchant or selling agent receives from the Secretary of State written notice as provided in paragraph (d) or (f) of subsection (4) of Section 1-9-320.6 of this title, and the buyer of farm products, commission merchant or selling agent does not secure a waiver or release of the security interest specified in an effective financing statement from the secured party by performing any payment obligation or otherwise; or&nbsp;</span></p> <p class="cls6"><span class="cls0">(b)&nbsp;&nbsp;the secured party or the seller provides written notice of the security interest pursuant to the provisions of Section 1-9-320.7 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 4. Amended by Laws 2000, c. 371, &sect; 44, eff. July 1, 2001. Renumbered from &sect; 9-307.4 of this title by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.5. Immunity from liability.&nbsp;</span></p> <p class="cls1"><span class="cls0">IMMUNITY FROM LIABILITY&nbsp;</span></p> <p><span class="cls0">A buyer of farm products, commission merchant, or selling agent who purchases or sells farm products in the ordinary course of business from or for a person engaged in farming operations shall not be liable for errors or inaccuracies generated by the central filing system provided for in Section 19320.6 of this title if the buyer, commission merchant, or selling agent has otherwise complied with the provisions of Sections 19320.1 through 19320.7 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 5. Amended by Laws 2000, c. 371, &sect; 45, eff. July 1, 2001. Renumbered from &sect; 9-307.5 of this title by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.6. Central filing system relating to farm products.&nbsp;</span></p> <p class="cls1"><span class="cls0">CENTRAL FILING SYSTEM RELATING TO FARM PRODUCTS&nbsp;</span></p> <p><span class="cls0">(1) The Secretary of State shall be responsible for developing and implementing the central filing system. This responsibility shall include obtaining the necessary certification for the system from the United States Department of Agriculture ("USDA"). The effective date for the implementation of the central filing system was October 24, 1988.&nbsp;</span></p> <p><span class="cls0">(2) The Secretary of State may promulgate, in accordance with the applicable provisions of the Administrative Procedures Act, appropriate rules for the implementation and operation of the central filing system.&nbsp;</span></p> <p><span class="cls0">(3) The Office of Management and Enterprise Services shall assist the Secretary of State in developing and implementing the central filing system.&nbsp;</span></p> <p><span class="cls0">(4) The central filing system shall conform to the following requirements:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;The Secretary of State shall record the date and hour of the filing of each effective financing statement;&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;The Secretary of State shall compile all effective financing statements into a master list:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;organized according to farm products;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;arranged within each such product:&nbsp;</span></p> <p class="cls5"><span class="cls0">(A)&nbsp;&nbsp;in alphabetical order according to the last name of the individual debtors or, in the case of debtors doing business other than as individuals, the first word in the name of the debtors;&nbsp;</span></p> <p class="cls5"><span class="cls0">(B)&nbsp;&nbsp;in numerical order according to the social security number of the individual debtors or, in the case of debtors doing business other than as individuals, the Internal Revenue Service taxpayer identification number of the debtors;&nbsp;</span></p> <p class="cls5"><span class="cls0">(C)&nbsp;&nbsp;geographically by county produced; and&nbsp;</span></p> <p class="cls5"><span class="cls0">(D)&nbsp;&nbsp;by crop year; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;containing the information provided for in subparagraph (iv) of paragraph (d) of Section 1-9-320.2 of this title;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;portions of the master list shall be available in hard copy or electronic formats, and may be organized by other sorting methods in addition to the methods listed above.&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;The Secretary of State shall maintain records of all buyers of farm products, commission merchants, selling agents and others who register with the Secretary of State, on a form containing:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;the name and address of each registrant;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;the information on the farm product or products that the registrant is requesting;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;the name of each county where the product is produced or to be produced, or a blanket code covering all seventy-seven (77) counties of this state; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;an authorized signature.&nbsp;</span></p> <p class="cls4"><span class="cls0">(d)&nbsp;&nbsp;(i)&nbsp;&nbsp;A copy of those portions of the master list covering the information requested by a registrant shall be distributed to such registrants by the Secretary of State on or before the last business day of each month and shall be presumed to have been received by the third business day of the following month.&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;Registrants shall be deemed to be registered only as to those portions of the master list for which they register, and shall be deemed to have failed to register and shall not be considered to be registrants as to those portions for which they do not register.&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;Registrants are subject only to security interests shown on the portions of the master list which they receive as a consequence of registration with the Secretary of State.&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;If a particular security interest is shown on the master list, but was included since the last regular distribution of portions of the master list to registrants, registrants shall not be subject to that security interest;&nbsp;</span></p> <p class="cls3"><span class="cls0">(e)&nbsp;&nbsp;The duration of the registration with the Secretary of State of a buyer of farm products, commission merchant, selling agent or other registrant shall be one (1) year from the effective date of the registration with the Secretary of State.&nbsp;</span></p> <p class="cls4"><span class="cls0">(f)&nbsp;&nbsp;(i)&nbsp;&nbsp;Upon request, within twenty-four (24) hours of any inquiry, for information, the Secretary of State shall provide verbal confirmation of the existence or nonexistence of any effective financing statement on file. By the close of the business day following the day on which the request was received, written confirmation of the existence of an effective financing statement will be provided to buyers of farm products, commission merchants, and selling agents who have not registered, and others who request it.&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;The state or political subdivision shall not be liable if a loss or claim results from any confirmation of the existence or nonexistence of any effective financing statement on file in the Office of the Secretary of State made in good faith by an employee of the Office of the Secretary of State as required by the provisions of this section.&nbsp;</span></p> <p><span class="cls0">(5) The filing in the office of the Secretary of State under this section shall be in addition to the filing requirements provided for in this article.&nbsp;</span></p> <p><span class="cls0">(6) A financing or continuation statement covering farm products that has not lapsed and which was filed pursuant to this title between December 23, 1986, and October 24, 1988, inclusive, and for which no written notice was furnished as provided in Section 1-9-320.7 of this title, shall become ineffective as to a buyer of farm products, commission merchant or selling agent, unless the secured party files an effective financing statement in the office of the Secretary of State.&nbsp;</span></p> <p><span class="cls0">(7) An effective financing statement shall not be deemed filed in accordance with the provisions of this section until all fees authorized by Section 111 of Title 28 of the Oklahoma Statutes relating to the filing of the statement are tendered to the Secretary of State.&nbsp;</span></p> <p><span class="cls0">(8) The secured party shall file a termination statement within twenty (20) days after there is no outstanding secured obligation or commitment to make advances, incur obligations or otherwise give value. The secured party shall not be required to file a termination statement if the debtor, in writing, addressed to the secured party, requests that a termination not be filed. The request shall be signed by the debtor or an authorized representative and the request may be made at any time prior to the expiration date of an effective financing statement set forth herein. If the affected secured party fails to file a termination statement as required by this subsection, the party shall be liable to the Secretary of State for Five Hundred Dollars ($500.00). In addition the affected secured party shall be liable to the debtor for any loss caused to the debtor by the failure to terminate the effective financing statement.&nbsp;</span></p> <p><span class="cls0">(9) The Attorney General shall be responsible for enforcing the provisions of subsection (8) of this section on behalf of the Secretary of State and is authorized to take appropriate actions to collect any penalties owed to the Secretary of State pursuant to subsection (8) of this section. When collected, the Attorney General shall cause the penalty to be deposited into the Central Filing System Revolving Fund created pursuant to Section 276.3 of Title 62 of the Oklahoma Statutes.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 6. Amended by Laws 1991, c. 314, &sect; 1, eff. Sept. 1, 1991; Laws 2000, c. 371, &sect; 46, eff. July 1, 2001. Renumbered from &sect; 9-307.6 of this title by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001. Amended by Laws 2001, c. 406, &sect; 2, emerg. eff. June 4, 2001; Laws 2012, c. 304, &sect; 53.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320.7. Written notification affecting farm products; disclosure requirements; penalty.&nbsp;</span></p> <p class="cls1"><span class="cls0">WRITTEN NOTIFICATION AFFECTING FARM PRODUCTS;&nbsp;</span></p> <p class="cls1"><span class="cls0">DISCLOSURE REQUIREMENTS; PENALTY&nbsp;</span></p> <p><span class="cls0">(1) A secured party or a seller of farm products may furnish to the buyer of such farm products, commission merchant, or selling agent, within one (1) year before the sale of the farm products, a written notice of a security interest, organized according to farm products, that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;is an original or reproduced copy thereof;&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;contains:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;the name and address of the secured party;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;the name and address of the person indebted to the secured party;&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;the social security number of the debtor or, in the case of a debtor doing business other than as an individual, the Internal Revenue Service taxpayer identification number of the debtor; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iv)&nbsp;&nbsp;a description of the farm products subject to the security interest created by the debtor, including the amount of the products where applicable, crop year, county, and a reasonable description of the property;&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;must be amended in writing, within ten (10) days, similarly signed and transmitted, to reflect material changes;&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;will lapse on the expiration period of the statement, or the transmission of a notice signed by the secured party that the statement has lapsed, whichever occurs first; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(e)&nbsp;&nbsp;states any payment obligations imposed on the buyer of farm products, commission merchant, or selling agent by the secured party as conditions for waiver or release of the security interest.&nbsp;</span></p> <p><span class="cls0">(2) For purposes of this section, receipt of notice shall be presumed if notice is sent by certified mail.&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;(a)&nbsp;&nbsp;A secured party who intends to furnish written notification of the existence of a security interest in farm products as provided in this section, shall require the person engaged in farming operations to execute a security agreement containing a provision requiring the person to furnish to the secured party a list of the buyers, commission merchants, and selling agents to or through whom the person may sell the farm products. If the person engaged in farming operations sells the farm product collateral to a buyer or through a commission merchant or selling agent not included on the list, the person engaged in farming operations shall be subject to the penalty provisions of paragraph (b) of this subsection, unless the person:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;has notified the secured party in writing of the identity of the buyer, commission merchant, or selling agent at least seven (7) days prior to the sale; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;has accounted to the secured party for the proceeds of the sale not later than twenty (20) days after the sale.&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;A person violating the provisions of paragraph (a) of this subsection shall be fined Five Thousand Dollars ($5,000.00) or fifteen percent (15%) of the value or benefit received for the farm product described in the security agreement, whichever is greater.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1987, c. 69, &sect; 7. Amended by Laws 1991, c. 314, &sect; 2, eff. Sept. 1, 1991; Laws 2000, c. 371, &sect; 47, eff. July 1, 2001. Renumbered from &sect; 9-307.7 of this title by Laws 2000, c. 371, &sect; 183, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-320. Buyer of goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">BUYER OF GOODS&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (e) of this section, a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer&rsquo;s seller, even if the security interest is perfected and the buyer knows of its existence.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (e) of this section, a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:&nbsp;</span></p> <p><span class="cls0">(1) without knowledge of the security interest;&nbsp;</span></p> <p><span class="cls0">(2) for value;&nbsp;</span></p> <p><span class="cls0">(3) primarily for the buyer&rsquo;s personal, family, or household purposes; and&nbsp;</span></p> <p><span class="cls0">(4) before the filing of a financing statement covering the goods.&nbsp;</span></p> <p><span class="cls0">(c) To the extent that it affects the priority of a security interest over a buyer of goods under subsection (b) of this section, the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by subsections (a) and (b) of Section 19316 of this title.&nbsp;</span></p> <p><span class="cls0">(d) A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance.&nbsp;</span></p> <p><span class="cls0">(e) Subsections (a) and (b) of this section do not affect a security interest in goods in the possession of the secured party under Section 19313 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 40, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-321. Licensee of general intangible and lessee of goods in ordinary course of business.&nbsp;</span></p> <p class="cls1"><span class="cls0">LICENSEE OF GENERAL INTANGIBLE AND LESSEE&nbsp;</span></p> <p class="cls1"><span class="cls0">OF GOODS IN ORDINARY COURSE OF BUSINESS&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;licensee in ordinary course of business&rdquo; means a person that becomes a licensee of a general intangible in good faith, without knowledge that the license violates the rights of another person in the general intangible, and in the ordinary course from a person in the business of licensing general intangibles of that kind. A person becomes a licensee in the ordinary course if the license to the person comports with the usual or customary practices in the kind of business in which the licensor is engaged or with the licensor&rsquo;s own usual or customary practices.&nbsp;</span></p> <p><span class="cls0">(b) A licensee in ordinary course of business takes its rights under a nonexclusive license free of a security interest in the general intangible created by the licensor, even if the security interest is perfected and the licensee knows of its existence.&nbsp;</span></p> <p><span class="cls0">(c) A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor, even if the security interest is perfected and the lessee knows of its existence.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 48, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-322. Priorities among conflicting security interests in and agricultural liens on same collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITIES AMONG CONFLICTING SECURITY INTERESTS&nbsp;</span></p> <p class="cls1"><span class="cls0">IN AND AGRICULTURAL LIENS ON SAME COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:&nbsp;</span></p> <p><span class="cls0">(1) Conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection;&nbsp;</span></p> <p><span class="cls0">(2) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien; and&nbsp;</span></p> <p><span class="cls0">(3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.&nbsp;</span></p> <p><span class="cls0">(b) For the purposes of paragraph (1) of subsection (a) of this section:&nbsp;</span></p> <p><span class="cls0">(1) The time of filing or perfection as to a security interest in collateral is also the time of filing or perfection as to a security interest in proceeds; and&nbsp;</span></p> <p><span class="cls0">(2) The time of filing or perfection as to a security interest in collateral supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting obligation.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsection (f) of this section, a security interest in collateral which qualifies for priority over a conflicting security interest under Sections 19327, 19328, 19329, 19330, or 19331 of this title also has priority over a conflicting security interest in:&nbsp;</span></p> <p><span class="cls0">(1) Any supporting obligation for the collateral; and&nbsp;</span></p> <p><span class="cls0">(2) Proceeds of the collateral if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the security interest in proceeds is perfected;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the proceeds are cash proceeds or of the same type as the collateral; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;in the case of proceeds that are proceeds of proceeds, all intervening proceeds are cash proceeds, proceeds of the same type as the collateral, or an account relating to the collateral.&nbsp;</span></p> <p><span class="cls0">(d) Subject to subsection (e) of this section and except as otherwise provided in subsection (f) of this section, if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, or letter-of-credit rights is perfected by a method other than filing, conflicting perfected security interests in proceeds of the collateral rank according to priority in time of filing.&nbsp;</span></p> <p><span class="cls0">(e) Subsection (d) of this section applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, or letter-of-credit rights.&nbsp;</span></p> <p><span class="cls0">(f) Subsections (a) through (e) of this section are subject to:&nbsp;</span></p> <p><span class="cls0">(1) subsection (g) of this section and the other provisions of this part;&nbsp;</span></p> <p><span class="cls0">(2) Section 4210 of this title with respect to a security interest of a collecting bank;&nbsp;</span></p> <p><span class="cls0">(3) Section 5118 of this title with respect to a security interest of an issuer or nominated person; and&nbsp;</span></p> <p><span class="cls0">(4) Section 19110 of this title with respect to a security interest arising under Article 2 or 2A of this title.&nbsp;</span></p> <p><span class="cls0">(g) A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 49, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-323. Future advances.&nbsp;</span></p> <p class="cls1"><span class="cls0">FUTURE ADVANCES&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (c) of this section, for purposes of determining the priority of a perfected security interest under paragraph (1) of subsection (a) of Section 19322 of this title, perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:&nbsp;</span></p> <p><span class="cls0">(1) is made while the security interest is perfected only:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;under Section 19309 of this title when it attaches; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;temporarily under subsection (e), (f), or (g) of Section 19312 of this title; and&nbsp;</span></p> <p><span class="cls0">(2) is not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under Section 19309 or subsection (e), (f), or (g) of Section 19312 of this title.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (c) of this section, a security interest is subordinate to the rights of a person that becomes a lien creditor to the extent that the security interest secures an advance made more than forty-five (45) days after the person becomes a lien creditor unless the advance is made:&nbsp;</span></p> <p><span class="cls0">(1) without knowledge of the lien; or&nbsp;</span></p> <p><span class="cls0">(2) pursuant to a commitment entered into without knowledge of the lien.&nbsp;</span></p> <p><span class="cls0">(c) Subsections (a) and (b) of this section do not apply to a security interest held by a secured party that is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in subsection (e) of this section, a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of:&nbsp;</span></p> <p><span class="cls0">(1) the time the secured party acquires knowledge of the buyer&rsquo;s purchase; or&nbsp;</span></p> <p><span class="cls0">(2) forty-five (45) days after the purchase.&nbsp;</span></p> <p><span class="cls0">(e) Subsection (d) of this section does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer&rsquo;s purchase and before the expiration of the forty-fiveday period.&nbsp;</span></p> <p><span class="cls0">(f) Except as otherwise provided in subsection (g) of this section, a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of:&nbsp;</span></p> <p><span class="cls0">(1) the time the secured party acquires knowledge of the lease; or&nbsp;</span></p> <p><span class="cls0">(2) Forty-five (45) days after the lease contract becomes enforceable.&nbsp;</span></p> <p><span class="cls0">(g) Subsection (f) of this section does not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the forty-fiveday period.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 50, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-324. Priority of purchase-money security interests.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF PURCHASE-MONEY SECURITY INTERESTS&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in Section 19327 of this title, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within twenty (20) days thereafter.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (c) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in Section 19330 of this title, and, except as otherwise provided in Section 19327 of this title, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if:&nbsp;</span></p> <p><span class="cls0">(1) the purchase-money security interest is perfected when the debtor receives possession of the inventory;&nbsp;</span></p> <p><span class="cls0">(2) the purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;&nbsp;</span></p> <p><span class="cls0">(3) the holder of the conflicting security interest receives the notification within five (5) years before the debtor receives possession of the inventory; and&nbsp;</span></p> <p><span class="cls0">(4) the notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.&nbsp;</span></p> <p><span class="cls0">(c) Paragraphs (2) through (4) of subsection (b) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:&nbsp;</span></p> <p><span class="cls0">(1) if the purchase-money security interest is perfected by filing, before the date of the filing; or&nbsp;</span></p> <p><span class="cls0">(2) if the purchase-money security interest is temporarily perfected without filing or possession under subsection (f) of Section 19312 of this title, before the beginning of the twentyday period thereunder.&nbsp;</span></p> <p><span class="cls0">(d) Subject to subsection (e) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock, and, except as otherwise provided in Section 19327 of this title, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:&nbsp;</span></p> <p><span class="cls0">(1) the purchase-money security interest is perfected when the debtor receives possession of the livestock;&nbsp;</span></p> <p><span class="cls0">(2) the purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;&nbsp;</span></p> <p><span class="cls0">(3) the holder of the conflicting security interest receives the notification within six (6) months before the debtor receives possession of the livestock; and&nbsp;</span></p> <p><span class="cls0">(4) the notification states that the person sending the notification has or expects to acquire a purchase-money security interest in livestock of the debtor and describes the livestock.&nbsp;</span></p> <p><span class="cls0">(e) Paragraphs (2) through (4) of subsection (d) of this section applies only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:&nbsp;</span></p> <p><span class="cls0">(1) if the purchase-money security interest is perfected by filing, before the date of the filing; or&nbsp;</span></p> <p><span class="cls0">(2) if the purchase-money security interest is temporarily perfected without filing or possession under subsection (f) of Section 19312 of this title, before the beginning of the twentyday period thereunder.&nbsp;</span></p> <p><span class="cls0">(f) Except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral, and, except as otherwise provided in Section 19327 of this title, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.&nbsp;</span></p> <p><span class="cls0">(g) If more than one security interest qualifies for priority in the same collateral under subsection (a), (b), (d), or (f) of this section:&nbsp;</span></p> <p><span class="cls0">(1) a security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and&nbsp;</span></p> <p><span class="cls0">(2) in all other cases, subsection (a) of Section 19322 of this title applies to the qualifying security interests.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 51, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-325. Priority of security interests in transferred collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS IN TRANSFERRED COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, a security interest created by a debtor is subordinate to a security interest in the same collateral created by another person if:&nbsp;</span></p> <p><span class="cls0">(1) the debtor acquired the collateral subject to the security interest created by the other person;&nbsp;</span></p> <p><span class="cls0">(2) the security interest created by the other person was perfected when the debtor acquired the collateral; and&nbsp;</span></p> <p><span class="cls0">(3) there is no period thereafter when the security interest is unperfected.&nbsp;</span></p> <p><span class="cls0">(b) Subsection (a) of this section subordinates a security interest only if the security interest:&nbsp;</span></p> <p><span class="cls0">(1) otherwise would have priority solely under subsection (a) of Section 19322 or Section 19324 of this title; or&nbsp;</span></p> <p><span class="cls0">(2) arose solely under paragraph (3) of Section 2711 or paragraph (5) of Section 2A508 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 52, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-326. Priority of security interests created by new debtor.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS CREATED BY NEW DEBTOR&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (b) of this section, a security interest created by a new debtor which is perfected by a filed financing statement that is effective solely under Section 19508 of this title in collateral in which a new debtor has or acquires rights is subordinate to a security interest in the same collateral which is perfected other than by a filed financing statement that is effective solely under Section 19508 of this title.&nbsp;</span></p> <p><span class="cls0">(b) The other provisions of this part determine the priority among conflicting security interests in the same collateral perfected by filed financing statements that are effective solely under Section 19508 of this title. However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor&rsquo;s having become bound.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 53, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-327. Priority of security interests in deposit account.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS IN DEPOSIT ACCOUNT&nbsp;</span></p> <p><span class="cls0">The following rules govern priority among conflicting security interests in the same deposit account:&nbsp;</span></p> <p><span class="cls0">(1) A security interest held by a secured party having control of the deposit account under Section 19104 of this title has priority over a conflicting security interest held by a secured party that does not have control.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided in paragraphs (3) and (4) of this section, security interests perfected by control under Section 19314 of this title rank according to priority in time of obtaining control.&nbsp;</span></p> <p><span class="cls0">(3) Except as otherwise provided in paragraph (4) of this section, a security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party.&nbsp;</span></p> <p><span class="cls0">(4) A security interest perfected by control under paragraph (3) of subsection (a) of Section 19104 of this title has priority over a security interest held by the bank with which the deposit account is maintained.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 54, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-328. Priority of security interests in investment property.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS IN INVESTMENT PROPERTY&nbsp;</span></p> <p><span class="cls0">The following rules govern priority among conflicting security interests in the same investment property:&nbsp;</span></p> <p><span class="cls0">(1) A security interest held by a secured party having control of investment property under Section 19106 of this title has priority over a security interest held by a secured party that does not have control of the investment property.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided in paragraphs (3) and (4) of this section, conflicting security interests held by secured parties each of which has control under Section 19106 of this title rank according to priority in time of:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;if the collateral is a security, obtaining control;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the collateral is a security entitlement carried in a securities account and:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;if the secured party obtained control under paragraph (1) of subsection (d) of Section 8-106 of this title, the secured party&rsquo;s becoming the person for which the securities account is maintained;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;if the secured party obtained control under paragraph (2) of subsection (d) of Section 8106 of this title, the securities intermediary&rsquo;s agreement to comply with the secured party&rsquo;s entitlement orders with respect to security entitlements carried or to be carried in the securities account; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;if the secured party obtained control through another person under paragraph (3) of subsection (d) of Section 8106 of this title, the time on which priority would be based under this paragraph if the other person were the secured party; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;if the collateral is a commodity contract carried with a commodity intermediary, the satisfaction of the requirement for control specified in paragraph (2) of subsection (b) of Section 19106 of this title with respect to commodity contracts carried or to be carried with the commodity intermediary.&nbsp;</span></p> <p><span class="cls0">(3) A security interest held by a securities intermediary in a security entitlement or a securities account maintained with the securities intermediary has priority over a conflicting security interest held by another secured party.&nbsp;</span></p> <p><span class="cls0">(4) A security interest held by a commodity intermediary in a commodity contract or a commodity account maintained with the commodity intermediary has priority over a conflicting security interest held by another secured party.&nbsp;</span></p> <p><span class="cls0">(5) A security interest in a certificated security in registered form which is perfected by taking delivery under subsection (a) of Section 19313 of this title and not by control under Section 19314 of this title has priority over a conflicting security interest perfected by a method other than control.&nbsp;</span></p> <p><span class="cls0">(6) Conflicting security interests created by a broker, securities intermediary, or commodity intermediary which are perfected without control under Section 19106 of this title rank equally.&nbsp;</span></p> <p><span class="cls0">(7) In all other cases, priority among conflicting security interests in investment property is governed by Sections 19322 and 19323 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 55, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-329. Priority of security interests in letter-of-credit right.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS IN LETTER-OF-CREDIT RIGHT&nbsp;</span></p> <p><span class="cls0">The following rules govern priority among conflicting security interests in the same letter-of-credit right:&nbsp;</span></p> <p><span class="cls0">(1) A security interest held by a secured party having control of the letter-of-credit right under Section 19107 of this title has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control.&nbsp;</span></p> <p><span class="cls0">(2) Security interests perfected by control under Section 19 314 of this title rank according to priority in time of obtaining control.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 56, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-330. Priority of purchaser of chattel paper or instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF PURCHASER OF CHATTEL PAPER OR INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed merely as proceeds of inventory subject to a security interest if:&nbsp;</span></p> <p><span class="cls0">(1) in good faith and in the ordinary course of the purchaser&rsquo;s business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under Section 19105 of this title; and&nbsp;</span></p> <p><span class="cls0">(2) the chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.&nbsp;</span></p> <p><span class="cls0">(b) A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under Section 19105 of this title in good faith, in the ordinary course of the purchaser&rsquo;s business, and without knowledge that the purchase violates the rights of the secured party.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in Section 19327 of this title, a purchaser having priority in chattel paper under subsection (a) or (b) of this section also has priority in proceeds of the chattel paper to the extent that:&nbsp;</span></p> <p><span class="cls0">(1) Section 19322 of this title provides for priority in the proceeds; or&nbsp;</span></p> <p><span class="cls0">(2) the proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser&rsquo;s security interest in the proceeds is unperfected.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in subsection (a) of Section 19331 of this title, a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.&nbsp;</span></p> <p><span class="cls0">(e) For purposes of subsections (a) and (b) of this section, the holder of a purchase-money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.&nbsp;</span></p> <p><span class="cls0">(f) For purposes of subsections (b) and (d) of this section, if chattel paper or an instrument indicates that it has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 57, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-331. Priority of rights of purchasers of instruments, documents, and securities under other articles; priority of interests in financial assets and security entitlements under Article 8&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF RIGHTS OF PURCHASERS OF INSTRUMENTS, DOCUMENTS,&nbsp;</span></p> <p class="cls1"><span class="cls0">AND SECURITIES UNDER OTHER ARTICLES; PRIORITY OF INTERESTS&nbsp;</span></p> <p class="cls1"><span class="cls0">IN FINANCIAL ASSETS AND SECURITY ENTITLEMENTS UNDER ARTICLE 8&nbsp;</span></p> <p><span class="cls0">(a) This article does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in Articles 3, 7, and 8 of this title.&nbsp;</span></p> <p><span class="cls0">(b) This article does not limit the rights of or impose liability on a person to the extent that the person is protected against the assertion of a claim under Article 8 of this title.&nbsp;</span></p> <p><span class="cls0">(c) Filing under this article does not constitute notice of a claim or defense to the holders, or purchasers, or persons described in subsections (a) and (b) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 58, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-332. Transfer of money; transfer of funds from deposit account.&nbsp;</span></p> <p class="cls1"><span class="cls0">TRANSFER OF MONEY; TRANSFER OF FUNDS FROM DEPOSIT ACCOUNT&nbsp;</span></p> <p><span class="cls0">(a) A transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.&nbsp;</span></p> <p><span class="cls0">(b) A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the rights of the secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 59, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-333. Priority of certain liens arising by operation of law.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;possessory lien&rdquo; means an interest, other than a security interest or an agricultural lien:&nbsp;</span></p> <p><span class="cls0">(1) which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person&rsquo;s business;&nbsp;</span></p> <p><span class="cls0">(2) which is created by statute or rule of law in favor of the person; and&nbsp;</span></p> <p><span class="cls0">(3) whose effectiveness depends on the person&rsquo;s possession of the goods.&nbsp;</span></p> <p><span class="cls0">(b) A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 60, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-334. Priority of security interests in fixtures and crops.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS IN FIXTURES AND CROPS&nbsp;</span></p> <p><span class="cls0">(a) A security interest under this article may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this article in ordinary building materials incorporated into an improvement on land.&nbsp;</span></p> <p><span class="cls0">(b) This article does not prevent creation of an encumbrance upon fixtures under real property law.&nbsp;</span></p> <p><span class="cls0">(c) In cases not governed by subsections (d) through (h) of this section, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in subsection (h) of this section, a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:&nbsp;</span></p> <p><span class="cls0">(1) the security interest is a purchase-money security interest;&nbsp;</span></p> <p><span class="cls0">(2) the interest of the encumbrancer or owner arises before the goods become fixtures; and&nbsp;</span></p> <p><span class="cls0">(3) the security interest is perfected by a fixture filing before the goods become fixtures or within twenty (20) days thereafter.&nbsp;</span></p> <p><span class="cls0">(e) A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:&nbsp;</span></p> <p><span class="cls0">(1) the debtor has an interest of record in the real property or is in possession of the real property and the security interest:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;&nbsp;</span></p> <p><span class="cls0">(2) before the goods become fixtures, the security interest is perfected by any method permitted by this article and the fixtures are readily removable:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;factory or office machines;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;equipment that is not primarily used or leased for use in the operation of the real property; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;replacements of domestic appliances that are consumer goods;&nbsp;</span></p> <p><span class="cls0">(3) the conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this article; or&nbsp;</span></p> <p><span class="cls0">(4) the security interest is:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;created in a manufactured home in a manufactured-home transaction; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;perfected pursuant to a statute described in paragraph (2) of subsection (a) of Section 19311 of this title.&nbsp;</span></p> <p><span class="cls0">(f) A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:&nbsp;</span></p> <p><span class="cls0">(1) the encumbrancer or owner has, in an authenticated record, consented to the security interest or disclaimed an interest in the goods as fixtures; or&nbsp;</span></p> <p><span class="cls0">(2) the debtor has a right to remove the goods as against the encumbrancer or owner.&nbsp;</span></p> <p><span class="cls0">(g) The priority of the security interest under paragraph (2) of subsection (f) of this section continues for a reasonable time if the debtor&rsquo;s right to remove the goods as against the encumbrancer or owner terminates.&nbsp;</span></p> <p><span class="cls0">(h) A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subsections (e) and (f) of this section, a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.&nbsp;</span></p> <p><span class="cls0">(i) A perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.&nbsp;</span></p> <p><span class="cls0">(j) Subsection (i) of this section prevails over any inconsistent provisions of other statutes of this state.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 61, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-335. Accessions.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCESSIONS&nbsp;</span></p> <p><span class="cls0">(a) A security interest may be created in an accession and continues in collateral that becomes an accession.&nbsp;</span></p> <p><span class="cls0">(b) If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsection (d) of this section, the other provisions of this part determine the priority of a security interest in an accession.&nbsp;</span></p> <p><span class="cls0">(d) A security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute under subsection (b) of Section 19311 of this title.&nbsp;</span></p> <p><span class="cls0">(e) After default, subject to Part 6 of this article, a secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole.&nbsp;</span></p> <p><span class="cls0">(f) A secured party that removes an accession from other goods under subsection (e) of this section shall promptly reimburse any holder of a security interest or other lien on, or owner of, the whole or of the other goods, other than the debtor, for the cost of repair of any physical injury to the whole or the other goods. The secured party need not reimburse the holder or owner for any diminution in value of the whole or the other goods caused by the absence of the accession removed or by any necessity for replacing it. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 62, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-336. Commingled goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">COMMINGLED GOODS&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;commingled goods&rdquo; means goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.&nbsp;</span></p> <p><span class="cls0">(b) A security interest does not exist in commingled goods as such. However, a security interest may attach to a product or mass that results when goods become commingled goods.&nbsp;</span></p> <p><span class="cls0">(c) If collateral becomes commingled goods, a security interest attaches to the product or mass.&nbsp;</span></p> <p><span class="cls0">(d) If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under subsection (c) of this section is perfected.&nbsp;</span></p> <p><span class="cls0">(e) Except as otherwise provided in subsection (f) of this section, the other provisions of this part determine the priority of a security interest that attaches to the product or mass under subsection (c) of this section.&nbsp;</span></p> <p><span class="cls0">(f) If more than one security interest attaches to the product or mass under subsection (c) of this section, the following rules determine priority:&nbsp;</span></p> <p><span class="cls0">(1) A security interest that is perfected under subsection (d) of this section has priority over a security interest that is unperfected at the time the collateral becomes commingled goods.&nbsp;</span></p> <p><span class="cls0">(2) If more than one security interest is perfected under subsection (d) of this section, the security interests rank equally in proportion to value of the collateral at the time it became commingled goods.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 63, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-337. Priority of security interests in goods covered by certificate of title.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTERESTS IN&nbsp;</span></p> <p class="cls1"><span class="cls0">GOODS COVERED BY CERTIFICATE OF TITLE&nbsp;</span></p> <p><span class="cls0">If, while a security interest in goods is perfected by any method under the law of another jurisdiction, this state issues a certificate of title that does not show that the goods are subject to the security interest or does not contain a statement that they may be subject to security interests not shown on the certificate:&nbsp;</span></p> <p><span class="cls0">(1) a buyer of the goods, other than a person in the business of selling goods of that kind, takes free of the security interest if the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest; and&nbsp;</span></p> <p><span class="cls0">(2) the security interest is subordinate to a conflicting security interest in the goods that attaches, and is perfected under subsection (b) of Section 19311 of this title, after issuance of the certificate and without the conflicting secured party&rsquo;s knowledge of the security interest.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 64, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-338. Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF SECURITY INTEREST OR&nbsp;</span></p> <p class="cls1"><span class="cls0">AGRICULTURAL LIEN PERFECTED BY FILED FINANCING&nbsp;</span></p> <p class="cls1"><span class="cls0">STATEMENT PROVIDING CERTAIN INCORRECT INFORMATION&nbsp;</span></p> <p><span class="cls0">If a security interest or agricultural lien is perfected by a filed financing statement providing information described in paragraph (5) of subsection (b) of Section 19516 of this title which is incorrect at the time the financing statement is filed:&nbsp;</span></p> <p><span class="cls0">(1) the security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and&nbsp;</span></p> <p><span class="cls0">(2) a purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, tangible documents, goods, instruments, or a security certificate, receives delivery of the collateral.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 65, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 69, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-339. Priority subject to subordination.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY SUBJECT TO SUBORDINATION&nbsp;</span></p> <p><span class="cls0">This article does not preclude subordination by agreement by a person entitled to priority.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 66, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-340. Effectiveness of right of recoupment or set-off against deposit account.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECTIVENESS OF RIGHT OF RECOUPMENT OR&nbsp;</span></p> <p class="cls1"><span class="cls0">SET-OFF AGAINST DEPOSIT ACCOUNT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (c) of this section, a bank with which a deposit account is maintained may exercise any right of recoupment or set-off against a secured party that holds a security interest in the deposit account.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (c) of this section, the application of this article to a security interest in a deposit account does not affect a right of recoupment or set-off of the secured party as to a deposit account maintained with the secured party.&nbsp;</span></p> <p><span class="cls0">(c) The exercise by a bank of a set-off against a deposit account is ineffective against a secured party that holds a security interest in the deposit account which is perfected by control under paragraph (3) of subsection (a) of Section 19104 of this title, if the set-off is based on a claim against the debtor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 67, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-341. Bank&rsquo;s rights and duties with respect to deposit account.&nbsp;</span></p> <p class="cls1"><span class="cls0">BANK&rsquo;S RIGHTS AND DUTIES WITH RESPECT TO DEPOSIT ACCOUNT&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in subsection (c) of Section 19340 of this title, and unless the bank otherwise agrees in an authenticated record, a bank&rsquo;s rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended, or modified by:&nbsp;</span></p> <p><span class="cls0">(1) the creation, attachment, or perfection of a security interest in the deposit account;&nbsp;</span></p> <p><span class="cls0">(2) the bank&rsquo;s knowledge of the security interest; or&nbsp;</span></p> <p><span class="cls0">(3) the bank&rsquo;s receipt of instructions from the secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 68, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-342. Bank&rsquo;s right to refuse to enter into or disclose existence of control agreement.&nbsp;</span></p> <p class="cls1"><span class="cls0">BANK&rsquo;S RIGHT TO REFUSE TO ENTER INTO&nbsp;</span></p> <p class="cls1"><span class="cls0">OR DISCLOSE EXISTENCE OF CONTROL AGREEMENT&nbsp;</span></p> <p><span class="cls0">This article does not require a bank to enter into an agreement of the kind described in paragraph (2) of subsection (a) of Section 19104 of this title, even if its customer so requests or directs. A bank that has entered into such an agreement is not required to confirm the existence of the agreement to another person unless requested to do so by its customer.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 69, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-401. Alienability of debtor&rsquo;s rights.&nbsp;</span></p> <p class="cls1"><span class="cls0">ALIENABILITY OF DEBTOR&rsquo;S RIGHTS&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section and Sections 19406, 19407, 19408, and 19409 of this title, whether a debtor&rsquo;s rights in collateral may be voluntarily or involuntarily transferred is governed by law other than this article.&nbsp;</span></p> <p><span class="cls0">(b) An agreement between the debtor and secured party which prohibits a transfer of the debtor&rsquo;s rights in collateral or makes the transfer a default does not prevent the transfer from taking effect.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 70, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-402. Secured party not obligated on contract of debtor or in tort.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURED PARTY NOT OBLIGATED ON&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTRACT OF DEBTOR OR IN TORT&nbsp;</span></p> <p><span class="cls0">The existence of a security interest, agricultural lien, or authority given to a debtor to dispose of or use collateral, without more, does not subject a secured party to liability in contract or tort for the debtor&rsquo;s acts or omissions.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 71, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-403. Agreement not to assert defenses against assignee.&nbsp;</span></p> <p class="cls1"><span class="cls0">AGREEMENT NOT TO ASSERT DEFENSES AGAINST ASSIGNEE&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;value&rdquo; has the meaning provided in subsection (a) of Section 3303 of this title.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in this section, an agreement between an account debtor and an assignor not to assert against an assignee any claim or defense that the account debtor may have against the assignor is enforceable by an assignee that takes an assignment:&nbsp;</span></p> <p><span class="cls0">(1) for value;&nbsp;</span></p> <p><span class="cls0">(2) in good faith;&nbsp;</span></p> <p><span class="cls0">(3) without notice of a claim of a property or possessory right to the property assigned; and&nbsp;</span></p> <p><span class="cls0">(4) without notice of a defense or claim in recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under subsection (a) Section 3305 of this title.&nbsp;</span></p> <p><span class="cls0">(c) Subsection (b) of this section does not apply to defenses of a type that may be asserted against a holder in due course of a negotiable instrument under subsection (b) of Section 3305 of this title.&nbsp;</span></p> <p><span class="cls0">(d) In a consumer transaction, if a record evidences the account debtor&rsquo;s obligation, law other than this article requires that the record include a statement to the effect that the rights of an assignee are subject to claims or defenses that the account debtor could assert against the original obligee, and the record does not include such a statement:&nbsp;</span></p> <p><span class="cls0">(1) the record has the same effect as if the record included such a statement; and&nbsp;</span></p> <p><span class="cls0">(2) the account debtor may assert against an assignee those claims and defenses that would have been available if the record included such a statement.&nbsp;</span></p> <p><span class="cls0">(e) This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(f) Except as otherwise provided in subsection (d) of this section, this section does not displace law other than this article which gives effect to an agreement by an account debtor not to assert a claim or defense against an assignee.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 72, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-404. Rights acquired by assignee; claims and defenses against assignee.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS ACQUIRED BY ASSIGNEE;&nbsp;</span></p> <p class="cls1"><span class="cls0">CLAIMS AND DEFENSES AGAINST ASSIGNEE&nbsp;</span></p> <p><span class="cls0">(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) through (e) of this section, the rights of an assignee are subject to:&nbsp;</span></p> <p><span class="cls0">(1) all terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and&nbsp;</span></p> <p><span class="cls0">(2) any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (c) of this section and except as otherwise provided in subsection (d) of this section, the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) of this section only to reduce the amount the account debtor owes.&nbsp;</span></p> <p><span class="cls0">(c) This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(d) In a consumer transaction, if a record evidences the account debtor&rsquo;s obligation, law other than this article requires that the record include a statement to the effect that the account debtor&rsquo;s recovery against an assignee with respect to claims and defenses against the assignor may not exceed amounts paid by the account debtor under the record, and the record does not include such a statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included such a statement.&nbsp;</span></p> <p><span class="cls0">(e) This section does not apply to an assignment of a health-care-insurance receivable.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 73, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-405. Modification of assigned contract.&nbsp;</span></p> <p class="cls1"><span class="cls0">MODIFICATION OF ASSIGNED CONTRACT&nbsp;</span></p> <p><span class="cls0">(a) A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor. This subsection is subject to subsections (b) through (d) of this section.&nbsp;</span></p> <p><span class="cls0">(b) Subsection (a) of this section applies to the extent that:&nbsp;</span></p> <p><span class="cls0">(1) the right to payment or a part thereof under an assigned contract has not been fully earned by performance; or&nbsp;</span></p> <p><span class="cls0">(2) the right to payment or a part thereof has been fully earned by performance and the account debtor has not received notification of the assignment under subsection (a) of Section 19406 of this title.&nbsp;</span></p> <p><span class="cls0">(c) This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(d) This section does not apply to an assignment of a health-care-insurance receivable.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 74, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-406. Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.&nbsp;</span></p> <p class="cls1"><span class="cls0">DISCHARGE OF ACCOUNT DEBTOR; NOTIFICATION OF ASSIGNMENT;&nbsp;</span></p> <p class="cls1"><span class="cls0">IDENTIFICATION AND PROOF OF ASSIGNMENT; RESTRICTIONS ON&nbsp;</span></p> <p class="cls1"><span class="cls0">ASSIGNMENT OF ACCOUNTS, CHATTEL PAPER, PAYMENT&nbsp;</span></p> <p class="cls1"><span class="cls0">INTANGIBLES, AND PROMISSORY NOTES INEFFECTIVE&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsections (b) through (i) of this section, an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (h) of this section, notification is ineffective under subsection (a) of this section:&nbsp;</span></p> <p><span class="cls0">(1) if it does not reasonably identify the rights assigned;&nbsp;</span></p> <p><span class="cls0">(2) to the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor&rsquo;s duty to pay a person other than the seller and the limitation is effective under law other than this article; or&nbsp;</span></p> <p><span class="cls0">(3) at the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;only a portion of the account, chattel paper, or general intangible has been assigned to that assignee;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;a portion has been assigned to another assignee; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the account debtor knows that the assignment to that assignee is limited.&nbsp;</span></p> <p><span class="cls0">(c) Subject to subsection (h) of this section, if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a) of this section.&nbsp;</span></p> <p><span class="cls0">(d) (1) Except as otherwise provided in paragraph (2) of this subsection and subsection (e) of this section and Sections 2A303 and 19407 of this title, and subject to subsection (h) of this section, a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible, or promissory note.&nbsp;</span></p> <p><span class="cls0">(2) This subsection does not apply to the assignment or transfer of or creation of a security interest in the following:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;a claim or right to receive compensation for injuries or sickness as described in 26 U.S.C., Section 104 (a)(1) or (2), as amended from time to time;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;a claim or right to receive benefits under a special needs trust as described in 42 U.S.C., Section 1396p(d)(4), as amended from time to time; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;a structured settlement payment right as defined in paragraph 16 of Section 3239 of Title 12 of the Oklahoma Statutes to the extent of any conflict between the Uniform Commercial Code and the Structured Settlement Protection Act of 2001.&nbsp;</span></p> <p><span class="cls0">(e) Subsection (d) of this section does not apply to the sale of a payment intangible or promissory note.&nbsp;</span></p> <p><span class="cls0">(f) Except as otherwise provided in Sections 2A-303 and 19407 of this title and subject to subsections (h) and (i) of this section, a rule of law, statute, or regulation, that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:&nbsp;</span></p> <p><span class="cls0">(1) prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account or chattel paper; or&nbsp;</span></p> <p><span class="cls0">(2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account or chattel paper.&nbsp;</span></p> <p><span class="cls0">(g) Subject to subsection (h) of this section, an account debtor may not waive or vary its option under paragraph (3) of subsection (b) of this section.&nbsp;</span></p> <p><span class="cls0">(h) This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(i) This section does not apply to an assignment of a health-care-insurance receivable.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 75, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 5, eff. Nov. 1, 2004.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-407. Restrictions on creation or enforcement of security interest in leasehold interest or in lessor&rsquo;s residual interest.&nbsp;</span></p> <p class="cls1"><span class="cls0">RESTRICTIONS ON CREATION OR ENFORCEMENT&nbsp;</span></p> <p class="cls1"><span class="cls0">OF SECURITY INTEREST IN LEASEHOLD INTEREST&nbsp;</span></p> <p class="cls1"><span class="cls0">OR IN LESSOR&rsquo;S RESIDUAL INTEREST&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, a term in a lease agreement is ineffective to the extent that it:&nbsp;</span></p> <p><span class="cls0">(1) prohibits, restricts, or requires the consent of a party to the lease to the assignment or transfer of or the creation, attachment, perfection, or enforcement of a security interest in, an interest of a party under the lease contract or in the lessor&rsquo;s residual interest in the goods; or&nbsp;</span></p> <p><span class="cls0">(2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the lease.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in paragraph (7) of Section 2A303 of this title, a term described in paragraph (2) of subsection (a) of this section is effective to the extent that there is:&nbsp;</span></p> <p><span class="cls0">(1) a transfer by the lessee of the lessee&rsquo;s right of possession or use of the goods in violation of the term; or&nbsp;</span></p> <p><span class="cls0">(2) a delegation of a material performance of either party to the lease contract in violation of the term.&nbsp;</span></p> <p><span class="cls0">(c) The creation, attachment, perfection, or enforcement of a security interest in the lessor&rsquo;s interest under the lease contract or the lessor&rsquo;s residual interest in the goods is not a transfer that materially impairs the lessee&rsquo;s prospect of obtaining return performance or materially changes the duty of or materially increases the burden or risk imposed on the lessee within the purview of paragraph (4) of Section 2A303 of this title unless, and then only to the extent that, enforcement actually results in delegation of material performance of the lessor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 76, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-408. Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective.&nbsp;</span></p> <p class="cls1"><span class="cls0">RESTRICTIONS ON ASSIGNMENT OF PROMISSORY&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTES, HEALTH-CARE-INSURANCE RECEIVABLES, AND&nbsp;</span></p> <p class="cls1"><span class="cls0">CERTAIN GENERAL INTANGIBLES INEFFECTIVE&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health-care-insurance receivable, or general intangible, is ineffective to the extent that the term:&nbsp;</span></p> <p><span class="cls0">(1) would impair the creation, attachment, or perfection of a security interest; or&nbsp;</span></p> <p><span class="cls0">(2) provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.&nbsp;</span></p> <p><span class="cls0">(b) Subsection (a) of this section applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note.&nbsp;</span></p> <p><span class="cls0">(c) A rule of law, statute, or regulation, that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:&nbsp;</span></p> <p><span class="cls0">(1) would impair the creation, attachment, or perfection of a security interest; or&nbsp;</span></p> <p><span class="cls0">(2) provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.&nbsp;</span></p> <p><span class="cls0">(d) To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or general intangible or a rule of law, statute, or regulation described in subsection (c) of this section would be effective under law other than this article but is ineffective under subsection (a) or (c) of this section, the creation, attachment, or perfection of a security interest in the promissory note, health-care-insurance receivable, or general intangible:&nbsp;</span></p> <p><span class="cls0">(1) is not enforceable against the person obligated on the promissory note or the account debtor;&nbsp;</span></p> <p><span class="cls0">(2) does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;&nbsp;</span></p> <p><span class="cls0">(3) does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party;&nbsp;</span></p> <p><span class="cls0">(4) does not entitle the secured party to use or assign the debtor&rsquo;s rights under the promissory note, health-care-insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health-care-insurance receivable, or general intangible;&nbsp;</span></p> <p><span class="cls0">(5) does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor; and&nbsp;</span></p> <p><span class="cls0">(6) does not entitle the secured party to enforce the security interest in the promissory note, health-care-insurance receivable, or general intangible.&nbsp;</span></p> <p><span class="cls0">(e) Subsections (a) and (c) of this section do not apply to the assignment or transfer of or creation of a security interest in:&nbsp;</span></p> <p><span class="cls0">(1) a claim or right to receive compensation for injuries or sickness as described in 26 U.S.C., Section 104(a)(1) or (2), as amended from time to time;&nbsp;</span></p> <p><span class="cls0">(2) a claim or right to receive benefits under a special needs trust as described in 42 U.S.C., Section 1396p(d)(4), as amended from time to time; or&nbsp;</span></p> <p><span class="cls0">(3) a structured settlement payment right as defined in paragraph 16 of Section 3239 of Title 12 of the Oklahoma Statutes to the extent of any conflict between the Uniform Commercial Code and the Structured Settlement Protection Act of 2001.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 77, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 6, eff. Nov. 1, 2004.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-409. Repealed by Laws 2000, c. 371, &sect; 185, eff. July 1, 2001.&nbsp;</span></p> <p><span class="cls0">&sect;12A-1-9-501. Filing office.&nbsp;</span></p> <p class="cls1"><span class="cls0">FILING OFFICE&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, if the local law of this state governs perfection of a security interest or agricultural lien, the office in which to file a financing statement to perfect the security interest or agricultural lien is:&nbsp;</span></p> <p><span class="cls0">(1) the office designated for the filing or recording of a record of a mortgage on the related real property, if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the collateral is as-extracted collateral or timber to be cut; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the financing statement is filed as a fixture filing and the collateral is goods that are or are to become fixtures; or&nbsp;</span></p> <p><span class="cls0">(2) the office of the county clerk of Oklahoma County, in all other cases, including a case in which the collateral is goods that are or are to become fixtures and the financing statement is not filed as a fixture filing.&nbsp;</span></p> <p><span class="cls0">(b) The office in which to file a financing statement to perfect a security interest in collateral, including fixtures, of a transmitting utility is the office of the Secretary of State pursuant to Sections 17 and 18 of Title 46 of the Oklahoma Statutes. The financing statement also constitutes a fixture filing as to the collateral indicated in the financing statement which is or is to become fixtures.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 79, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-502. Contents of financing statement; record of mortgage as financing statement; time of filing financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTENTS OF FINANCING STATEMENT; RECORD OF MORTGAGE AS&nbsp;</span></p> <p class="cls1"><span class="cls0">FINANCING STATEMENT; TIME OF FILING FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (b) of this section, a financing statement is sufficient only if it:&nbsp;</span></p> <p><span class="cls0">(1) provides the name of the debtor;&nbsp;</span></p> <p><span class="cls0">(2) provides the name of the secured party or a representative of the secured party; and&nbsp;</span></p> <p><span class="cls0">(3) indicates the collateral covered by the financing statement.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (b) of Section 19501 of this title, to be sufficient, a financing statement that covers as-extracted collateral or timber to be cut, or which is filed as a fixture filing and covers goods that are or are to become fixtures, must satisfy subsection (a) of this section and also:&nbsp;</span></p> <p><span class="cls0">(1) indicate that it covers this type of collateral;&nbsp;</span></p> <p><span class="cls0">(2) indicate that it is to be filed against the tract index in the real property records;&nbsp;</span></p> <p><span class="cls0">(3) provide a description of the real property to which the collateral is related; and&nbsp;</span></p> <p><span class="cls0">(4) if the debtor does not have an interest of record in the real property, provide the name of a record owner.&nbsp;</span></p> <p><span class="cls0">(c) A record of a mortgage is effective, from the date of recording as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut only if:&nbsp;</span></p> <p><span class="cls0">(1) the record indicates the goods or accounts that it covers;&nbsp;</span></p> <p><span class="cls0">(2) the goods are or are to become fixtures related to the real property described in the record or the collateral is related to the real property described in the record and is as-extracted collateral or timber to be cut;&nbsp;</span></p> <p><span class="cls0">(3) the record satisfies the requirements for a financing statement in this section other than an indication that it is to be filed in the real property records; and&nbsp;</span></p> <p><span class="cls0">(4) the record is duly recorded.&nbsp;</span></p> <p><span class="cls0">(d) A financing statement may be filed before a security agreement is made or a security interest otherwise attaches.&nbsp;</span></p> <p><span class="cls0">(e) (1) No filing of a financing statement, continuation statement, termination statement, or assignment or release of a financing statement under the provisions of paragraph (1) of subsection (a) of Section 19501 of this title shall constitute record notice of the contents thereof against any subsequent purchaser or encumbrancer of real estate or any interest therein unless the same contains a legal description of the real estate adequate for the purposes of indexing in the tract indexes of the county wherein the real estate is situated.&nbsp;</span></p> <p><span class="cls0">(2) It shall be the duty of the county clerk to cause all such financing statements, continuation statements, termination statements, or assignments or releases of financing statements containing an adequate legal description to be recorded and indexed in the records of said office in the same place and manner as a mortgage on real estate or assignment or release thereof.&nbsp;</span></p> <p><span class="cls0">(3) To effectuate the provisions of Section 2A-309 of this title, a lessor of goods that are or are to become fixtures may file a fixture filing complying with that section, and filings related to that fixture filing, using the terms &ldquo;lessor,&rdquo; &ldquo;lessee,&rdquo; or the like instead of the terms specified in this part. The provisions of this article relating to a fixture filing or a filing related to it shall apply as appropriate in conjunction with the provisions of Article 2A of this title with respect to such filings.&nbsp;</span></p> <p><span class="cls0">(f) Except as otherwise provided in subsection (c) of this section, a financing statement, or any filing related to it, that complies with this section is sufficient and may be recorded and shall be effective as a financing statement even though it does not comply with the execution and acknowledgement requirements of Sections 15, 26, 93, 94, or 95 of Title 16 of the Oklahoma Statutes, as amended, or other statutes, if any, of like import that would impose requirements beyond those of the kind encompassed in this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 80, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-503. Name of debtor and secured party.&nbsp;</span></p> <p class="cls1"><span class="cls0">NAME OF DEBTOR AND SECURED PARTY&nbsp;</span></p> <p><span class="cls0">(a) A financing statement sufficiently provides the name of the debtor:&nbsp;</span></p> <p><span class="cls0">(1) if the debtor is a registered organization, only if the financing statement provides the name of the debtor indicated on the public record of the debtor&rsquo;s jurisdiction of organization which shows the debtor to have been organized;&nbsp;</span></p> <p><span class="cls0">(2) if the debtor is a decedent&rsquo;s estate, only if the financing statement provides the name of the decedent and indicates that the debtor is an estate;&nbsp;</span></p> <p><span class="cls0">(3) if the debtor is a trust or a trustee acting with respect to property held in trust, only if the financing statement:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;provides the name specified for the trust in its organic documents or, if no name is specified, provides the name of the settlor and additional information sufficient to distinguish the debtor from other trusts having one or more of the same settlors; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;indicates, in the debtor&rsquo;s name or otherwise, that the debtor is a trust or is a trustee acting with respect to property held in trust; and&nbsp;</span></p> <p><span class="cls0">(4) in other cases:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;if the debtor has a name, only if it provides the individual or organizational name of the debtor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the debtor does not have a name, only if it provides the names of the partners, members, associates, or other persons comprising the debtor.&nbsp;</span></p> <p><span class="cls0">(b) A financing statement that provides the name of the debtor in accordance with subsection (a) of this section is not rendered ineffective by the absence of:&nbsp;</span></p> <p><span class="cls0">(1) a trade name or other name of the debtor; or&nbsp;</span></p> <p><span class="cls0">(2) unless required under subparagraph (B) of paragraph (4) of subsection (a) of this section, names of partners, members, associates, or other persons comprising the debtor.&nbsp;</span></p> <p><span class="cls0">(c) A financing statement that provides only the debtor&rsquo;s trade name does not sufficiently provide the name of the debtor.&nbsp;</span></p> <p><span class="cls0">(d) Failure to indicate the representative capacity of a secured party or representative of a secured party does not affect the sufficiency of a financing statement.&nbsp;</span></p> <p><span class="cls0">(e) A financing statement may provide the name of more than one debtor and the name of more than one secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 81, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-504. Indication of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">INDICATION OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">A financing statement sufficiently indicates the collateral that it covers if the financing statement provides:&nbsp;</span></p> <p><span class="cls0">(1) a description of the collateral pursuant to Section 19108 of this title; or&nbsp;</span></p> <p><span class="cls0">(2) an indication that the financing statement covers all assets or all personal property.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 82, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-505. Filing and compliance with other statutes and treaties for consignments, leases, other bailments, and other transactions.&nbsp;</span></p> <p class="cls1"><span class="cls0">FILING AND COMPLIANCE WITH OTHER STATUTES AND TREATIES FOR&nbsp;</span></p> <p class="cls1"><span class="cls0">CONSIGNMENTS, LEASES, OTHER BAILMENTS, AND OTHER TRANSACTIONS&nbsp;</span></p> <p><span class="cls0">(a) A consignor, lessor, or other bailor of goods, a licensor, or a buyer of a payment intangible or promissory note may file a financing statement, or may comply with a statute or treaty described in subsection (a) of Section 19311 of this title, using the terms &ldquo;consignor&rdquo;, &ldquo;consignee&rdquo;, &ldquo;lessor&rdquo;, &ldquo;lessee&rdquo;, &ldquo;bailor&rdquo;, &ldquo;bailee&rdquo;, &ldquo;licensor&rdquo;, &ldquo;licensee&rdquo;, &ldquo;owner&rdquo;, &ldquo;registered owner&rdquo;, &ldquo;buyer&rdquo;, &ldquo;seller&rdquo;, or words of similar import, instead of the terms &ldquo;secured party&rdquo; and &ldquo;debtor&rdquo;.&nbsp;</span></p> <p><span class="cls0">(b) This part applies to the filing of a financing statement under subsection (a) of this section and, as appropriate, to compliance that is equivalent to filing a financing statement under subsection (b) of Section 19311 of this title, but the filing or compliance is not of itself a factor in determining whether the collateral secures an obligation. If it is determined for another reason that the collateral secures an obligation, a security interest held by the consignor, lessor, bailor, licensor, owner, or buyer which attaches to the collateral is perfected by the filing or compliance.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 83, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-506. Effect of errors or omissions.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF ERRORS OR OMISSIONS&nbsp;</span></p> <p><span class="cls0">(a) A financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (c) of this section, a financing statement that fails sufficiently to provide the name of the debtor in accordance with subsection (a) of Section 19503 of this title is seriously misleading.&nbsp;</span></p> <p><span class="cls0">(c) If a search of the records of the filing office under the debtor&rsquo;s correct name, using the filing office&rsquo;s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with subsection (a) of Section 19503 of this title, the name provided does not make the financing statement seriously misleading.&nbsp;</span></p> <p><span class="cls0">(d) For purposes of subsection (b) of Section 19508 of this title, the &ldquo;debtor&rsquo;s correct name&rdquo; in subsection (c) of this section means the correct name of the new debtor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 84, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-507. Effect of certain events on effectiveness of financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF CERTAIN EVENTS ON&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECTIVENESS OF FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) A filed financing statement remains effective with respect to collateral that is sold, exchanged, leased, licensed, or otherwise disposed of and in which a security interest or agricultural lien continues, even if the secured party knows of or consents to the disposition.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (c) of this section and Section 19508 of this title, a financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes seriously misleading under Section 19506 of this title.&nbsp;</span></p> <p><span class="cls0">(c) If a debtor so changes its name that a filed financing statement becomes seriously misleading under Section 19506 of this title:&nbsp;</span></p> <p><span class="cls0">(1) the financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four (4) months after, the change; and&nbsp;</span></p> <p><span class="cls0">(2) the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four (4) months after the change, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four (4) months after the change.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 85, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-508. Effectiveness of financing statement if new debtor becomes bound by security agreement.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECTIVENESS OF FINANCING STATEMENT IF&nbsp;</span></p> <p class="cls1"><span class="cls0">NEW DEBTOR BECOMES BOUND BY SECURITY AGREEMENT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this section, a filed financing statement naming an original debtor is effective to perfect a security interest in collateral in which a new debtor has or acquires rights to the extent that the financing statement would have been effective had the original debtor acquired rights in the collateral.&nbsp;</span></p> <p><span class="cls0">(b) If the difference between the name of the original debtor and that of the new debtor causes a filed financing statement that is effective under subsection (a) of this section to be seriously misleading under Section 19506 of this title:&nbsp;</span></p> <p><span class="cls0">(1) the financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four (4) months after, the new debtor becomes bound under subsection (d) of Section 19203 of this title; and&nbsp;</span></p> <p><span class="cls0">(2) the financing statement is not effective to perfect a security interest in collateral acquired by the new debtor more than four (4) months after the new debtor becomes bound under subsection (d) of Section 19203 of this title unless an initial financing statement providing the name of the new debtor if filed before the expiration of that time.&nbsp;</span></p> <p><span class="cls0">(c) This section does not apply to collateral for which a filed financing statement remains effective against the new debtor under subsection (a) of Section 19507 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 86, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-509. Persons entitled to file a record.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERSONS ENTITLED TO FILE A RECORD&nbsp;</span></p> <p><span class="cls0">(a) A person may file an initial financing statement, amendment that adds collateral covered by a financing statement, or amendment that adds a debtor to a financing statement only if:&nbsp;</span></p> <p><span class="cls0">(1) the debtor authorizes the filing in an authenticated record; or&nbsp;</span></p> <p><span class="cls0">(2) the person holds an agricultural lien that has become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien.&nbsp;</span></p> <p><span class="cls0">(b) By authenticating or becoming bound as a debtor by a security agreement, a debtor or new debtor authorizes the filing of an initial financing statement, and an amendment, covering:&nbsp;</span></p> <p><span class="cls0">(1) the collateral described in the security agreement; and&nbsp;</span></p> <p><span class="cls0">(2) property that becomes collateral under paragraph (2) of subsection (a) of Section 19315 of this title, whether or not the security agreement expressly covers proceeds.&nbsp;</span></p> <p><span class="cls0">(c) By acquiring collateral in which a security interest or agricultural lien continues under paragraph (1) of subsection (a) of Section 1-9-315 of this title, a debtor authorizes the filing of an initial financing statement, and an amendment, covering the collateral and property that becomes collateral under paragraph (2) of subsection (a) of Section 1-9-315 of this title.&nbsp;</span></p> <p><span class="cls0">(d) A person may file an amendment other than an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement only if:&nbsp;</span></p> <p><span class="cls0">(1) the secured party of record authorizes the filing; or&nbsp;</span></p> <p><span class="cls0">(2) the amendment is a termination statement for a financing statement for which the secured party of record has failed to file or send a termination statement as required by subsection (a) or (c) of Section 19513 of this title, the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.&nbsp;</span></p> <p><span class="cls0">(e) If there is more than one secured party of record for a financing statement, each secured party of record may authorize the filing of an amendment under subsection (d) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 87, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-510. Effectiveness of filed record.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECTIVENESS OF FILED RECORD&nbsp;</span></p> <p><span class="cls0">(a) A filed record is effective only to the extent that it was filed by a person that may file it under Section 19509 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A record authorized by one secured party of record does not affect the financing statement with respect to another secured party of record.&nbsp;</span></p> <p><span class="cls0">(c) A continuation statement that is not filed within the six-month period prescribed by subsection (d) of Section 19515 of this title is ineffective.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 88, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-511. Secured party of record.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURED PARTY OF RECORD&nbsp;</span></p> <p><span class="cls0">(a) A secured party of record with respect to a financing statement is a person whose name is provided as the name of the secured party or a representative of the secured party in an initial financing statement that has been filed. If an initial financing statement is filed under subsection (a) of Section 19514 of this title, the assignee named in the initial financing statement is the secured party of record with respect to the financing statement.&nbsp;</span></p> <p><span class="cls0">(b) If an amendment of a financing statement which provides the name of a person as a secured party or a representative of a secured party is filed, the person named in the amendment is a secured party of record. If an amendment is filed under subsection (b) of Section 19514 of this title, the assignee named in the amendment is a secured party of record.&nbsp;</span></p> <p><span class="cls0">(c) A person remains a secured party of record until the filing of an amendment of the financing statement which deletes the person.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 89, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-512. Amendment of financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">AMENDMENT OF FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) Subject to Section 19509 of this title, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or, subject to subsection (e) of this section, otherwise amend the information provided in, a financing statement by filing an amendment that:&nbsp;</span></p> <p><span class="cls0">(1) identifies, by its file number, the initial financing statement to which the amendment relates; and&nbsp;</span></p> <p><span class="cls0">(2) if the amendment relates to an initial financing statement filed or recorded in a filing office described in paragraph (1) of subsection (a) of Section 19501 of this title, provides the file number and date that the initial financing statement was filed or recorded, and the information specified in subsection (b) of Section 19502 of this title.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in Section 19515 of this title, the filing of an amendment does not extend the period of effectiveness of the financing statement.&nbsp;</span></p> <p><span class="cls0">(c) A financing statement that is amended by an amendment that adds collateral is effective as to the added collateral only from the date of the filing of the amendment.&nbsp;</span></p> <p><span class="cls0">(d) A financing statement that is amended by an amendment that adds a debtor is effective as to the added debtor only from the date of the filing of the amendment.&nbsp;</span></p> <p><span class="cls0">(e) An amendment is ineffective to the extent it:&nbsp;</span></p> <p><span class="cls0">(1) purports to delete all debtors and fails to provide the name of a debtor to be covered by the financing statement; or&nbsp;</span></p> <p><span class="cls0">(2) purports to delete all secured parties of record and fails to provide the name of a new secured party of record.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 90, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-513. Termination statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">TERMINATION STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) A secured party shall cause the secured party of record for a financing statement to file a termination statement for the financing statement if the financing statement covers consumer goods and:&nbsp;</span></p> <p><span class="cls0">(1) there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or&nbsp;</span></p> <p><span class="cls0">(2) the debtor did not authorize the filing of the initial financing statement.&nbsp;</span></p> <p><span class="cls0">(b) To comply with subsection (a) of this section, a secured party shall cause the secured party of record to file the termination statement:&nbsp;</span></p> <p><span class="cls0">(1) within one (1) month after there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or&nbsp;</span></p> <p><span class="cls0">(2) if earlier, within twenty (20) days after the secured party receives an authenticated demand from a debtor.&nbsp;</span></p> <p><span class="cls0">(c) In cases not governed by subsection (a) of this section, within twenty (20) days after a secured party receives an authenticated demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:&nbsp;</span></p> <p><span class="cls0">(1) except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value;&nbsp;</span></p> <p><span class="cls0">(2) the financing statement covers accounts or chattel paper that has been sold but as to which the account debtor or other person obligated has discharged its obligation;&nbsp;</span></p> <p><span class="cls0">(3) the financing statement covers goods that were the subject of a consignment to the debtor but are not in the debtor&rsquo;s possession; or&nbsp;</span></p> <p><span class="cls0">(4) the debtor did not authorize the filing of the initial financing statement.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in Section 19510 of this title, upon the filing of a termination statement with the filing office, the financing statement to which the termination statement relates ceases to be effective. Except as otherwise provided in Section 1-9-510 of this title, for purposes of subsection (g) of Section 1-9-519, subsection (a) of Section 1-9-522, and subsection (c) of Section 1-9-523 of this title, the filing with the filing office of a termination statement relating to a financing statement that indicates that the debtor is a transmitting utility also causes the effectiveness of the financing statement to lapse.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 91, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-514. Assignment of powers of secured party of record.&nbsp;</span></p> <p class="cls1"><span class="cls0">ASSIGNMENT OF POWERS OF SECURED PARTY OF RECORD&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (c) of this section, an initial financing statement may reflect an assignment of all of the secured party&rsquo;s power to authorize an amendment to the financing statement by providing the name and mailing address of the assignee as the name and address of the secured party.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (c) of this section, a secured party of record may assign of record all or part of its power to authorize an amendment to a financing statement by filing in the filing office an amendment of the financing statement which:&nbsp;</span></p> <p><span class="cls0">(1) identifies, by its file number, the initial financing statement to which it relates;&nbsp;</span></p> <p><span class="cls0">(2) provides the name of the assignor; and&nbsp;</span></p> <p><span class="cls0">(3) provides the name and mailing address of the assignee.&nbsp;</span></p> <p><span class="cls0">(c) An assignment of record of a security interest in a fixture covered by a record of a mortgage which is effective as a fixture filing under subsection (c) of Section 19502 of this title may be made only by an assignment of record of the mortgage in the manner provided by law of this state other than the Uniform Commercial Code.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 92, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-515. Duration and effectiveness of financing statement; effect of lapsed financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">DURATION AND EFFECTIVENESS OF FINANCING STATEMENT;&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF LAPSED FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsections (b), (e), (f), and (g) of this section, a filed financing statement is effective for a period of five (5) years after the date of filing.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsections (e), (f), and (g) of this section, an initial financing statement filed in connection with a public-finance transaction or manufactured-home transaction is effective for a period of thirty (30) years after the date of filing if it indicates that it is filed in connection with a public-finance transaction or manufactured-home transaction.&nbsp;</span></p> <p><span class="cls0">(c) The effectiveness of a filed financing statement lapses on the expiration of the period of its effectiveness unless before the lapse a continuation statement is filed pursuant to subsection (d) of this section. Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless the security interest is perfected otherwise. If the security interest or agricultural lien becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral for value.&nbsp;</span></p> <p><span class="cls0">(d) A continuation statement may be filed only within six (6) months before the expiration of the five-year period specified in subsection (a) of this section or the thirty-year period specified in subsection (b) of this section, whichever is applicable.&nbsp;</span></p> <p><span class="cls0">(e) Except as otherwise provided in Section 19510 of this title, upon timely filing of a continuation statement, the effectiveness of the initial financing statement continues for a period of five (5) years commencing on the day on which the financing statement would have become ineffective in the absence of the filing. Upon the expiration of the five-year period, the financing statement lapses in the same manner as provided in subsection (c) of this section, unless, before the lapse, another continuation statement is filed pursuant to subsection (d) of this section. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the initial financing statement.&nbsp;</span></p> <p><span class="cls0">(f) If a debtor is a transmitting utility and a filed financing statement so indicates, the financing statement is effective until a termination statement is filed.&nbsp;</span></p> <p><span class="cls0">(g) A record of a mortgage that is effective as a financing statement filed as a fixture filing under subsection (c) of Section 19502 of this title remains effective as a financing statement filed as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real property.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 93, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-516. What constitutes filing; effectiveness of filing.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHAT CONSTITUTES FILING; EFFECTIVENESS OF FILING&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing.&nbsp;</span></p> <p><span class="cls0">(b) Filing does not occur with respect to a record that a filing office refuses to accept because:&nbsp;</span></p> <p><span class="cls0">(1) the record is not communicated by a method or medium of communication authorized by the filing office;&nbsp;</span></p> <p><span class="cls0">(2) an amount equal to or greater than the applicable filing fee is not tendered;&nbsp;</span></p> <p><span class="cls0">(3) the filing office is unable to index the record because:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;in the case of an initial financing statement, the record does not provide a name for the debtor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;in the case of an amendment or correction statement, the record:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;does not identify the initial financing statement as required by Section 19512 or 19518 of this title, as applicable; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;identifies an initial financing statement whose effectiveness has lapsed under Section 19515 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;in the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor&rsquo;s last name; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;in the case of a record filed or recorded in the filing office described in paragraph (1) of subsection (a) of Section 19501 of this title, the record does not provide a sufficient description of the real property to which it relates;&nbsp;</span></p> <p><span class="cls0">(4) in the case of an initial financing statement or an amendment that adds a secured party of record, the record does not provide a name and mailing address for the secured party of record;&nbsp;</span></p> <p><span class="cls0">(5) in the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, the record does not:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;provide a mailing address for the debtor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;indicate whether the debtor is an individual or an organization; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;if the financing statement indicates that the debtor is an organization, provide:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;a type of organization for the debtor;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;a jurisdiction of organization for the debtor; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;an organizational identification number for the debtor or indicate that the debtor has none;&nbsp;</span></p> <p><span class="cls0">(6) in the case of an assignment reflected in an initial financing statement under paragraph (a) of Section 19514 of this title or an amendment filed under subsection (b) of Section 19514 of this title, the record does not provide a name and mailing address for the assignee; or&nbsp;</span></p> <p><span class="cls0">(7) in the case of a continuation statement, the record is not filed within the six-month period prescribed by subsection (d) of Section 19515 of this title.&nbsp;</span></p> <p><span class="cls0">(c) For purposes of subsection (b) of this section:&nbsp;</span></p> <p><span class="cls0">(1) a record does not provide information if the filing office is unable to read or decipher the information; and&nbsp;</span></p> <p><span class="cls0">(2) a record that does not indicate that it is an amendment or identify an initial financing statement to which it relates, as required by Section 19512, 19514, or 19518 of this title, is an initial financing statement.&nbsp;</span></p> <p><span class="cls0">(d) A record that is communicated to the filing office with tender of the filing fee, but which the filing office refuses to accept for a reason other than one set forth in subsection (b) of this section, is effective as a filed record except as against a purchaser of the collateral which gives value in reasonable reliance upon the absence of the record from the files.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 94, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-517. Effect of indexing errors.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF INDEXING ERRORS&nbsp;</span></p> <p><span class="cls0">The failure of the filing office to index a record correctly does not affect the effectiveness of the filed record.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 95, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-518. Claim concerning inaccurate or wrongfully filed record.&nbsp;</span></p> <p class="cls1"><span class="cls0">CLAIM CONCERNING INACCURATE OR WRONGFULLY FILED RECORD&nbsp;</span></p> <p><span class="cls0">(a) A person may file in the filing office a correction statement with respect to a record indexed there under the person&rsquo;s name if the person believes that the record is inaccurate or was wrongfully filed.&nbsp;</span></p> <p><span class="cls0">(b) A correction statement must:&nbsp;</span></p> <p><span class="cls0">(1) identify the record to which it relates by:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the file number of the initial financing statement to which the record relates; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the correction statement relates to a record filed or recorded in a filing office described in paragraph (1) of subsection (a) of Section 19501 of this title, the file number, the date that the initial financing statement was filed or recorded, and the information specified in paragraph (1) of subsection (e) of Section 19502 of this title;&nbsp;</span></p> <p><span class="cls0">(2) indicate that it is a correction statement; and&nbsp;</span></p> <p><span class="cls0">(3) provide the basis for the person&rsquo;s belief that the record is inaccurate and indicate the manner in which the person believes the record should be amended to cure any inaccuracy or provide the basis for the person&rsquo;s belief that the record was wrongfully filed.&nbsp;</span></p> <p><span class="cls0">(c) The filing of a correction statement does not affect the effectiveness of an initial financing statement or other filed record.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 96, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-519. Numbering, maintaining, and indexing records; communicating information provided in records.&nbsp;</span></p> <p class="cls1"><span class="cls0">NUMBERING, MAINTAINING, AND INDEXING RECORDS;&nbsp;</span></p> <p class="cls1"><span class="cls0">COMMUNICATING INFORMATION PROVIDED IN RECORDS&nbsp;</span></p> <p><span class="cls0">(a) For each record filed in a filing office, the filing office shall:&nbsp;</span></p> <p><span class="cls0">(1) assign a unique number to the filed record;&nbsp;</span></p> <p><span class="cls0">(2) create a record that bears the number assigned to the filed record and the date and time of filing;&nbsp;</span></p> <p><span class="cls0">(3) maintain the filed record for public inspection; and&nbsp;</span></p> <p><span class="cls0">(4) index the filed record in accordance with subsections (c), (d), and (e) of this section.&nbsp;</span></p> <p><span class="cls0">(b) A file number assigned by the county clerk of Oklahoma County after July 1, 2001, must include a digit that:&nbsp;</span></p> <p><span class="cls0">(1) is mathematically derived from or related to the other digits of the file number; and&nbsp;</span></p> <p><span class="cls0">(2) aids the filing office in determining whether a number communicated as the file number includes a single-digit or transpositional error.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsections (d) and (e) of this section, the filing office shall:&nbsp;</span></p> <p><span class="cls0">(1) index an initial financing statement according to the name of the debtor and shall index all filed records relating to the initial financing statement in a manner that associates with one another an initial financing statement and all filed records relating to the initial financing statement; and&nbsp;</span></p> <p><span class="cls0">(2) index a record that provides a name of a debtor which was not previously provided in the financing statement to which the record relates also according to the name that was not previously provided.&nbsp;</span></p> <p><span class="cls0">(d) If a financing statement is filed as a fixture filing or covers as-extracted collateral or timber to be cut, it must be filed for record and the filing office shall index it:&nbsp;</span></p> <p><span class="cls0">(1) under the names of the debtor and of each owner of record shown on the financing statement as if they were the mortgagors under a mortgage of the real property described; and&nbsp;</span></p> <p><span class="cls0">(2) to the extent that the law of this state provides for indexing of records of mortgages under the name of the mortgagee, under the name of the secured party as if the secured party were the mortgagee thereunder, or, if indexing is by description, as if the financing statement were a record of a mortgage of the real property described.&nbsp;</span></p> <p><span class="cls0">(e) If a financing statement is filed as a fixture filing or covers as-extracted collateral or timber to be cut, the filing office shall index an assignment filed under subsection (a) of Section 19514 of this title or an amendment filed under subsection (b) of Section 19514 of this title:&nbsp;</span></p> <p><span class="cls0">(1) under the name of the assignor as grantor; and&nbsp;</span></p> <p><span class="cls0">(2) to the extent that the law of this state provides for indexing a record of the assignment of a mortgage under the name of the assignee, under the name of the assignee.&nbsp;</span></p> <p><span class="cls0">(f) The filing office shall maintain a capability:&nbsp;</span></p> <p><span class="cls0">(1) to retrieve a record by the name of the debtor and:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;if the filing office is described in paragraph (1) of subsection (a) of Section 19501 of this title, by the file number assigned to the initial financing statement to which the record relates, the date that the record was filed or recorded, and the legal description of the real estate adequate for the purposes of indexing in the tract indexes of the county where the real estate is situated; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the filing office is described in paragraph (2) of subsection (a) of Section 19501 of this title, by the file number and date of the initial financing statement to which the record relates; and&nbsp;</span></p> <p><span class="cls0">(2) to associate and retrieve with one another an initial financing statement and each filed record relating to the initial financing statement.&nbsp;</span></p> <p><span class="cls0">(g) The filing office may not remove a debtor&rsquo;s name from the index until one (1) year after the effectiveness of a financing statement naming the debtor lapses under Section 19515 of this title with respect to all secured parties of record.&nbsp;</span></p> <p><span class="cls0">(h) The filing office shall perform the acts required by subsections (a) through (e) of this section at the time and in the manner prescribed by filing-office rule, but not later than two (2) business days after the filing office receives the record in question.&nbsp;</span></p> <p><span class="cls0">(i) Subsection (b) of this section does not apply to a filing office described in paragraph (1) of subsection (a) of Section 19501 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 97, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-520. Acceptance and refusal to accept record.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCEPTANCE AND REFUSAL TO ACCEPT RECORD&nbsp;</span></p> <p><span class="cls0">(a) A filing office shall refuse to accept a record for filing for a reason set forth in subsection (b) of Section 19516 of this title and may refuse to accept a record for filing only for a reason set forth in subsection (b) of Section 19516 of this title.&nbsp;</span></p> <p><span class="cls0">(b) If a filing office refuses to accept a record for filing, it shall communicate to the person that presented the record the fact of and reason for the refusal and the date and time the record would have been filed had the filing office accepted it. The communication must be made at the time and in the manner prescribed by filing-office rule, but, in the case of a filing office described in paragraph (2) of subsection (a) of Section 19501 of this title, in no event more than two (2) business days after the filing office receives the record.&nbsp;</span></p> <p><span class="cls0">(c) A filed financing statement satisfying subsections (a) and (b) of Section 19502 of this title is effective, even if the filing office is required to refuse to accept it for filing under subsection (a). However, Section 19338 of this title applies to a filed financing statement providing information described in paragraph (5) of subsection (b) of Section 19516 of this title which is incorrect at the time the financing statement is filed.&nbsp;</span></p> <p><span class="cls0">(d) If a record communicated to a filing office provides information that relates to more than one debtor, this part applies to each debtor separately.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 98, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-521. Uniform form of written financing statement and amendment.&nbsp;</span></p> <p class="cls1"><span class="cls0">UNIFORM FORM OF WRITTEN FINANCING STATEMENT AND AMENDMENT&nbsp;</span></p> <p><span class="cls0">(a) A filing office that accepts written records may not refuse to accept a written initial financing statement in the following form and format, except for a reason set forth in subsection (b) of Section 19516:&nbsp;</span></p> <p><span class="cls0">UCC FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">FOLLOW INSTRUCTIONS (front and back) CAREFULLY&nbsp;</span></p> <p><span class="cls0">A.&nbsp;&nbsp;NAME AND PHONE OF CONTACT AT FILER [optional]&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________&nbsp;</span></p> <p><span class="cls0">B.&nbsp;&nbsp;SEND ACKNOWLEDGMENT TO: (Name and Address)&nbsp;</span></p> <p class="cls7"><span class="cls0">________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">________________________________________ THE ABOVE SPACE IS FOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________ FILING OFFICE USE ONLY&nbsp;</span></p> <p class="cls7"><span class="cls0">1.&nbsp;&nbsp;DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - Do not abbreviate or combine names&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;1a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;1c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;1d.&nbsp;&nbsp;TAX ID. NO.&nbsp;&nbsp;ADD'L INFO. RE&nbsp;&nbsp;1e. TYPE OF ORGANIZATION&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;&nbsp;&nbsp;SSN OR EIN&nbsp;&nbsp;ORGANIZATION DEBTOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;1f.&nbsp;&nbsp;JURISDICTION OF ORGANIZATION&nbsp;&nbsp;1g. ORGANIZATIONAL ID No.,&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;if any&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________[ ] NONE&nbsp;</span></p> <p class="cls7"><span class="cls0">2.&nbsp;&nbsp;ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;2a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;2c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;2d.&nbsp;&nbsp;TAX ID. NO.&nbsp;&nbsp;ADD'L INFO. RE&nbsp;&nbsp;2e. TYPE OF ORGANIZATION&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;&nbsp;&nbsp;SSN OR EIN&nbsp;&nbsp;ORGANIZATION DEBTOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;2f.&nbsp;&nbsp;JURISDICTION OF ORGANIZATION&nbsp;&nbsp;2g. ORGANIZATIONAL ID No.,&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;if any&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________[ ] NONE&nbsp;</span></p> <p class="cls7"><span class="cls0">3.&nbsp;&nbsp;SECURED PARTY'S NAME (or name of total assignee of assignor S/P) - insert only one secured party name (3a or 3b)&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;3a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;3c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">4.&nbsp;&nbsp;This FINANCING STATEMENT covers the following collateral:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">5.&nbsp;&nbsp;ALTERNATIVE DESIGNATION [if applicable]: [ ] LESSEE/LESSOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/BAILOR [ ] SELLER/BUYER&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[ ] AG. LIEN [ ] NON-UCC FILING&nbsp;</span></p> <p class="cls7"><span class="cls0">6.&nbsp;&nbsp;[ ] This FINANCING STATEMENT is to be filed against the tract index in the REAL ESTATE RECORDS.&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;Attach Addendum [if applicable]&nbsp;</span></p> <p><span class="cls0">7.&nbsp;&nbsp;Check to REQUEST SEARCH REPORT(S) on Debtor(s)&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[ ] All Debtors [ ] Debtor 1 [ ] Debtor 2&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[ADDITIONAL FEE] [optional]&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">8.&nbsp;&nbsp;OPTIONAL FILER REFERENCE DATA&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT (FORM UCC 1))&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[BACK OF FORM]&nbsp;</span></p> <p><span class="cls0">UCC FINANCING STATEMENT ADDENDUM&nbsp;</span></p> <p><span class="cls0">FOLLOW INSTRUCTIONS (front and back) CAREFULLY.&nbsp;</span></p> <p><span class="cls0">9.&nbsp;&nbsp;NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;9a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">10.&nbsp;&nbsp;MISCELLANEOUS:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________ THE ABOVE SPACE IS FOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________ FILING OFFICE USE ONLY&nbsp;</span></p> <p class="cls7"><span class="cls0">11.&nbsp;&nbsp;ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one name (11a or 11b) - do not abbreviate or combine names&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;11a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;11b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;11c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;11d.&nbsp;&nbsp;TAX ID. NO.&nbsp;&nbsp;ADD'L INFO. RE&nbsp;&nbsp;11e. TYPE OF ORGANIZATION&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;&nbsp;&nbsp;SSN OR EIN&nbsp;&nbsp;ORGANIZATION DEBTOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;11f.&nbsp;&nbsp;JURISDICTION OF ORGANIZATION&nbsp;&nbsp;11g. ORGANIZATIONAL ID No.,&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;if any&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________[ ] NONE&nbsp;</span></p> <p class="cls7"><span class="cls0">12.&nbsp;&nbsp;[ ] ADDITIONAL SECURED PARTY'S or [ ] ASSIGNOR S/P'S NAME - insert only one name (12a or 12b).&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;12a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;12c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">13.&nbsp;&nbsp;This FINANCING STATEMENT covers [ ] timber to be cut or [ ] as-extracted collateral, or is filed as a [ ] fixture filing.&nbsp;</span></p> <p><span class="cls0">14.&nbsp;&nbsp;Description of real estate:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">15.&nbsp;&nbsp;Name and address of a RECORD OWNER of the above-described real estate (if Debtor does not have record interest):&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">16.&nbsp;&nbsp;Additional collateral description:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">17.&nbsp;&nbsp;Check only if applicable and check only one box:&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;Debtor is a [ ] Trust or [ ] Trustee acting with respect to property held in trust or&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[ ] Decedent's Estate&nbsp;</span></p> <p><span class="cls0">18.&nbsp;&nbsp;Check only if applicable and check only one box:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;[ ] Debtor is a TRANSMITTING UTILITY&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;[ ] Filed in connection with a Manufactured-Home Transaction - effective 30 years&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;[ ] Filed in connection with a Public-Finance Transaction - effective 30 years&nbsp;</span></p> <p><span class="cls0">FILING OFFICE COPY - NATIONAL UCC FILING STATEMENT&nbsp;</span></p> <p><span class="cls0">(FORM UCC 1Ad)&nbsp;</span></p> <p><span class="cls0">(b) A filing office that accepts written records for filing may not refuse to accept a written financing statement amendment in the following form, except for a reason set forth in subsection (b) of Section 19516:&nbsp;</span></p> <p><span class="cls0">UCC FINANCING STATEMENT AMENDMENT&nbsp;</span></p> <p><span class="cls0">FOLLOW INSTRUCTIONS (front and back) CAREFULLY&nbsp;</span></p> <p><span class="cls0">A.&nbsp;&nbsp;NAME AND PHONE OF CONTACT AT FILER [optional]&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">B.&nbsp;&nbsp;SEND ACKNOWLEDGMENT TO: (Name and Address)&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________ THE ABOVE SPACE IS FOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;________________________________________ FILING OFFICE USE ONLY&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;1a. INITIAL FINANCING STATEMENT FILE NO. __________________&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;1b. [ ] This FINANCING STATEMENT AMENDMENT is to be filed against the tract index in the REAL ESTATE RECORDS.&nbsp;</span></p> <p class="cls7"><span class="cls0">2.&nbsp;&nbsp;[ ] TERMINATION: Effectiveness of the Financing Statement identified above is terminated with respect to security interest(s) of the Secured Party authorizing this Termination Statement.&nbsp;</span></p> <p class="cls7"><span class="cls0">3.&nbsp;&nbsp;[&nbsp;] CONTINUATION: Effectiveness of the Financing Statement identified above with respect to security interest(s) of the Secured Party authorizing this Continuation Statement is continued for the additional period provided by applicable law.&nbsp;</span></p> <p class="cls7"><span class="cls0">4.&nbsp;&nbsp;[ ] ASSIGNMENT (full or partial): Give name of assignee in item 7a or 7b and address of assignee in item 7c; and also give name of assignor in item 9.&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">5.&nbsp;&nbsp;AMENDMENT (PARTY INFORMATION): This Amendment affects [ ] Debtor or [ ] Secured Party of record. Check only one of these two boxes. Also check one of the following three boxes and provide appropriate information in items 6 and/or 7.&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;[ ] CHANGE name and/or address: Give current record name in item 6a or 6b; also give new name (if name change) in item 7a or 7b and/or new address (if address change) in item 7c.&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;[ ] DELETE name: Give record name to be deleted in item 6a or 6b.&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;[ ] ADD name: Complete item 7a or 7b, and also item 7c; also complete items 7d-7g (if applicable).&nbsp;</span></p> <p><span class="cls0">6.&nbsp;&nbsp;CURRENT RECORD INFORMATION:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;6a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;6b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">7.&nbsp;&nbsp;CHANGED (NEW) OR ADDED INFORMATION:&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;7a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;7b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;7c. MAILING ADDRESS CITY&nbsp;&nbsp; STATE POSTAL CODE COUNTRY&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;7d.&nbsp;&nbsp;TAX ID. NO.&nbsp;&nbsp;ADD'L INFO. RE&nbsp;&nbsp;7e. TYPE OF ORGANIZATION&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;&nbsp;&nbsp;SSN OR EIN&nbsp;&nbsp;ORGANIZATION DEBTOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;7f.&nbsp;&nbsp;JURISDICTION OF ORGANIZATION&nbsp;&nbsp;7g. ORGANIZATIONAL ID No.,&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;if any&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________[ ] NONE&nbsp;</span></p> <p><span class="cls0">8.&nbsp;&nbsp;AMENDMENT (COLLATERAL CHANGE): check only one box&nbsp;</span></p> <p class="cls7"><span class="cls0">&nbsp;&nbsp;Describe collateral [ ] deleted or [ ] added, or give entire [&nbsp;] restated collateral description, or describe collateral [ ] assigned.&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">9.&nbsp;&nbsp;NAME OF SECURED PARTY OF RECORD AUTHORIZING THIS AMENDMENT (name of assignor, if this is an Assignment). If this is an Amendment authorized by a Debtor which adds collateral or adds the authorizing Debtor, or if this is a Termination authorized by a Debtor, check here [&nbsp;] and enter name of DEBTOR authorizing this Amendment.&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;9a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">10.&nbsp;&nbsp;OPTIONAL FILE REFERENCE DATA&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT (FORM UCC3)&nbsp;</span></p> <p class="cls1"><span class="cls0">[BACK OF FORM]&nbsp;</span></p> <p><span class="cls0">UCC FINANCING STATEMENT AMENDMENT ADDENDUM&nbsp;</span></p> <p><span class="cls0">FOLLOW INSTRUCTIONS (front and back) CAREFULLY&nbsp;</span></p> <p class="cls7"><span class="cls0">11.&nbsp;&nbsp;INITIAL FINANCING STATEMENT FILE NO. (same as item 1a on Amendment form)&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p class="cls7"><span class="cls0">12.&nbsp;&nbsp;NAME OF PARTY AUTHORIZING THIS AMENDMENT (same as item 9 on Amendment form)&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;12a. ORGANIZATION'S NAME&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">OR&nbsp;&nbsp;12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_______________________________________________________________&nbsp;</span></p> <p><span class="cls0">13. USE THIS SPACE FOR ADDITIONAL INFORMATION&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_________________________________________&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_________________________________________THE ABOVE SPACE IS FOR&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;_________________________________________FILING OFFICE USE ONLY&nbsp;</span></p> <p><span class="cls0">FILING OFFICE COPY - NATIONAL UCC FINANCING STATEMENT AMENDMENT ADDENDUM (FORM UCC3Ad)&nbsp;</span></p> <p><span class="cls0">(c) A form that a filing office may not refuse to accept under subsection (a) or (b) of this section must conform to the format prescribed for the form by the National Conference of Commissioners on Uniform State Laws.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 99, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-522. Maintenance and destruction of records.&nbsp;</span></p> <p class="cls1"><span class="cls0">MAINTENANCE AND DESTRUCTION OF RECORDS&nbsp;</span></p> <p><span class="cls0">(a) The filing office shall maintain a record of the information provided in a filed financing statement for at least one year after the effectiveness of the financing statement has lapsed under Section 19515 of this title with respect to all secured parties of record. The record must be retrievable by using the name of the debtor and:&nbsp;</span></p> <p><span class="cls0">(1) if the record was filed or recorded in the filing office described in paragraph (1) of subsection (a) of Section 19501 of this title, by using the file number of the initial financing statement to which the record relates and the date and that the record was filed or recorded, and by the legal description of the real estate adequate for the purposes of indexing in the tract indexes of the county where the real estate is situated; or&nbsp;</span></p> <p><span class="cls0">(2) if the record was filed in the filing office described in paragraph (2) of subsection (a) of Section 19501 of this title, by using the file number of the initial financing statement to which the record relates.&nbsp;</span></p> <p><span class="cls0">(b) Except to the extent that a statute governing disposition of public records provides otherwise, the filing office immediately may destroy any written record evidencing a financing statement. However, if the filing office destroys a written record, it shall maintain another record of the financing statement which complies with subsection (a) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 100, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-523. Information from filing office; sale or license of records.&nbsp;</span></p> <p class="cls1"><span class="cls0">INFORMATION FROM FILING OFFICE; SALE OR LICENSE OF RECORDS&nbsp;</span></p> <p><span class="cls0">(a) If a person that files a written record requests an acknowledgment of the filing, the filing office shall send to the person an image of the record showing the number assigned to the record pursuant to paragraph (1) of subsection (a) of Section 19519 of this title and the date and time of the filing of the record. However, if the person furnishes a copy of the record to the filing office, the filing office may instead:&nbsp;</span></p> <p><span class="cls0">(1) note upon the copy the number assigned to the record pursuant to paragraph (1) of subsection (a) of Section 19519 of this title and the date and time of the filing of the record; and&nbsp;</span></p> <p><span class="cls0">(2) send the copy to the person.&nbsp;</span></p> <p><span class="cls0">(b) If a person files a record other than a written record, the filing office shall communicate to the person an acknowledgment that provides:&nbsp;</span></p> <p><span class="cls0">(1) the information in the record;&nbsp;</span></p> <p><span class="cls0">(2) the number assigned to the record pursuant to paragraph (1) of subsection (a) of Section 19519 of this title; and&nbsp;</span></p> <p><span class="cls0">(3) the date and time of the filing of the record.&nbsp;</span></p> <p><span class="cls0">(c) The filing office shall communicate or otherwise make available in a record the following information to any person that requests it:&nbsp;</span></p> <p><span class="cls0">(1) whether there is on file on a date and time specified by the filing office, but not a date earlier than three (3) business days before the filing office receives the request, any financing statement that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;designates a particular debtor or, if the request so states, designates a particular debtor at the address specified in the request;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;has not lapsed under Section 19515 of this title with respect to all secured parties of record; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;if the request so states, has lapsed under Section 19515 of this title and a record of which is maintained by the filing office under subsection (a) of Section 19522 of this title;&nbsp;</span></p> <p><span class="cls0">(2) the date and time of filing of each financing statement; and&nbsp;</span></p> <p><span class="cls0">(3) the information provided in each financing statement.&nbsp;</span></p> <p><span class="cls0">(d) In complying with its duty under subsection (c) of this section, the filing office may communicate information in any medium. However, if requested, the filing office shall communicate information by issuing a record that can be admitted into evidence in the courts of this state without extrinsic evidence of its authenticity.&nbsp;</span></p> <p><span class="cls0">(e) The filing office shall perform the acts required by subsections (a) through (d) of this section at the time and in the manner prescribed by filing-office rule, but not later than two (2) business days after the filing office receives the request.&nbsp;</span></p> <p><span class="cls0">(f) At least weekly, the filing office shall offer to sell or license to the public on a nonexclusive basis, in bulk, copies of all records filed in it under this part, in every medium from time to time available to the filing office.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 101, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-524. Delay by filing office.&nbsp;</span></p> <p class="cls1"><span class="cls0">DELAY BY FILING OFFICE&nbsp;</span></p> <p><span class="cls0">Delay by the filing office beyond a time limit prescribed by this part is excused if:&nbsp;</span></p> <p><span class="cls0">(1) the delay is caused by interruption of communication or computer facilities, war, emergency conditions, failure of equipment, or other circumstances beyond control of the filing office; and&nbsp;</span></p> <p><span class="cls0">(2) the filing office exercises reasonable diligence under the circumstances.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 102, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-525.1. Disposition of fees.&nbsp;</span></p> <p class="cls1"><span class="cls0">DISPOSITION OF FEES&nbsp;</span></p> <p><span class="cls0">(a) There is hereby created a cash account to be known as the &ldquo;Oklahoma County Clerk&rsquo;s Uniform Commercial Code Central Filing Fund&rdquo;. The fund shall be a continuing fund, not subject to fiscal year limitations, and shall consist of all fees and penalties collected pursuant to Section 1-9-525 of this title by the county clerk of Oklahoma County, all monies otherwise credited to the account, and any interest accruing thereon.&nbsp;</span></p> <p><span class="cls0">(b) Monies in this account shall be expended in the following amounts for the following purposes:&nbsp;</span></p> <p><span class="cls0">(1) Of the fees collected pursuant to paragraphs (1) and (2) of subsection (a) of Section 19525 of this title, Five Dollars ($5.00) shall be paid monthly by the thirtieth day following the month in which collected to the general fund of Oklahoma County as a liquidated fee for capital and other expenses associated with operation of the filing office; and&nbsp;</span></p> <p><span class="cls0">(2) All other fees or parts of fees and any interest accruing to this account shall be expended by the county clerk of Oklahoma County for the lawful operation of the filing office.&nbsp;</span></p> <p><span class="cls0">(c) The county clerk of Oklahoma County may, by rule, establish prepaid fee accounts. If adopted, the rule shall provide for at least the following:&nbsp;</span></p> <p><span class="cls0">(1) An application for an account on a form prescribed in the rule;&nbsp;</span></p> <p><span class="cls0">(2) A one-time application fee of not more than Twenty Dollars ($20.00);&nbsp;</span></p> <p><span class="cls0">(3) Acceptable methods of making deposits to an account;&nbsp;</span></p> <p><span class="cls0">(4) Any requirements for a minimum initial deposit, a minimum balance, and a minimum amount for subsequent deposits;&nbsp;</span></p> <p><span class="cls0">(5) The fees and penalties which may be paid from the account;&nbsp;</span></p> <p><span class="cls0">(6) Procedures for making deposits to and payments from an account; and&nbsp;</span></p> <p><span class="cls0">(7) Procedures for closing an account.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 104, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-525. Fees.&nbsp;</span></p> <p class="cls1"><span class="cls0">FEES&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (e) of this section, the fee for filing and indexing a record under this part, other than an initial financing statement of the kind described in subsection (c) of Section 19502 of this title, is:&nbsp;</span></p> <p><span class="cls0">(1) Ten Dollars ($10.00) if the record is communicated in writing and consists of one to five pages, and an additional One Dollar ($1.00) per page for each page exceeding five; and&nbsp;</span></p> <p><span class="cls0">(2) Ten Dollars ($10.00) if the record is communicated by an electronic medium authorized by filing-office rule.&nbsp;</span></p> <p><span class="cls0">(b) The number of names required to be indexed does not affect the amount of the fee in subsection (a) of this section.&nbsp;</span></p> <p><span class="cls0">(c) The fee for responding to a request for information from the filing office in any medium designated by the filing office, including issuing a certificate showing whether there is on file any financing statement naming a particular debtor, is Ten Dollars ($10.00) for each debtor.&nbsp;</span></p> <p><span class="cls0">(d) The fee for a copy of a record is One Dollar ($1.00) per page regardless of the medium used.&nbsp;</span></p> <p><span class="cls0">(e) This section does not require a fee with respect to a record of a mortgage which is effective as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut under subsection (c) of Section 19502 of this title. However, the recording and satisfaction fees that otherwise would be applicable to the record of the mortgage apply pursuant to paragraphs 1, 2, 4, 7, 11, 15 and 16 of subsection A of Section 32 of Title 28 of the Oklahoma Statutes.&nbsp;</span></p> <p><span class="cls0">(f) The fee for providing certified copies shall be One Dollar ($1.00) per page regardless of medium.&nbsp;</span></p> <p><span class="cls0">(g) The fee for providing bulk data of indexed records as described in subsection (f) of Section 19523 of this title is as follows:&nbsp;</span></p> <p><span class="cls0">(1) Five Hundred Dollars ($500.00) for the initial database history.&nbsp;</span></p> <p><span class="cls0">(2) Fifty Dollars ($50.00) for weekly updates to the database.&nbsp;</span></p> <p><span class="cls0">(3) Four cents ($0.04) per page for images of filed records.&nbsp;</span></p> <p><span class="cls0">(h) The filing office may accept payment for fees by automated clearing house or by a nationally recognized debit or credit card. If payment is made by a credit or debit card, the filing office may add an amount equal to the amount of the service charge incurred for the acceptance of the payment. The filing office may enter into contracts for credit card processing services according to applicable county purchasing laws or may enter into agreements with the State Treasurer to participate in any credit card processing agreements entered into by the State Treasurer.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 103, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-526.1. Procedures for adopting rules.&nbsp;</span></p> <p class="cls1"><span class="cls0">PROCEDURES FOR ADOPTING RULES&nbsp;</span></p> <p><span class="cls0">(a) The county clerk of Oklahoma County shall adopt rules, pursuant to Section 19526 of this title, for the operation of the filing office designated in paragraph (2) of subsection (a) of Section 19501 of this title. Initial rules for the filing office shall be adopted on or before January 1, 2001. These rules may be amended or repealed and additional rules may be adopted at any time in the same manner as initial rules.&nbsp;</span></p> <p><span class="cls0">(b) The county clerk of Oklahoma County, or a designee, shall conduct a meeting which complies with the Oklahoma Open Meeting Act at which public comment regarding the proposed rules may be given and received orally or in writing.&nbsp;</span></p> <p><span class="cls0">(c) In addition to any notice required by the Oklahoma Open Meeting Act, notice shall be given of the proposed rulemaking which shall:&nbsp;</span></p> <p><span class="cls0">(1) Be published in at least two newspapers in this state and in other periodicals and on Internet sites as the county clerk deems appropriate, at least thirty (30) and no more than sixty (60) days prior to the meeting at which public comment is invited on the proposed rules;&nbsp;</span></p> <p><span class="cls0">(2) Be sent to any person who requests notice of proposed rulemaking under this section; and&nbsp;</span></p> <p><span class="cls0">(3) Include the following:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the date, time, and place of the meeting or meetings at which public comment is invited on the proposed rules,&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the address, telephone number, and Internet address, if any, for the office to which comments regarding the rules may be made or a request for a copy of the proposed rules may be directed,&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the deadline for making comments, and&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;the reason for the proposed rule, repeal, or amendment, and a brief summary of the proposed rule, repeal, or amendment, including citations to the rules.&nbsp;</span></p> <p><span class="cls0">(d) At the request of any person, the county clerk of Oklahoma County shall provide copies of proposed rules and rules adopted pursuant to this section.&nbsp;</span></p> <p><span class="cls0">(1) One copy of each proposed rule, repeal, or amendment shall be provided free of charge. Additional copies shall be made available upon payment of a fee which shall not exceed twenty-five cents ($0.25) per page plus the cost of mailing, if any.&nbsp;</span></p> <p><span class="cls0">(2) Copies of rules adopted pursuant to this section shall be made available either:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;upon payment of a fee which shall not exceed twenty-five cents ($0.25) per page plus the cost of mailing, if any, or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;pursuant to subsection (f) of this section, or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;a combination of subparagraphs (A) and (B) of this paragraph.&nbsp;</span></p> <p><span class="cls0">(e) Proposed rules and rules adopted pursuant to this section may also be published on one or more Internet sites designated by the county clerk.&nbsp;</span></p> <p><span class="cls0">(f) The county clerk of Oklahoma County shall, no less than annually, compile and publish all rules adopted pursuant to this section which have been adopted and are effective or have been adopted and will become effective during the year after publication. Copies of this compilation shall be made available upon payment of a fee which shall not exceed Five Dollars ($5.00) plus the cost of mailing, if any.&nbsp;</span></p> <p><span class="cls0">(g) The county clerk of Oklahoma County may agree with the Office of Administrative Rules in the Office of the Secretary of State to publish the rules with the Oklahoma Administrative Code. An agreement made pursuant to this subsection shall not require compliance with the Administrative Procedures Act.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 106, eff. Jan. 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-526. Filing-office rules.&nbsp;</span></p> <p class="cls1"><span class="cls0">FILING-OFFICE RULES&nbsp;</span></p> <p><span class="cls0">(a) The county clerk of Oklahoma County shall adopt and publish rules to implement this article. The filing-office rules must be:&nbsp;</span></p> <p><span class="cls0">(1) consistent with this article; and&nbsp;</span></p> <p><span class="cls0">(2) adopted and published in accordance with Section 19526.1 of this title.&nbsp;</span></p> <p><span class="cls0">(b) To keep the filing-office rules and practices of the filing office in harmony with the rules and practices of filing offices in other jurisdictions that enact substantially this part, and to keep the technology used by the filing office compatible with the technology used by filing offices in other jurisdictions that enact substantially this part, the county clerk of Oklahoma County, so far as is consistent with the purposes, policies, and provisions of this article, in adopting, amending, and repealing filing-office rules, shall:&nbsp;</span></p> <p><span class="cls0">(1) consult with filing offices in other jurisdictions that enact substantially this part;&nbsp;</span></p> <p><span class="cls0">(2) consult the most recent version of the Model Rules promulgated by the International Association of Corporate Administrators or any successor organization; and&nbsp;</span></p> <p><span class="cls0">(3) take into consideration the rules and practices of, and the technology used by, filing offices in other jurisdictions that enact substantially this part.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 105, eff. Jan. 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-527. Duty to report.&nbsp;</span></p> <p class="cls1"><span class="cls0">DUTY TO REPORT&nbsp;</span></p> <p><span class="cls0">The county clerk of Oklahoma County shall report annually on or before January 1 to the Governor and Legislature on the operation of the filing office. The report must contain a statement of the extent to which:&nbsp;</span></p> <p><span class="cls0">(1) the filing-office rules are not in harmony with the rules of filing offices in other jurisdictions that enact substantially this part and the reasons for these variations; and&nbsp;</span></p> <p><span class="cls0">(2) the filing-office rules are not in harmony with the most recent version of the Model Rules promulgated by the International Association of Corporate Administrators, or any successor organization, and the reasons for these variations.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 107, eff. Jan. 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-601. Rights after default - Judicial enforcement - Consignor or buyer of accounts, chattel paper, payment intangibles, or promissory notes.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS AFTER DEFAULT; JUDICIAL ENFORCEMENT;&nbsp;</span></p> <p class="cls1"><span class="cls0">CONSIGNOR OR BUYER OF ACCOUNTS, CHATTEL PAPER,&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYMENT INTANGIBLES, OR PROMISSORY NOTES&nbsp;</span></p> <p><span class="cls0">(a) After default, a secured party has the rights provided in this part and, except as otherwise provided in Section 19602 of this title, those provided by agreement of the parties. A secured party:&nbsp;</span></p> <p><span class="cls0">(1) may reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure, but Section 686 of Title 12 of the Oklahoma Statutes, shall not apply to the enforcement of a claim, security interest, or agricultural lien under this article except as provided in Section 19604 of this title where the procedure is in accordance with the rights of the parties with respect to real property; and&nbsp;</span></p> <p><span class="cls0">(2) if the collateral is documents, may proceed either as to the documents or as to the goods they cover.&nbsp;</span></p> <p><span class="cls0">(b) A secured party in possession of collateral or control of collateral under Section 7-106, 19104, 19105, 19106, or 19107 of this title has the rights and duties provided in Section 19207 of this title.&nbsp;</span></p> <p><span class="cls0">(c) The rights under subsections (a) and (b) of this section are cumulative and may be exercised simultaneously.&nbsp;</span></p> <p><span class="cls0">(d) Except as otherwise provided in subsection (g) of this section and Section 19605 of this title, after default, a debtor and an obligor have the rights provided in this part and by agreement of the parties.&nbsp;</span></p> <p><span class="cls0">(e) If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based upon the judgment relates back to the earliest of:&nbsp;</span></p> <p><span class="cls0">(1) the date of perfection of the security interest or agricultural lien in the collateral;&nbsp;</span></p> <p><span class="cls0">(2) the date of filing a financing statement covering the collateral; or&nbsp;</span></p> <p><span class="cls0">(3) any date specified in a statute under which the agricultural lien was created.&nbsp;</span></p> <p><span class="cls0">(f) A sale pursuant to an execution is a foreclosure of the security interest or agricultural lien by judicial procedure within the meaning of this section. A secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this article.&nbsp;</span></p> <p><span class="cls0">(g) Except as otherwise provided in subsection (c) of Section 19607 of this title, this part imposes no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 108, eff. July 1, 2001. Amended by Laws 2005, c. 140, &sect; 70, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-602. Waiver and variance of rights and duties.&nbsp;</span></p> <p class="cls1"><span class="cls0">WAIVER AND VARIANCE OF RIGHTS AND DUTIES&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in Section 19624 of this title, to the extent that they give rights to a debtor or obligor and impose duties on a secured party, the debtor or obligor may not waive or vary the rules stated in the following listed sections:&nbsp;</span></p> <p><span class="cls0">(1) Subparagraph (C) of paragraph (4) of subsection (b) of Section 19207 of this title, which deals with use and operation of the collateral by the secured party;&nbsp;</span></p> <p><span class="cls0">(2) Section 19210 of this title, which deals with requests for an accounting and requests concerning a list of collateral and statement of account;&nbsp;</span></p> <p><span class="cls0">(3) Subsection (c) of Section 19607 of this title, which deals with collection and enforcement of collateral;&nbsp;</span></p> <p><span class="cls0">(4) Subsection (a) of Section 19608 of this title and subsection (c) of Section 19615 of this title to the extent that they deal with application or payment of noncash proceeds of collection, enforcement, or disposition;&nbsp;</span></p> <p><span class="cls0">(5) Subsection (a) of Section 19608 of this title and subsection (d) of Section 19615 of this title to the extent that they require accounting for or payment of surplus proceeds of collateral;&nbsp;</span></p> <p><span class="cls0">(6) Section 19609 of this title to the extent that it imposes upon a secured party that takes possession of collateral without judicial process the duty to do so without breach of the peace;&nbsp;</span></p> <p><span class="cls0">(7) Subsection (b) of Section 19610 of this title and Sections 19611, 19613, and 19614 of this title, which deal with disposition of collateral;&nbsp;</span></p> <p><span class="cls0">(8) Subsection (f) of Section 19615 of this title, which deals with calculation of a deficiency or surplus when a disposition is made to the secured party, a person related to the secured party, or a secondary obligor;&nbsp;</span></p> <p><span class="cls0">(9) Section 19616 of this title, which deals with explanation of the calculation of a surplus or deficiency;&nbsp;</span></p> <p><span class="cls0">(10) Sections 19620, 19621, and 19622 of this title, which deal with acceptance of collateral in satisfaction of obligation;&nbsp;</span></p> <p><span class="cls0">(11) Section 19623 of this title, which deals with redemption of collateral;&nbsp;</span></p> <p><span class="cls0">(12) Section 19624 of this title, which deals with permissible waivers; and&nbsp;</span></p> <p><span class="cls0">(13) Sections 19625 and 19626 of this title, which deal with the secured party&rsquo;s liability for failure to comply with this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 109, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-603. Agreement on standards concerning rights and duties.&nbsp;</span></p> <p class="cls1"><span class="cls0">AGREEMENT ON STANDARDS CONCERNING RIGHTS AND DUTIES&nbsp;</span></p> <p><span class="cls0">(a) The parties may determine by agreement the standards measuring the fulfillment of the rights of a debtor or obligor and the duties of a secured party under a rule stated in Section 19602 of this title if the standards are not manifestly unreasonable.&nbsp;</span></p> <p><span class="cls0">(b) Subsection (a) of this section does not apply to the duty under Section 19609 of this title to refrain from breaching the peace.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 110, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-604. Procedure if security agreement covers real property or fixtures.&nbsp;</span></p> <p class="cls1"><span class="cls0">PROCEDURE IF SECURITY AGREEMENT&nbsp;</span></p> <p class="cls1"><span class="cls0">COVERS REAL PROPERTY OR FIXTURES&nbsp;</span></p> <p><span class="cls0">(a) If a security agreement covers both personal and real property, a secured party may proceed:&nbsp;</span></p> <p><span class="cls0">(1) under this part as to the personal property without prejudicing any rights with respect to the real property; or&nbsp;</span></p> <p><span class="cls0">(2) as to both the personal property and the real property in accordance with the rights with respect to the real property, in which case the other provisions of this part do not apply.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (c) of this section, if a security agreement covers goods that are or become fixtures, a secured party may proceed:&nbsp;</span></p> <p><span class="cls0">(1) under this part; or&nbsp;</span></p> <p><span class="cls0">(2) in accordance with the rights with respect to real property, in which case the other provisions of this part do not apply.&nbsp;</span></p> <p><span class="cls0">(c) Subject to the other provisions of this part, if a secured party holding a security interest in fixtures has priority over all owners and encumbrances of the real property, the secured party, after default, may remove the collateral from the real property.&nbsp;</span></p> <p><span class="cls0">(d) A secured party that removes collateral shall promptly reimburse any encumbrancer or owner of the real property, other than the debtor, for the cost of repair of any physical injury caused by the removal. The secured party need not reimburse the encumbrancer or owner for any diminution in value of the real property caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 111, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-605. Unknown debtor or secondary obligor.&nbsp;</span></p> <p class="cls1"><span class="cls0">UNKNOWN DEBTOR OR SECONDARY OBLIGOR&nbsp;</span></p> <p><span class="cls0">A secured party does not owe a duty based on its status as secured party:&nbsp;</span></p> <p><span class="cls0">(1) to a person that is a debtor or obligor, unless the secured party knows:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;that the person is a debtor or obligor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the identity of the person; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;how to communicate with the person; or&nbsp;</span></p> <p><span class="cls0">(2) to a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;that the person is a debtor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the identity of the person.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 112, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-606. Time of default for agricultural lien.&nbsp;</span></p> <p class="cls1"><span class="cls0">TIME OF DEFAULT FOR AGRICULTURAL LIEN&nbsp;</span></p> <p><span class="cls0">For purposes of this part, a default occurs in connection with an agricultural lien at the time the secured party becomes entitled to enforce the lien in accordance with the statute under which it was created.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 113, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-607. Collection and enforcement by secured party.&nbsp;</span></p> <p class="cls1"><span class="cls0">COLLECTION AND ENFORCEMENT BY SECURED PARTY&nbsp;</span></p> <p><span class="cls0">(a) If so agreed, and in any event after default, a secured party:&nbsp;</span></p> <p><span class="cls0">(1) may notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party;&nbsp;</span></p> <p><span class="cls0">(2) may take any proceeds to which the secured party is entitled under Section 19315 of this title;&nbsp;</span></p> <p><span class="cls0">(3) may enforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral;&nbsp;</span></p> <p><span class="cls0">(4) if it holds a security interest in a deposit account perfected by control under paragraph (1) of subsection (a) of Section 19104 of this title, may apply the balance of the deposit account to the obligation secured by the deposit account; and&nbsp;</span></p> <p><span class="cls0">(5) if it holds a security interest in a deposit account perfected by control under paragraph (2) or (3) of subsection (a) Section 19104 of this title, may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party.&nbsp;</span></p> <p><span class="cls0">(b) If necessary to enable a secured party to exercise under paragraph (3) of subsection (a) of this section the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:&nbsp;</span></p> <p><span class="cls0">(1) a copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and&nbsp;</span></p> <p><span class="cls0">(2) the secured party&rsquo;s sworn affidavit in recordable form stating that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a default has occurred; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the secured party is entitled to enforce the mortgage nonjudicially.&nbsp;</span></p> <p><span class="cls0">(c) A secured party shall proceed in a commercially reasonable manner if the secured party:&nbsp;</span></p> <p><span class="cls0">(1) undertakes to collect from or enforce an obligation of an account debtor or other person obligated on collateral; and&nbsp;</span></p> <p><span class="cls0">(2) is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor or a secondary obligor.&nbsp;</span></p> <p><span class="cls0">(d) A secured party may deduct from the collections made pursuant to subsection (c) of this section reasonable expenses of collection and enforcement, including reasonable attorney&rsquo;s fees and legal expenses incurred by the secured party.&nbsp;</span></p> <p><span class="cls0">(e) This section does not determine whether an account debtor, bank, or other person obligated on collateral owes a duty to a secured party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 114, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-608. Application of proceeds of collection or enforcement; liability for deficiency and right to surplus.&nbsp;</span></p> <p class="cls1"><span class="cls0">APPLICATION OF PROCEEDS OF COLLECTION OR ENFORCEMENT;&nbsp;</span></p> <p class="cls1"><span class="cls0">LIABILITY FOR DEFICIENCY AND RIGHT TO SURPLUS&nbsp;</span></p> <p><span class="cls0">(a) If a security interest or agricultural lien secures payment or performance of an obligation, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) A secured party shall apply or pay over for application the cash proceeds of collection or enforcement under this section in the following order to:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney&rsquo;s fees and legal expenses incurred by the secured party;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the satisfaction of obligations secured by the security interest or agricultural lien under which the collection or enforcement is made; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the satisfaction of obligations secured by any subordinate security interest in or other lien on the collateral subject to the security interest or agricultural lien under which the collection or enforcement is made if the secured party receives an authenticated demand for proceeds before distribution of the proceeds is completed.&nbsp;</span></p> <p><span class="cls0">(2) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder complies, the secured party need not comply with the holder&rsquo;s demand under subparagraph (C) of paragraph (1) of this subsection.&nbsp;</span></p> <p><span class="cls0">(3) A secured party need not apply or pay over for application noncash proceeds of collection and enforcement under this section unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.&nbsp;</span></p> <p><span class="cls0">(4) A secured party shall account to and pay a debtor for any surplus, and the obligor is liable for any deficiency.&nbsp;</span></p> <p><span class="cls0">(b) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 115, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-609. Secured party&rsquo;s right to take possession after default.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURED PARTY&rsquo;S RIGHT TO TAKE POSSESSION AFTER DEFAULT&nbsp;</span></p> <p><span class="cls0">(a) After default, a secured party:&nbsp;</span></p> <p><span class="cls0">(1) may take possession of the collateral; and&nbsp;</span></p> <p><span class="cls0">(2) without removal, may render equipment unusable and dispose of collateral on a debtor&rsquo;s premises under Section 19610 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A secured party may proceed under subsection (a) of this section:&nbsp;</span></p> <p><span class="cls0">(1) pursuant to judicial process; or&nbsp;</span></p> <p><span class="cls0">(2) without judicial process, if it proceeds without breach of the peace.&nbsp;</span></p> <p><span class="cls0">(c) If so agreed, and in any event after default, a secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 116, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-610. Disposition of collateral after default.&nbsp;</span></p> <p class="cls1"><span class="cls0">DISPOSITION OF COLLATERAL AFTER DEFAULT&nbsp;</span></p> <p><span class="cls0">(a) After default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.&nbsp;</span></p> <p><span class="cls0">(b) Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. If commercially reasonable, a secured party may dispose of collateral by public or private proceedings, by one or more contracts, as a unit or in parcels, and at any time and place and on any terms.&nbsp;</span></p> <p><span class="cls0">(c) A secured party may purchase collateral:&nbsp;</span></p> <p><span class="cls0">(1) at a public disposition; or&nbsp;</span></p> <p><span class="cls0">(2) at a private disposition only if the collateral is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations.&nbsp;</span></p> <p><span class="cls0">(d) A contract for sale, lease, license, or other disposition includes the warranties relating to title, possession, quiet enjoyment, and the like which by operation of law accompany a voluntary disposition of property of the kind subject to the contract.&nbsp;</span></p> <p><span class="cls0">(e) A secured party may disclaim or modify warranties under subsection (d) of this section:&nbsp;</span></p> <p><span class="cls0">(1) in a manner that would be effective to disclaim or modify the warranties in a voluntary disposition of property of the kind subject to the contract of disposition; or&nbsp;</span></p> <p><span class="cls0">(2) by communicating to the purchaser a record evidencing the contract for disposition and including an express disclaimer or modification of the warranties.&nbsp;</span></p> <p><span class="cls0">(f) A record is sufficient to disclaim warranties under subsection (e) of this section if it indicates &ldquo;There is no warranty relating to title, possession, quiet enjoyment, or the like in this disposition&rdquo; or uses words of similar import.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 117, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-611. Notification before disposition of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTIFICATION BEFORE DISPOSITION OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;notification date&rdquo; means the earlier of the date on which:&nbsp;</span></p> <p><span class="cls0">(1) a secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or&nbsp;</span></p> <p><span class="cls0">(2) the debtor and any secondary obligor waive the right to notification.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (d) of this section, a secured party that disposes of collateral under Section 19610 of this title shall send to the persons specified in subsection (c) of this section a reasonable authenticated notification of disposition.&nbsp;</span></p> <p><span class="cls0">(c) To comply with subsection (b) of this section, the secured party shall send an authenticated notification of disposition to:&nbsp;</span></p> <p><span class="cls0">(1) the debtor;&nbsp;</span></p> <p><span class="cls0">(2) any secondary obligor; and&nbsp;</span></p> <p><span class="cls0">(3) if the collateral is other than consumer goods:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;any other person from which the secured party has received, before the notification date, an authenticated notification of a claim of an interest in the collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;any other secured party or lienholder that, ten (10) days before the notification date, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;identified the collateral;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;was indexed under the debtor&rsquo;s name as of that date; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;any other secured party that, ten (10) days before the notification date, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in subsection (a) of Section 19311 of this title.&nbsp;</span></p> <p><span class="cls0">(d) Subsection (b) of this section does not apply if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market.&nbsp;</span></p> <p><span class="cls0">(e) A secured party complies with the requirement for notification prescribed by subparagraph (B) of paragraph (3) of subsection (c) of this section if:&nbsp;</span></p> <p><span class="cls0">(1) not later than twenty (20) days or earlier than thirty (30) days before the notification date, the secured party requests, in a commercially reasonable manner, information concerning financing statements indexed under the debtor&rsquo;s name in the office indicated in subparagraph (B) of paragraph (3) of subsection (c) of this section; and&nbsp;</span></p> <p><span class="cls0">(2) before the notification date, the secured party:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;did not receive a response to the request for information; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;received a response to the request for information and sent an authenticated notification of disposition to each secured party or other lienholder named in that response whose financing statement covered the collateral.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 118, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-612. Timeliness of notification before disposition of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">TIMELINESS OF NOTIFICATION BEFORE DISPOSITION OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section, whether a notification is sent within a reasonable time is a question of fact.&nbsp;</span></p> <p><span class="cls0">(b) In a transaction other than a consumer transaction, a notification of disposition sent after default and ten (10) days or more before the earliest time of disposition set forth in the notification is sent within a reasonable time before the disposition.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 119, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-613. Contents and form of notification before disposition of collateral: general.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTENTS AND FORM OF NOTIFICATION&nbsp;</span></p> <p class="cls1"><span class="cls0">BEFORE DISPOSITION OF COLLATERAL: GENERAL&nbsp;</span></p> <p><span class="cls0">Except in a consumer-goods transaction, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) The contents of a notification of disposition are sufficient if the notification:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;describes the debtor and the secured party;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;describes the collateral that is the subject of the intended disposition;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;states the method of intended disposition;&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;states that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(E)&nbsp;&nbsp;states the time and place of a public disposition or the time after which any other disposition is to be made.&nbsp;</span></p> <p><span class="cls0">(2) Whether the contents of a notification that lacks any of the information specified in paragraph (1) of this section are nevertheless sufficient is a question of fact.&nbsp;</span></p> <p><span class="cls0">(3) The contents of a notification providing substantially the information specified in paragraph (1) of this section are sufficient, even if the notification includes:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;information not specified by that paragraph; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;minor errors that are not seriously misleading.&nbsp;</span></p> <p><span class="cls0">(4) A particular phrasing of the notification is not required.&nbsp;</span></p> <p><span class="cls0">(5) The following form of notification and the form appearing in paragraph (3) of Section 19614 of this title, when completed, each provides sufficient information:&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTIFICATION OF DISPOSITION OF COLLATERAL&nbsp;</span></p> <p class="cls3"><span class="cls0">To:&nbsp;&nbsp;[Name of debtor, obligor, or other person to which the notification is sent]&nbsp;</span></p> <p class="cls3"><span class="cls0">____________________________________________________&nbsp;</span></p> <p class="cls3"><span class="cls0">____________________________________________________&nbsp;</span></p> <p class="cls3"><span class="cls0">From:&nbsp;&nbsp;[Name, address, and telephone number of secured party]&nbsp;</span></p> <p class="cls3"><span class="cls0">____________________________________________________&nbsp;</span></p> <p class="cls3"><span class="cls0">____________________________________________________&nbsp;</span></p> <p class="cls3"><span class="cls0">Name of Debtor(s):&nbsp;</span></p> <p class="cls3"><span class="cls0">[Include only if debtor(s) are not an addressee]&nbsp;</span></p> <p class="cls3"><span class="cls0">____________________________________________________&nbsp;</span></p> <p><span class="cls0">[For a public disposition:]&nbsp;</span></p> <p><span class="cls0">We will sell [or lease or license, as applicable] the [describe collateral] __________________ [to the highest qualified bidder] in public as follows:&nbsp;</span></p> <p><span class="cls0">Day and Date:&nbsp;&nbsp;&nbsp;&nbsp;_________________&nbsp;</span></p> <p><span class="cls0">Time:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_________________&nbsp;</span></p> <p><span class="cls0">Place:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_________________&nbsp;</span></p> <p><span class="cls0">[For a private disposition:]&nbsp;</span></p> <p><span class="cls0">We will sell [or lease or license, as applicable] the [describe collateral] __________________ privately sometime after [day and date] ________________.&nbsp;</span></p> <p><span class="cls0">You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell [or lease or license, as applicable] [for a charge of $_____________ ]. You may request an accounting by calling us at [telephone number] ________________.&nbsp;</span></p> <p><span class="cls0">[End of Form]&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 120, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-614. Contents and form of notification before disposition of collateral: consumer-goods transaction.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTENTS AND FORM OF NOTIFICATION BEFORE&nbsp;</span></p> <p class="cls1"><span class="cls0">DISPOSITION OF COLLATERAL: CONSUMER-GOODS TRANSACTION&nbsp;</span></p> <p><span class="cls0">In a consumer-goods transaction, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) A notification of disposition must provide the following information:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the information specified in paragraph (1) of Section 19613 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;a description of any liability for a deficiency of the person to which the notification is sent;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;a telephone number from which the amount that must be paid to the secured party to redeem the collateral under Section 19623 of this title is available; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;a telephone number or mailing address from which additional information concerning the disposition and the obligation secured is available.&nbsp;</span></p> <p><span class="cls0">(2) A particular phrasing of the notification is not required.&nbsp;</span></p> <p><span class="cls0">(3) The following form of notification, when completed, provides sufficient information:&nbsp;</span></p> <p class="cls6"><span class="cls0">[Name and address of secured party]&nbsp;</span></p> <p class="cls8"><span class="cls0">______________________________________________&nbsp;</span></p> <p class="cls6"><span class="cls0">[Date]&nbsp;</span></p> <p class="cls8"><span class="cls0">_________________&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTICE OF OUR PLAN TO SELL PROPERTY&nbsp;</span></p> <p class="cls6"><span class="cls0">[Name and address of any obligor who is also a debtor]&nbsp;</span></p> <p><span class="cls0">________________________________________________________________&nbsp;</span></p> <p class="cls6"><span class="cls0">Subject: [Identification of Transaction]&nbsp;</span></p> <p><span class="cls0">________________________________________________________________&nbsp;</span></p> <p><span class="cls0">We have your [describe collateral] ________________________, because you broke promises in our agreement.&nbsp;</span></p> <p><span class="cls0">[For a public disposition:]&nbsp;</span></p> <p><span class="cls0">We will sell [describe collateral] _______________________ at public sale. A sale could include a lease or license. The sale will be held as follows:&nbsp;</span></p> <p><span class="cls0">Date:&nbsp;&nbsp;&nbsp;&nbsp;_________________________&nbsp;</span></p> <p><span class="cls0">Time:&nbsp;&nbsp;&nbsp;&nbsp;_________________________&nbsp;</span></p> <p><span class="cls0">Place:&nbsp;&nbsp;_________________________&nbsp;</span></p> <p><span class="cls0">You may attend the sale and bring bidders if you want.&nbsp;</span></p> <p><span class="cls0">[For a private disposition:]&nbsp;</span></p> <p><span class="cls0">We will sell [describe collateral] ______________________ at private sale sometime after [date] _________________. A sale could include a lease or license.&nbsp;</span></p> <p><span class="cls0">The money that we get from the sale (after paying our costs) will reduce the amount you owe. If we get less money than you owe, you [will or will not, as applicable] _______________________ still owe us the difference. If we get more money than you owe, you will get the extra money, unless we must pay it to someone else.&nbsp;</span></p> <p><span class="cls0">You can get the property back at any time before we sell it by paying us the full amount you owe (not just the past due payments), including our expenses. To learn the exact amount you must pay, call us at [telephone number] _________________.&nbsp;</span></p> <p><span class="cls0">If you want us to explain to you in writing how we have figured the amount that you owe us, you may call us at [telephone number] _______________ [or write us at [secured party&rsquo;s address] ________________________] and request a written explanation. [We will charge you $_______________ for the explanation if we sent you another written explanation of the amount you owe us within the last six months.]&nbsp;</span></p> <p><span class="cls0">If you need more information about the sale call us at [telephone number]__________________] [or write us at [secured party&rsquo;s address]_________________________________].&nbsp;</span></p> <p><span class="cls0">We are sending this notice to the following other people who have an interest in [describe collateral] _____________________ or who owe money under your agreement:&nbsp;</span></p> <p class="cls6"><span class="cls0">[Names of all other debtors and obligors, if any]&nbsp;</span></p> <p><span class="cls0">____________________________________________________________&nbsp;</span></p> <p><span class="cls0">[End of Form]&nbsp;</span></p> <p><span class="cls0">(4) A notification in the form of paragraph (3) of this section is sufficient, even if additional information appears at the end of the form.&nbsp;</span></p> <p><span class="cls0">(5) A notification in the form of paragraph (3) of this section is sufficient, even if it includes errors in information not required by paragraph (1) of this section, unless the error is misleading with respect to rights arising under this article.&nbsp;</span></p> <p><span class="cls0">(6) If a notification under this section is not in the form of paragraph (3) of this section, law other than this article determines the effect of including information not required by paragraph (1) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 121, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-615. Application of proceeds of disposition; liability for deficiency and right to surplus.&nbsp;</span></p> <p class="cls1"><span class="cls0">APPLICATION OF PROCEEDS OF DISPOSITION;&nbsp;</span></p> <p class="cls1"><span class="cls0">LIABILITY FOR DEFICIENCY AND RIGHT TO SURPLUS&nbsp;</span></p> <p><span class="cls0">(a) A secured party shall apply or pay over for application the cash proceeds of disposition pursuant to Section 1-9-610 of this title in the following order to:&nbsp;</span></p> <p><span class="cls0">(1) the reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney&rsquo;s fees and legal expenses incurred by the secured party;&nbsp;</span></p> <p><span class="cls0">(2) the satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;&nbsp;</span></p> <p><span class="cls0">(3) the satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the secured party receives from the holder of the subordinate security interest or other lien an authenticated demand for proceeds before distribution of the proceeds is completed; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;in a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and&nbsp;</span></p> <p><span class="cls0">(4) a secured party that is a consignor of the collateral if the secured party receives from the consignor an authenticated demand for proceeds before distribution of the proceeds is completed.&nbsp;</span></p> <p><span class="cls0">(b) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder&rsquo;s demand under paragraph (3) of subsection (a) of this section.&nbsp;</span></p> <p><span class="cls0">(c) A secured party need not apply or pay over for application noncash proceeds of disposition pursuant to Section 1-9-610 of this title unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.&nbsp;</span></p> <p><span class="cls0">(d) If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection (a) of this section and permitted by subsection (c) of this section:&nbsp;</span></p> <p><span class="cls0">(1) unless paragraph (4) of subsection (a) of this section requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus; and&nbsp;</span></p> <p><span class="cls0">(2) the obligor is liable for any deficiency.&nbsp;</span></p> <p><span class="cls0">(e) If the underlying transaction is a sale of accounts, tangible chattel paper, payment intangibles, or promissory notes:&nbsp;</span></p> <p><span class="cls0">(1) the debtor is not entitled to any surplus; and&nbsp;</span></p> <p><span class="cls0">(2) the obligor is not liable for any deficiency.&nbsp;</span></p> <p><span class="cls0">(f) The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this part to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:&nbsp;</span></p> <p><span class="cls0">(1) the transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and&nbsp;</span></p> <p><span class="cls0">(2) the amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.&nbsp;</span></p> <p><span class="cls0">(g) A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:&nbsp;</span></p> <p><span class="cls0">(1) takes the cash proceeds free of the security interest or other lien;&nbsp;</span></p> <p><span class="cls0">(2) is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and&nbsp;</span></p> <p><span class="cls0">(3) is not obligated to account to or pay the holder of the security interest or other lien for any surplus.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 122, eff. July 1, 2001. Amended by Laws 2001, c. 354, &sect; 3, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-616. Explanation of calculation of surplus or deficiency.&nbsp;</span></p> <p class="cls1"><span class="cls0">EXPLANATION OF CALCULATION OF SURPLUS OR DEFICIENCY&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p><span class="cls0">(1) &ldquo;Explanation&rdquo; means a writing that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;states the amount of the surplus or deficiency;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;provides an explanation in accordance with subsection (c) of this section of how the secured party calculated the surplus or deficiency;&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;states, if applicable, that future debits, credits, charges, including additional credit service charges or interest, rebates, and expenses may affect the amount of the surplus or deficiency; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(D)&nbsp;&nbsp;provides a telephone number or mailing address from which additional information concerning the transaction is available.&nbsp;</span></p> <p><span class="cls0">(2) &ldquo;Request&rdquo; means a record:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;authenticated by a debtor or consumer obligor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;requesting that the recipient provide an explanation; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;sent after disposition of the collateral under Section 19610 of this title.&nbsp;</span></p> <p><span class="cls0">(b) In a consumer-goods transaction in which the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency under Section 19615 of this title, the secured party shall:&nbsp;</span></p> <p><span class="cls0">(1) send an explanation to the debtor or consumer obligor, as applicable, after the disposition and:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;before or when the secured party accounts to the debtor and pays any surplus or first makes written demand on the consumer obligor after the disposition for payment of the deficiency; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;within fourteen (14) days after receipt of a request; or&nbsp;</span></p> <p><span class="cls0">(2) in the case of a consumer obligor who is liable for a deficiency, within fourteen (14) days after receipt of a request, send to the consumer obligor a record waiving the secured party&rsquo;s right to a deficiency.&nbsp;</span></p> <p><span class="cls0">(c) To comply with subparagraph (B) of paragraph (1) of subsection (a) of this section, a writing must provide the following information in the following order:&nbsp;</span></p> <p><span class="cls0">(1) the aggregate amount of obligations secured by the security interest under which the disposition was made, and, if the amount reflects a rebate of unearned interest or credit service charge, an indication of that fact, calculated as of a specified date:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;if the secured party takes or receives possession of the collateral after default, not more than thirty-five (35) days before the secured party takes or receives possession; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if the secured party takes or receives possession of the collateral before default or does not take possession of the collateral, not more than thirty-five (35) days before the disposition;&nbsp;</span></p> <p><span class="cls0">(2) the amount of proceeds of the disposition;&nbsp;</span></p> <p><span class="cls0">(3) the aggregate amount of the obligations after deducting the amount of proceeds;&nbsp;</span></p> <p><span class="cls0">(4) the amount, in the aggregate or by type, and types of expenses, including expenses of retaking, holding, preparing for disposition, processing, and disposing of the collateral, and attorney&rsquo;s fees secured by the collateral which are known to the secured party and relate to the current disposition;&nbsp;</span></p> <p><span class="cls0">(5) the amount, in the aggregate or by type, and types of credits, including rebates of interest or credit service charges, to which the obligor is known to be entitled and which are not reflected in the amount in paragraph (1) of this subsection; and&nbsp;</span></p> <p><span class="cls0">(6) the amount of the surplus or deficiency.&nbsp;</span></p> <p><span class="cls0">(d) A particular phrasing of the explanation is not required. An explanation complying substantially with the requirements of subsection (a) of this section is sufficient, even if it includes minor errors that are not seriously misleading.&nbsp;</span></p> <p><span class="cls0">(e) A debtor or consumer obligor is entitled without charge to one response to a request under this section during any six-month period in which the secured party did not send to the debtor or consumer obligor an explanation pursuant to paragraph (1) of subsection (b) of this section. The secured party may require payment of a charge not exceeding Twenty-five Dollars ($25.00) for each additional response.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 123, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-617. Rights of transferee of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS OF TRANSFEREE OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) A secured party&rsquo;s disposition of collateral after default:&nbsp;</span></p> <p><span class="cls0">(1) transfers to a transferee for value all of the debtor&rsquo;s rights in the collateral;&nbsp;</span></p> <p><span class="cls0">(2) discharges the security interest under which the disposition is made; and&nbsp;</span></p> <p><span class="cls0">(3) discharges any subordinate security interest or other subordinate lien.&nbsp;</span></p> <p><span class="cls0">(b) A transferee that acts in good faith takes free of the rights and interests described in subsection (a) of this section, even if the secured party fails to comply with this article or the requirements of any judicial proceeding.&nbsp;</span></p> <p><span class="cls0">(c) If a transferee does not take free of the rights and interests described in subsection (a) of this section, the transferee takes the collateral subject to:&nbsp;</span></p> <p><span class="cls0">(1) the debtor&rsquo;s rights in the collateral;&nbsp;</span></p> <p><span class="cls0">(2) the security interest or agricultural lien under which the disposition is made; and&nbsp;</span></p> <p><span class="cls0">(3) any other security interest or other lien.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 124, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-618. Rights and duties of certain secondary obligors.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS AND DUTIES OF CERTAIN SECONDARY OBLIGORS&nbsp;</span></p> <p><span class="cls0">(a) A secondary obligor acquires the rights and becomes obligated to perform the duties of the secured party after the secondary obligor:&nbsp;</span></p> <p><span class="cls0">(1) receives an assignment of a secured obligation from the secured party;&nbsp;</span></p> <p><span class="cls0">(2) receives a transfer of collateral from the secured party and agrees to accept the rights and assume the duties of the secured party; or&nbsp;</span></p> <p><span class="cls0">(3) is subrogated to the rights of a secured party with respect to collateral.&nbsp;</span></p> <p><span class="cls0">(b) An assignment, transfer, or subrogation described in subsection (a) of this section:&nbsp;</span></p> <p><span class="cls0">(1) is not a disposition of collateral under Section 19610 of this title; and&nbsp;</span></p> <p><span class="cls0">(2) relieves the secured party of further duties under this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 125, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-619. Transfer of record or legal title.&nbsp;</span></p> <p class="cls1"><span class="cls0">TRANSFER OF RECORD OR LEGAL TITLE&nbsp;</span></p> <p><span class="cls0">(a) In this section, &ldquo;transfer statement&rdquo; means a record authenticated by a secured party stating:&nbsp;</span></p> <p><span class="cls0">(1) that the debtor has defaulted in connection with an obligation secured by specified collateral;&nbsp;</span></p> <p><span class="cls0">(2) that the secured party has exercised its post-default remedies with respect to the collateral;&nbsp;</span></p> <p><span class="cls0">(3) that, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral; and&nbsp;</span></p> <p><span class="cls0">(4) the name and mailing address of the secured party, debtor, and transferee.&nbsp;</span></p> <p><span class="cls0">(b) A transfer statement entitles the transferee to the transfer of record of all rights of the debtor in the collateral specified in the statement in any official filing, recording, registration, or certificate-of-title system covering the collateral. If a transfer statement is presented with the applicable fee and request form to the official or office responsible for maintaining the system, the official or office shall:&nbsp;</span></p> <p><span class="cls0">(1) accept the transfer statement;&nbsp;</span></p> <p><span class="cls0">(2) promptly amend its records to reflect the transfer; and&nbsp;</span></p> <p><span class="cls0">(3) if applicable, issue a new appropriate certificate of title in the name of the transferee.&nbsp;</span></p> <p><span class="cls0">(c) A transfer of the record or legal title to collateral to a secured party under subsection (b) of this section or otherwise is not of itself a disposition of collateral under this article and does not of itself relieve the secured party of its duties under this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 126, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-620. Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCEPTANCE OF COLLATERAL IN FULL OR PARTIAL SATISFACTION&nbsp;</span></p> <p class="cls1"><span class="cls0">OF OBLIGATION; COMPULSORY DISPOSITION OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (g) of this section, a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:&nbsp;</span></p> <p><span class="cls0">(1) the debtor consents to the acceptance under subsection (c) of this section;&nbsp;</span></p> <p><span class="cls0">(2) the secured party does not receive, within the time set forth in subsection (d) of this section, a notification of objection to the proposal authenticated by:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;a person to which the secured party was required to send a proposal under Section 19621 of this title; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;&nbsp;</span></p> <p><span class="cls0">(3) if the collateral is consumer goods, the collateral is not in the possession of the debtor when the debtor consents to the acceptance; and&nbsp;</span></p> <p><span class="cls0">(4) subsection (e) of this section does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to Section 19624 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A purported or apparent acceptance of collateral under this section is ineffective unless:&nbsp;</span></p> <p><span class="cls0">(1) the secured party consents to the acceptance in an authenticated record or sends a proposal to the debtor; and&nbsp;</span></p> <p><span class="cls0">(2) the conditions of subsection (a) of this section are met.&nbsp;</span></p> <p><span class="cls0">(c) For purposes of this section:&nbsp;</span></p> <p><span class="cls0">(1) a debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default; and&nbsp;</span></p> <p><span class="cls0">(2) a debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default or the secured party:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;in the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;does not receive a notification of objection authenticated by the debtor within twenty (20) days after the proposal is sent.&nbsp;</span></p> <p><span class="cls0">(d) To be effective under paragraph (2) of subsection (a) of this section, a notification of objection must be received by the secured party:&nbsp;</span></p> <p><span class="cls0">(1) in the case of a person to which the proposal was sent pursuant to Section 19621 of this title, within twenty (20) days after notification was sent to that person; and&nbsp;</span></p> <p><span class="cls0">(2) in other cases:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;within twenty (20) days after the last notification was sent pursuant to Section 19621 of this title; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;if a notification was not sent, before the debtor consents to the acceptance under subsection (c) of this section.&nbsp;</span></p> <p><span class="cls0">(e) A secured party that has taken possession of collateral shall dispose of the collateral pursuant to Section 19610 of this title within the time specified in subsection (f) of this section if:&nbsp;</span></p> <p><span class="cls0">(1) Sixty percent (60%) of the cash price has been paid in the case of a purchase-money security interest in consumer goods; or&nbsp;</span></p> <p><span class="cls0">(2) Sixty percent (60%) of the principal amount of the obligation secured has been paid in the case of a non-purchase-money security interest in consumer goods.&nbsp;</span></p> <p><span class="cls0">(f) To comply with subsection (e) of this section, the secured party shall dispose of the collateral:&nbsp;</span></p> <p><span class="cls0">(1) within ninety (90) days after taking possession; or&nbsp;</span></p> <p><span class="cls0">(2) within any longer period to which the debtor and all secondary obligors have agreed in an agreement to that effect entered into and authenticated after default.&nbsp;</span></p> <p><span class="cls0">(g) In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 127, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-621. Notification of proposal to accept collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTIFICATION OF PROPOSAL TO ACCEPT COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) A secured party that desires to accept collateral in full or partial satisfaction of the obligation it secures shall send its proposal to:&nbsp;</span></p> <p><span class="cls0">(1) any person from which the secured party has received, before the debtor consented to the acceptance, an authenticated notification of a claim of an interest in the collateral;&nbsp;</span></p> <p><span class="cls0">(2) any other secured party or lienholder that, ten (10) days before the debtor consented to the acceptance, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;identified the collateral;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;was indexed under the debtor&rsquo;s name as of that date; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;was filed in the office or offices in which a financing statement against the debtor covering the collateral as of that date would have been filed; and&nbsp;</span></p> <p><span class="cls0">(3) any other secured party that, ten (10) days before the debtor consented to the acceptance, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in subsection (a) of Section 19311 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A secured party that desires to accept collateral in partial satisfaction of the obligation it secures shall send its proposal to any secondary obligor in addition to the persons described in subsection (a) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 128, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-622. Effect of acceptance of collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF ACCEPTANCE OF COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) A secured party&rsquo;s acceptance of collateral in full or partial satisfaction of the obligation it secures:&nbsp;</span></p> <p><span class="cls0">(1) discharges the obligation to the extent consented to by the debtor;&nbsp;</span></p> <p><span class="cls0">(2) transfers to the secured party all of a debtor&rsquo;s rights in the collateral;&nbsp;</span></p> <p><span class="cls0">(3) discharges the security interest or agricultural lien that is the subject of the debtor&rsquo;s consent and any subordinate security interest or other subordinate lien; and&nbsp;</span></p> <p><span class="cls0">(4) terminates any other subordinate interest.&nbsp;</span></p> <p><span class="cls0">(b) A subordinate interest is discharged or terminated under subsection (a) of this section, even if the secured party fails to comply with this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 129, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-623. Right to redeem collateral.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHT TO REDEEM COLLATERAL&nbsp;</span></p> <p><span class="cls0">(a) A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral.&nbsp;</span></p> <p><span class="cls0">(b) To redeem collateral, a person shall tender:&nbsp;</span></p> <p><span class="cls0">(1) fulfillment of all obligations secured by the collateral; and&nbsp;</span></p> <p><span class="cls0">(2) the reasonable expenses and attorney&rsquo;s fees described in paragraph (1) of subsection (a) of Section 19615 of this title.&nbsp;</span></p> <p><span class="cls0">(c) A redemption may occur at any time before a secured party:&nbsp;</span></p> <p><span class="cls0">(1) has collected collateral under Section 19607 of this title;&nbsp;</span></p> <p><span class="cls0">(2) has disposed of collateral or entered into a contract for its disposition under Section 19610 of this title; or&nbsp;</span></p> <p><span class="cls0">(3) has accepted collateral in full or partial satisfaction of the obligation it secures under Section 19622 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 130, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-624. Waiver.&nbsp;</span></p> <p class="cls1"><span class="cls0">WAIVER&nbsp;</span></p> <p><span class="cls0">(a) A debtor or secondary obligor may waive the right to notification of disposition of collateral under Section 19611 of this title only by an agreement to that effect entered into and authenticated after default.&nbsp;</span></p> <p><span class="cls0">(b) A debtor may waive the right to require disposition of collateral under subsection (e) of Section 19620 of this title only by agreement to that effect entered into and authenticated after default.&nbsp;</span></p> <p><span class="cls0">(c) Except in a consumer-goods transaction, a debtor or secondary obligor may waive the right to redeem collateral under Section 19623 of this title only by an agreement to that effect entered into and authenticated after default.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 131, eff. July 1, 2000.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-625. Remedies for secured party&rsquo;s failure to comply with article.&nbsp;</span></p> <p class="cls1"><span class="cls0">REMEDIES FOR SECURED PARTY&rsquo;S&nbsp;</span></p> <p class="cls1"><span class="cls0">FAILURE TO COMPLY WITH ARTICLE&nbsp;</span></p> <p><span class="cls0">(a) If it is established that a secured party is not proceeding in accordance with this article, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsections (c), (d), and (f) of this section, a person is liable for damages in the amount of any loss caused by a failure to comply with this article. Loss caused by a failure to comply may include loss resulting from the debtor&rsquo;s inability to obtain, or increased costs of, alternative financing.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in Section 19628 of this title:&nbsp;</span></p> <p><span class="cls0">(1) a person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under subsection (b) of this section for its loss; and&nbsp;</span></p> <p><span class="cls0">(2) if the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this part may recover for that failure in any event an amount not less than the credit service charge plus ten percent (10%) of the principal amount of the obligation or the time-price differential plus ten percent (10%) of the cash price.&nbsp;</span></p> <p><span class="cls0">(d) A debtor whose deficiency is eliminated under Section 19626 of this title may recover damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under Section 19626 of this title may not otherwise recover under subsection (b) of this section for noncompliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance.&nbsp;</span></p> <p><span class="cls0">(e) In addition to any damages recoverable under subsection (b) of this section, the debtor, consumer obligor, or person named as a debtor in a filed record, as applicable, may recover Five Hundred Dollars ($500.00) in each case from a person that:&nbsp;</span></p> <p><span class="cls0">(1) fails to comply with Section 19208 of this title;&nbsp;</span></p> <p><span class="cls0">(2) fails to comply with Section 19209 of this title;&nbsp;</span></p> <p><span class="cls0">(3) files a record that the person is not entitled to file under subsection (a) of Section 19509 of this title;&nbsp;</span></p> <p><span class="cls0">(4) fails to cause the secured party of record to file or send a termination statement as required by subsection (a) or (c) Section 19513 of this title;&nbsp;</span></p> <p><span class="cls0">(5) fails to comply with paragraph (1) of subsection (b) of Section 19616 of this title and whose failure is part of a pattern, or consistent with a practice, of noncompliance; or&nbsp;</span></p> <p><span class="cls0">(6) fails to comply with paragraph (2) of subsection (b) of Section 19616 of this title.&nbsp;</span></p> <p><span class="cls0">(f) A debtor or consumer obligor may recover damages under subsection (b) of this section and, in addition, Five Hundred Dollars ($500.00) in each case from a person that, without reasonable cause, fails to comply with a request under Section 19210 of this title. A recipient of a request under Section 19210 of this title which never claimed an interest in the collateral or obligations that are the subject of a request under that section has a reasonable excuse for failure to comply with the request within the meaning of this subsection.&nbsp;</span></p> <p><span class="cls0">(g) If a secured party fails to comply with a request regarding a list of collateral or a statement of account under Section 19210 of this title, the secured party may claim a security interest only as shown in the list or statement included in the request as against a person that is reasonably misled by the failure.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 132, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-626. Action in which deficiency or surplus is in issue.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACTION IN WHICH DEFICIENCY OR SURPLUS IS IN ISSUE&nbsp;</span></p> <p><span class="cls0">(a) In an action arising from a transaction, other than a consumer transaction, in which the amount of a deficiency or surplus is in issue, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) A secured party need not prove compliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance unless the debtor or a secondary obligor places the secured party&rsquo;s compliance in issue.&nbsp;</span></p> <p><span class="cls0">(2) If the secured party&rsquo;s compliance is placed in issue, the secured party has the burden of establishing that the collection, enforcement, disposition, or acceptance was conducted in accordance with this part.&nbsp;</span></p> <p><span class="cls0">(3) Except as otherwise provided in Section 19628 of this title, if a secured party fails to prove that the collection, enforcement, disposition, or acceptance was conducted in accordance with the provisions of this part relating to collection, enforcement, disposition, or acceptance, the liability of a debtor or a secondary obligor for a deficiency is limited to an amount by which the sum of the secured obligation, expenses, and attorney&rsquo;s fees exceeds the greater of:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;the proceeds of the collection, enforcement, disposition, or acceptance; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the amount of proceeds that would have been realized had the noncomplying secured party proceeded in accordance with the provisions of this part relating to collection, enforcement, disposition, or acceptance.&nbsp;</span></p> <p><span class="cls0">(4) For purposes of subparagraph (B) of paragraph (3) of this subsection, the amount of proceeds that would have been realized is equal to the sum of the secured obligation, expenses, and attorney&rsquo;s fees unless the secured party proves that the amount is less than that sum.&nbsp;</span></p> <p><span class="cls0">(5) If a deficiency or surplus is calculated under subsection (f) of Section 19615 of this title, the debtor or obligor has the burden of establishing that the amount of proceeds of the disposition is significantly below the range of prices that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.&nbsp;</span></p> <p><span class="cls0">(b) The limitation of the rules in subsection (a) of this section to transactions other than consumer transactions is intended to leave to the court the determination of the proper rules in consumer transactions. The court may not infer&nbsp;from that limitation the nature of the proper rule in consumer transactions and may continue to apply established approaches.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 133, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-627. Determination of whether conduct was commercially reasonable.&nbsp;</span></p> <p class="cls1"><span class="cls0">DETERMINATION OF WHETHER CONDUCT&nbsp;</span></p> <p class="cls1"><span class="cls0">WAS COMMERCIALLY REASONABLE&nbsp;</span></p> <p><span class="cls0">(a) The fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.&nbsp;</span></p> <p><span class="cls0">(b) A disposition of collateral is made in a commercially reasonable manner if the disposition is made:&nbsp;</span></p> <p><span class="cls0">(1) in the usual manner on any recognized market;&nbsp;</span></p> <p><span class="cls0">(2) at the price current in any recognized market at the time of the disposition; or&nbsp;</span></p> <p><span class="cls0">(3) otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.&nbsp;</span></p> <p><span class="cls0">(c) A collection, enforcement, disposition, or acceptance is commercially reasonable if it has been approved:&nbsp;</span></p> <p><span class="cls0">(1) in a judicial proceeding;&nbsp;</span></p> <p><span class="cls0">(2) by a bona fide creditors&rsquo; committee;&nbsp;</span></p> <p><span class="cls0">(3) by a representative of creditors; or&nbsp;</span></p> <p><span class="cls0">(4) by an assignee for the benefit of creditors.&nbsp;</span></p> <p><span class="cls0">(d) Approval under subsection (c) of this section need not be obtained, and lack of approval does not mean that the collection, enforcement, disposition, or acceptance is not commercially reasonable.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 134, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-628. Nonliability and limitation on liability of secured party; liability of secondary obligor.&nbsp;</span></p> <p class="cls1"><span class="cls0">NONLIABILITY AND LIMITATION ON LIABILITY&nbsp;</span></p> <p class="cls1"><span class="cls0">OF SECURED PARTY; LIABILITY OF SECONDARY OBLIGOR&nbsp;</span></p> <p><span class="cls0">(a) Unless a secured party knows that a person is a debtor or obligor, knows the identity of the person, and knows how to communicate with the person:&nbsp;</span></p> <p><span class="cls0">(1) the secured party is not liable to the person, or to a secured party or lienholder that has filed a financing statement against the person, for failure to comply with this article; and&nbsp;</span></p> <p><span class="cls0">(2) the secured party&rsquo;s failure to comply with this article does not affect the liability of the person for a deficiency.&nbsp;</span></p> <p><span class="cls0">(b) A secured party is not liable because of its status as secured party:&nbsp;</span></p> <p><span class="cls0">(1) to a person that is a debtor or obligor, unless the secured party knows:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;that the person is a debtor or obligor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the identity of the person; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;how to communicate with the person; or&nbsp;</span></p> <p><span class="cls0">(2) to a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;that the person is a debtor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;the identity of the person.&nbsp;</span></p> <p><span class="cls0">(c) A secured party is not liable to any person, and a person&rsquo;s liability for a deficiency is not affected, because of any act or omission arising out of the secured party&rsquo;s reasonable belief that a transaction is not a consumer-goods transaction or a consumer transaction or that goods are not consumer goods, if the secured party&rsquo;s belief is based on its reasonable reliance on:&nbsp;</span></p> <p><span class="cls0">(1) a debtor&rsquo;s representation concerning the purpose for which collateral was to be used, acquired, or held; or&nbsp;</span></p> <p><span class="cls0">(2) an obligor&rsquo;s representation concerning the purpose for which a secured obligation was incurred.&nbsp;</span></p> <p><span class="cls0">(d) A secured party is not liable to any person under paragraph (2) of subsection (c) of Section 19 625 of this title for its failure to comply with Section 19616 of this title.&nbsp;</span></p> <p><span class="cls0">(e) A secured party is not liable under paragraph (2) of subsection (c) of Section 19625 of this title more than once with respect to any one secured obligation.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 135, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-702. Savings clause.&nbsp;</span></p> <p class="cls1"><span class="cls0">SAVINGS CLAUSE&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this part, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act takes effect.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in subsection (c) of this section and Sections 19703 through 19709 of this title:&nbsp;</span></p> <p><span class="cls0">(1) transactions and liens that were not governed by former Article 9 of this title, were validly entered into or created before this act takes effect, and would be subject to this act if they had been entered into or created after this act takes effect, and the rights, duties, and interests flowing from those transactions and liens remain valid after this act takes effect; and&nbsp;</span></p> <p><span class="cls0">(2) the transactions and liens may be terminated, completed, consummated, and enforced as required or permitted by this act or by the law that otherwise would apply if this act had not taken effect.&nbsp;</span></p> <p><span class="cls0">(c) This act does not affect an action, case, or proceeding commenced before this act takes effect.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 136, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-703. Security interest perfected before effective date.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTEREST PERFECTED BEFORE EFFECTIVE DATE&nbsp;</span></p> <p><span class="cls0">(a) A security interest that is enforceable immediately before this act takes effect and would have priority over the rights of a person that becomes a lien creditor at that time is a perfected security interest under this act if, when this act takes effect, the applicable requirements for enforceability and perfection under this act are satisfied without further action.&nbsp;</span></p> <p><span class="cls0">(b) Except as otherwise provided in Section 19705 of this title, if, immediately before this act takes effect, a security interest is enforceable and would have priority over the rights of a person that becomes a lien creditor at that time, but the applicable requirements for enforceability or perfection under this act are not satisfied when this act takes effect, the security interest:&nbsp;</span></p> <p><span class="cls0">(1) is a perfected security interest for one (1) year after this act takes effect;&nbsp;</span></p> <p><span class="cls0">(2) remains enforceable thereafter only if the security interest becomes enforceable under Section 19203 of this title before the year expires; and&nbsp;</span></p> <p><span class="cls0">(3) remains perfected thereafter only if the applicable requirements for perfection under this act are satisfied before the year expires.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 137, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-704. Security interest unperfected before effective date.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTEREST UNPERFECTED BEFORE EFFECTIVE DATE&nbsp;</span></p> <p><span class="cls0">A security interest that is enforceable immediately before this act takes effect but which would be subordinate to the rights of a person that becomes a lien creditor at that time:&nbsp;</span></p> <p><span class="cls0">(1) remains an enforceable security interest for one (1) year after this act takes effect;&nbsp;</span></p> <p><span class="cls0">(2) remains enforceable thereafter if the security interest becomes enforceable under Section 19203 of this title when this act takes effect or within one (1) year thereafter; and&nbsp;</span></p> <p><span class="cls0">(3) becomes perfected:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;without further action, when this act takes effect if the applicable requirements for perfection under this act are satisfied before or at that time; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;when the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 138, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-705. Effectiveness of action taken before effective date of act.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECTIVENESS OF ACTION TAKEN&nbsp;</span></p> <p class="cls1"><span class="cls0">BEFORE EFFECTIVE DATE OF ACT&nbsp;</span></p> <p><span class="cls0">(a) If action, other than the filing of a financing statement, is taken before this act takes effect and the action would have resulted in priority of a security interest over the rights of a person that becomes a lien creditor had the security interest become enforceable before this act takes effect, the action is effective to perfect a security interest that attaches under this act within one (1) year after this act takes effect. An attached security interest becomes unperfected one (1) year after this act takes effect unless the security interest becomes a perfected security interest under this act before the expiration of that period.&nbsp;</span></p> <p><span class="cls0">(b) The filing of a financing statement before this act takes effect is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under this act.&nbsp;</span></p> <p><span class="cls0">(c) This act does not render ineffective an effective financing statement that, before this act takes effect, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in former Section 9-103.1 of this title. However, except as otherwise provided in subsections (d) and (e) of this section and Section 19706 of this title, the financing statement ceases to be effective at the earlier of:&nbsp;</span></p> <p><span class="cls0">(1) the time the financing statement would have ceased to be effective under the law of the jurisdiction in which it is filed; or&nbsp;</span></p> <p><span class="cls0">(2) June 30, 2006.&nbsp;</span></p> <p><span class="cls0">(d) The filing of a continuation statement after this act takes effect does not continue the effectiveness of the financing statement filed before this act takes effect. However, upon the timely filing of a continuation statement after this act takes effect and in accordance with the law of the jurisdiction governing perfection as provided in Part 3 of this article, the effectiveness of a financing statement filed in the same office in that jurisdiction before this act takes effect continues for the period provided by the law of that jurisdiction.&nbsp;</span></p> <p><span class="cls0">(e) Paragraph (2) of subsection (c) of this section applies to a financing statement that, before this act takes effect, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in former Section 9-103.1 only to the extent that Part 3 of this article provides that the law of a jurisdiction other than the jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.&nbsp;</span></p> <p><span class="cls0">(f) A financing statement that includes a financing statement filed before this act takes effect and a continuation statement filed after this act takes effect is effective only to the extent that it satisfies the requirements of Part 5 of this article for an initial financing statement.&nbsp;</span></p> <p><span class="cls0">(g) If an effective financing statement was filed before July 1, 2001, and that financing statement would otherwise cease to be effective on June 30, 2006, by operation of paragraph (2) of subsection (c) of this section, a continuation statement permitted to be filed by the second sentence of subsection (d) of this section may be filed between December 30, 2005, and June 30, 2006, inclusive, and will be timely, notwithstanding subsection (d) of Section 1-9-515 of this title. Without limitation, this provision applies to collateral, however described under former law, that meets the definition of &ldquo;as-extracted collateral&rdquo; in Section 1-9-102 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 139, eff. July 1, 2001. Amended by Laws 2004, c. 153, &sect; 7, eff. Nov. 1, 2004.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-706. When initial financing statement suffices to continue effectivness of financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN INITIAL FINANCING STATEMENT SUFFICES&nbsp;</span></p> <p class="cls1"><span class="cls0">TO CONTINUE EFFECTIVNESS OF FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) The filing of an initial financing statement in the office specified in Section 19501 of this title continues the effectiveness of a financing statement filed before this act takes effect if:&nbsp;</span></p> <p><span class="cls0">(1) the filing of an initial financing statement in that office would be effective to perfect a security interest under this act;&nbsp;</span></p> <p><span class="cls0">(2) the pre-effective-date financing statement was filed in an office in another state or another office in this state; and&nbsp;</span></p> <p><span class="cls0">(3) the initial financing statement satisfies subsection (c) of this section.&nbsp;</span></p> <p><span class="cls0">(b) The filing of an initial financing statement under subsection (a) of this section continues the effectiveness of the pre-effective-date financing statement:&nbsp;</span></p> <p><span class="cls0">(1) if the initial financing statement is filed before this act takes effect, for the period provided in former Section 9-403 of this title with respect to a financing statement; and&nbsp;</span></p> <p><span class="cls0">(2) if the initial financing statement is filed after this act takes effect, for the period provided in Section 19515 of this title with respect to an initial financing statement.&nbsp;</span></p> <p><span class="cls0">(c) To be effective for purposes of subsection (a) of this section, an initial financing statement must:&nbsp;</span></p> <p><span class="cls0">(1) satisfy the requirements of Part 5 of this article for an initial financing statement;&nbsp;</span></p> <p><span class="cls0">(2) identify the pre-effective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and&nbsp;</span></p> <p><span class="cls0">(3) indicate that the pre-effective-date financing statement remains effective.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 140, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-707. Persons entitled to file initial financing statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERSONS ENTITLED TO FILE INITIAL FINANCING STATEMENT&nbsp;</span></p> <p><span class="cls0">(a) In this section, "pre-effective-date financing statement" means a financing statement filed before this act takes effect.&nbsp;</span></p> <p><span class="cls0">(b) After this act takes effect, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in, a pre-effective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in Part 3 of this article of this title. However, the effectiveness of a pre-effective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.&nbsp;</span></p> <p><span class="cls0">(c) Except as otherwise provided in subsection (d) of this section, if the law of this state governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after this act takes effect only if:&nbsp;</span></p> <p><span class="cls0">(1) the pre-effective-date financing statement and an amendment are filed in the office specified in Section 1-9-501 of this title;&nbsp;</span></p> <p><span class="cls0">(2) an amendment is filed in the office specified in Section 1-9-501 of this title concurrently with, or after the filing in that office of, an initial financing statement that satisfies subsection (c) of Section 1-9-706 of this title; or&nbsp;</span></p> <p><span class="cls0">(3) an initial financing statement that provides the information as amended and satisfies subsection (c) of Section 1-9-706 of this title is filed in the office specified in Section 1-9-501 of this title.&nbsp;</span></p> <p><span class="cls0">(d) If the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under subsections (d) and (f) of Section 1-9-705 or Section 1-9-706 of this title.&nbsp;</span></p> <p><span class="cls0">(e) Whether or not the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed in this state may be terminated after this act takes effect by filing a termination statement in the office in which the pre-effective-date financing statement is filed, unless an initial financing statement that satisfies subsection (c) of Section 1-9-706 of this title has been filed in the office specified by the law of the jurisdiction governing perfection as provided in Part 3 of this article of this title as the office in which to file a financing statement.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 141, eff. July 1, 2001. Amended by Laws 2001, c. 354, &sect; 4, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-708. Persons entitled to file initial financing statement or continuation statement.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERSONS ENTITLED TO FILE INITIAL&nbsp;</span></p> <p class="cls1"><span class="cls0">FINANCING STATEMENT OR CONTINUATION STATEMENT&nbsp;</span></p> <p><span class="cls0">A person may file an initial financing statement or a continuation statement under this part if:&nbsp;</span></p> <p><span class="cls0">(1) the secured party of record authorizes the filing; and&nbsp;</span></p> <p><span class="cls0">(2) the filing is necessary under this part:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to continue the effectiveness of a financing statement filed before this act takes effect; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;to perfect or continue the perfection of a security interest.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 142, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-709. Priority.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY&nbsp;</span></p> <p><span class="cls0">(a) This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before this act takes effect, former Article 9 determines priority.&nbsp;</span></p> <p><span class="cls0">(b) For purposes of subsection (a) of Section 19322 of this title, the priority of a security interest that becomes enforceable under Section 19203 of this title dates from the time this act takes effect if the security interest is perfected under this act by the filing of a financing statement before this act takes effect which would not have been effective to perfect the security interest under former Article 9 of this title. This subsection does not apply to conflicting security interests each of which is perfected by the filing of such a financing statement.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 143, eff. July 1, 2001.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-9-710. Duties of local-filing offices.&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p><span class="cls0">(1) &ldquo;Local-filing office&rdquo; means a filing office, other than the statewide filing office in the office of the County Clerk of Oklahoma County or the statewide filing office in the office of the Secretary of State, that is designated as the proper place to file a financing statement under former Article 9 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;(A)&nbsp;&nbsp;&ldquo;Former-Article 9 records&rdquo; means:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;financing statements and other records that have been filed in a local-filing office before July 1, 2001, and that are, or upon processing and indexing will be, reflected in the index maintained by the local-filing office for filing for financing statements and other records filed in the local-filing office before July 1, 2001, and&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;the index maintained by the local-filing office as of June 30, 2001, including entries for filings completed before July 1, 2001, even though processed on or after that date.&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;&ldquo;Former-Article 9 records&rdquo; do not include records presented to a local-filing office for filing after June 30, 2001, whether or not the records relate to financing statements filed in the local-filing office before July 1, 2001; and&nbsp;</span></p> <p><span class="cls0">(3) &ldquo;Mortgage&rdquo;, &ldquo;as-extracted collateral&rdquo;, &ldquo;fixture filing&rdquo;, &ldquo;goods&rdquo; and &ldquo;fixtures&rdquo; have the meanings set forth in this article of this title.&nbsp;</span></p> <p><span class="cls0">(b) A local-filing office shall not accept for filing a record presented after June 30, 2001, whether or not the record relates to a financing statement filed in the local-filing office before July 1, 2001.&nbsp;</span></p> <p><span class="cls0">(c) Until July 1, 2008, each local-filing office shall maintain all former-Article 9 records in accordance with former-Article 9. A former-Article 9 record which is filed before July 1, 2001, but which is not reflected on the index maintained as of June 30, 2001, by the local-filing office, shall be processed and indexed and reflected on the index maintained as of June 30, 2001, as soon as practicable, but in no event later than July 30, 2001.&nbsp;</span></p> <p><span class="cls0">(d) Until July 1, 2008, each local-filing office shall respond to requests for information with respect to former-Article 9 records relating to a debtor and shall issue certificates in accordance with former-Article 9. The fees for issuing a certificate or for furnishing a certified copy of a former-Article 9 record shall be the uniform fees provided by subsections (c) and (d) of Section 19525 of this title.&nbsp;</span></p> <p><span class="cls0">(e) After June 30, 2008, each local-filing office may remove and destroy all former-Article 9 records pursuant to Section 155.2 of Title 19 of the Oklahoma Statutes.&nbsp;</span></p> <p><span class="cls0">(f) This section shall not apply, with respect to financing statements and other records, to a filing office in which mortgages or records of mortgages on real property are required to be filed or recorded if:&nbsp;</span></p> <p><span class="cls0">(1) the collateral is timber to be cut or as-extracted collateral, or&nbsp;</span></p> <p><span class="cls0">(2) the record is or relates to a financing statement files as a fixture filing and the collateral is goods that are or are to become fixtures.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2000, c. 371, &sect; 144, eff. July 1, 2001. Amended by Laws 2001, c. 354, &sect; 5, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A1101. Short titles.&nbsp;</span></p> <p><span class="cls0">Short Titles.&nbsp;</span></p> <p><span class="cls0">(a) Sections 1101 through 11107 of this title shall be known and may be cited as the &ldquo;Uniform Commercial Code&rdquo;.&nbsp;</span></p> <p><span class="cls0">(b) This article shall be known and may be cited as &ldquo;Uniform Commercial Code - General Provisions&rdquo;.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 69, &sect; 1-101. Amended by Laws 1988, c. 86, &sect; 79, eff. Nov. 1, 1988; Laws 2005, c. 139, &sect; 1, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1102. Scope of article.&nbsp;</span></p> <p><span class="cls0">Scope of Article.&nbsp;</span></p> <p><span class="cls0">This article applies to a transaction to the extent that it is governed by another article of the Uniform Commercial Code.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 69, &sect; 1102. Amended by Laws 2005, c. 139, &sect; 2, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1103. Construction of Uniform Commercial Code to promote its purposes and policies - Applicability of supplemental principles of law.&nbsp;</span></p> <p><span class="cls0">Construction of Uniform Commercial Code to Promote Its Purposes and Policies; Applicability of Supplemental Principles of Law.&nbsp;</span></p> <p><span class="cls0">(a) The Uniform Commercial Code shall be liberally construed and applied to promote its underlying purposes and policies, which are:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;to simplify, clarify and modernize the law governing commercial transactions;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;to permit the continued expansion of commercial practices through custom, usage and agreement of the parties; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;to make uniform the law among the various jurisdictions.&nbsp;</span></p> <p><span class="cls0">(b) Unless displaced by the particular provisions of the Uniform Commercial 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 shall supplement its provisions.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 69, &sect; 1103. Amended by Laws 2005, c. 139, &sect; 3, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1104. Construction against implicit repeal.&nbsp;</span></p> <p><span class="cls0">Construction Against Implicit Repeal.&nbsp;</span></p> <p><span class="cls0">The Uniform Commercial Code being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 69, &sect; 1104. Amended by Laws 2005, c. 139, &sect; 4, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-105. Repealed by Laws 2005, c. 139, &sect; 38, eff. Jan. 1, 2006.&nbsp;</span></p> <p><span class="cls0">&sect;12A1106. Use of singular and plural - Gender.&nbsp;</span></p> <p><span class="cls0">Use of Singular and Plural; Gender.&nbsp;</span></p> <p><span class="cls0">In the Uniform Commercial Code, unless the statutory context otherwise requires:&nbsp;</span></p> <p><span class="cls0">(1) words in the singular number include the plural, and in the plural include the singular; and&nbsp;</span></p> <p><span class="cls0">(2) words of any gender include any other gender.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 70, &sect; 1106. Amended by Laws 2005, c. 139, &sect; 5, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1107. Section captions.&nbsp;</span></p> <p><span class="cls0">Section Captions.&nbsp;</span></p> <p><span class="cls0">Section captions are part of the Uniform Commercial Code.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 70, &sect; 1107. Amended by Laws 2005, c. 139, &sect; 6, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-108. Repealed by Laws 1989, c. 154, &sect; 2, operative July 1, 1989.&nbsp;</span></p> <p><span class="cls0">&sect;12A-1-108.1. Relationship to Electronic Signatures in Global and National Commerce Act.&nbsp;</span></p> <p><span class="cls0">Article 1 of the Uniform Commercial Code modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C., Section 7001 et seq., except that nothing in this article modifies, limits or supersedes Section 7001(c) of that Act or authorizes electronic delivery of any of the notices described in Section 7003(b) of that Act.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 7, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-109. Repealed by Laws 2005, c. 139, &sect; 38, eff. Jan. 1, 2006.&nbsp;</span></p> <p><span class="cls0">&sect;12A-1-201. General definitions and principles of interpretation.&nbsp;</span></p> <p><span class="cls0">General Definitions and Principles of Interpretation.&nbsp;</span></p> <p><span class="cls0">(a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other articles of the Uniform Commercial Code that apply to particular articles or parts thereof, have the meanings stated.&nbsp;</span></p> <p><span class="cls0">(b) Subject to definitions contained in other articles of the Uniform Commercial Code that apply to particular articles or parts thereof:&nbsp;</span></p> <p><span class="cls0">(1) "Action" in the sense of a judicial proceeding includes a recoupment, counterclaim, setoff, suit in equity, and any other proceedings in which rights are determined.&nbsp;</span></p> <p><span class="cls0">(2) "Aggrieved party" means a party entitled to pursue a remedy.&nbsp;</span></p> <p><span class="cls0">(3) "Agreement", as distinguished from &ldquo;contract&rdquo;, 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 1-303 of this title.&nbsp;</span></p> <p><span class="cls0">(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.&nbsp;</span></p> <p><span class="cls0">(5) "Bearer" means a person in control of a negotiable electronic document of title or a person in possession of an instrument, negotiable tangible document of title, or certificated security payable to bearer or endorsed in blank.&nbsp;</span></p> <p><span class="cls0">(6) "Bill of lading" means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt.&nbsp;</span></p> <p><span class="cls0">(7) "Branch" includes a separately incorporated foreign branch of a bank.&nbsp;</span></p> <p><span class="cls0">(8) "Burden of establishing" means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.&nbsp;</span></p> <p><span class="cls0">(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&rsquo;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 Article 2 may be a buyer in ordinary course of business. &ldquo;Buyer in ordinary course of business&rdquo; does not include a person that acquires goods in a transfer in bulk or as security for or total or partial satisfaction of a money debt.&nbsp;</span></p> <p><span class="cls0">(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 &ldquo;conspicuous&rdquo; or not is a decision for the court. Conspicuous terms include the following:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;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 same or lesser size; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;language in the body of a record or display in larger type than 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.&nbsp;</span></p> <p><span class="cls0">(11) &ldquo;Consumer&rdquo; means an individual who enters into a transaction primarily for personal, family, or household purposes.&nbsp;</span></p> <p><span class="cls0">(12) "Contract", as distinguished from &ldquo;agreement&rdquo;, means the total legal obligation that results from the parties' agreement as determined by the provisions of the Uniform Commercial Code as supplemented by any other applicable laws.&nbsp;</span></p> <p><span class="cls0">(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.&nbsp;</span></p> <p><span class="cls0">(14) "Defendant" includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.&nbsp;</span></p> <p><span class="cls0">(15) "Delivery" with respect to an electronic document of title means voluntary transfer of control and with respect to an instrument, a tangible document of title, or chattel paper means voluntary transfer of possession.&nbsp;</span></p> <p><span class="cls0">(16) "Document of title" means a record that in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers and that purports to be issued by or addressed to a bailee and to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass. The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.&nbsp;</span></p> <p><span class="cls0">(17) "Fault" means a default, breach, or wrongful act or omission.&nbsp;</span></p> <p><span class="cls0">(18) "Fungible goods" means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;goods that by agreement are treated as equivalent.&nbsp;</span></p> <p><span class="cls0">(19) "Genuine" means free of forgery or counterfeiting.&nbsp;</span></p> <p><span class="cls0">(20) "Good faith", except as otherwise provided in Article 5 of this title, means honesty in fact and the observance of reasonable commercial standards of fair dealing.&nbsp;</span></p> <p><span class="cls0">(21) "Holder" means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;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;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;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; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;the person in control of a negotiable electronic document of title.&nbsp;</span></p> <p><span class="cls0">(22) "Insolvency proceeding" includes any assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.&nbsp;</span></p> <p><span class="cls0">(23) &ldquo;Insolvent&rdquo; means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;being unable to pay debts as they become due; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(C)&nbsp;&nbsp;being insolvent within the meaning of the federal bankruptcy law.&nbsp;</span></p> <p><span class="cls0">(24) "Money" means a medium of exchange 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.&nbsp;</span></p> <p><span class="cls0">(25) "Organization" means a person other than an individual.&nbsp;</span></p> <p><span class="cls0">(26) "Party", as distinguished from "third party", means a person who has engaged in a transaction or made an agreement subject to the Uniform Commercial Code.&nbsp;</span></p> <p><span class="cls0">(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.&nbsp;</span></p> <p><span class="cls0">(28) &ldquo;Present value&rdquo; 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.&nbsp;</span></p> <p><span class="cls0">(29) "Purchase" means taking by sale, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.&nbsp;</span></p> <p><span class="cls0">(30) "Purchaser" means a person who takes by purchase.&nbsp;</span></p> <p><span class="cls0">(31) &ldquo;Record&rdquo; 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.&nbsp;</span></p> <p><span class="cls0">(32) "Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.&nbsp;</span></p> <p><span class="cls0">(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.&nbsp;</span></p> <p><span class="cls0">(34) &ldquo;Right&rdquo; includes remedy.&nbsp;</span></p> <p><span class="cls0">(35)&nbsp;&nbsp;"Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation. &ldquo;Security interest&rdquo; 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 Article 9 of this title. &ldquo;Security interest&rdquo; does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 2-401 of this title, but a buyer may also acquire a "security interest" by complying with the provisions of Article 9 of this title. Except as otherwise provided in Section 2-505 of this title, the right of a seller or lessor of goods under Article 2 or 2A of this title to retain or acquire possession of the goods is not a &ldquo;security interest&rdquo;, but a seller or lessor may also acquire a &ldquo;security interest&rdquo; by complying with Article 9 of this title. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2-401 of this title is limited in effect to a reservation of a &ldquo;security interest&rdquo;. Whether a transaction in the form of a lease creates security interest is determined pursuant to Section 1-203 of this title.&nbsp;</span></p> <p><span class="cls0">(36) "Send" in connection with any writing, record, or notice means:&nbsp;</span></p> <p class="cls3"><span class="cls0">(A)&nbsp;&nbsp;to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none, to any address reasonable under the circumstances; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(B)&nbsp;&nbsp;in any other way to cause to be received any record or notice within the time at which it would have arrived if properly sent.&nbsp;</span></p> <p><span class="cls0">(37) "Signed" includes any symbol executed or adopted with present intention to adopt or accept a writing.&nbsp;</span></p> <p><span class="cls0">(38) &ldquo;State&rdquo; 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.&nbsp;</span></p> <p><span class="cls0">(39) "Surety" includes guarantor or other secondary obligor.&nbsp;</span></p> <p><span class="cls0">(40) "Term" means a portion of an agreement which relates to a particular matter.&nbsp;</span></p> <p><span class="cls0">(41) "Unauthorized signature" means a signature made without actual, implied or apparent authority. The term includes a forgery.&nbsp;</span></p> <p><span class="cls0">(42) "Warehouse receipt" means a document of title issued by a person engaged in the business of storing goods for hire.&nbsp;</span></p> <p><span class="cls0">(43) &ldquo;Writing&rdquo; includes printing, typewriting, or any other intentional reduction to tangible form. &ldquo;Written&rdquo; has a corresponding meaning.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 70, &sect; 1-201. Amended by Laws 1981, c. 194, &sect; 2, eff. Oct. 1, 1981; Laws 1984, c. 76, &sect; 1, eff. Nov. 1, 1984; Laws 1988, c. 86, &sect; 82, eff. Nov. 1, 1988; Laws 1991, c. 117, &sect; 1, eff. Jan. 1, 1992; Laws 1994, c. 46, &sect; 1, eff. Sept. 1, 1994; Laws 2000, c. 371, &sect; 147, eff. July 1, 2001; Laws 2005, c. 139, &sect; 8, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1202. Notice - Knowledge.&nbsp;</span></p> <p><span class="cls0">Notice; Knowledge.&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (f) of this section, a person has "notice" of a fact if the person:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;has actual knowledge of it;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;has received a notice or notification of it; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;from all the facts and circumstances known to the person at the time in question, has reason to know that it exists.&nbsp;</span></p> <p><span class="cls0">(b) &ldquo;Knowledge" means actual knowledge. &ldquo;Knows&rdquo; has a corresponding meaning.&nbsp;</span></p> <p><span class="cls0">(c) &ldquo;Discover" or "learn" or a word or phrase of similar import refers to knowledge rather than to reason to know.&nbsp;</span></p> <p><span class="cls0">(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.&nbsp;</span></p> <p><span class="cls0">(e) Subject to subsection (f) of this section, a person "receives" a notice or notification when:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;it comes to the attention of the person; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;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.&nbsp;</span></p> <p><span class="cls0">(f) 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 it would have been brought to the attention of the individual 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 such communication is part of the regular duties of the individual or unless the individual has reason to know of the transaction and that the transaction would be materially affected by the information.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 73, &sect; 1202. Amended by Laws 2005, c. 139, &sect; 9, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1203. Lease distinguished from security interest.&nbsp;</span></p> <p><span class="cls0">Lease Distinguished from Security Interest.&nbsp;</span></p> <p><span class="cls0">(a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.&nbsp;</span></p> <p><span class="cls0">(b) A transaction 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 not subject to termination by the lessee, and:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;the original term of the lease is equal to or greater than the remaining economic life of the goods;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;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;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;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&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;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.&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;A transaction in the form of a lease does not create a security interest merely because:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;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;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;the lessee assumes risk of loss of the goods;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;the lessee has an option to renew the lease or to become the owner of the goods;&nbsp;</span></p> <p class="cls3"><span class="cls0">(5)&nbsp;&nbsp;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&nbsp;</span></p> <p class="cls3"><span class="cls0">(6)&nbsp;&nbsp;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.&nbsp;</span></p> <p><span class="cls0">(d) Additional consideration is nominal if it is less than the lessee&rsquo;s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;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&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;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.&nbsp;</span></p> <p><span class="cls0">(e)&nbsp;&nbsp;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.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 73, &sect; 1203. Amended by Laws 2005, c. 139, &sect; 10, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1204. "Value".&nbsp;</span></p> <p><span class="cls0">&ldquo;Value&rdquo;.&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in Articles 3, 4 and 5 of the Uniform Commercial Code, a person gives value for rights if the person acquires them:&nbsp;</span></p> <p><span class="cls0">(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 charge-back is provided for in the event of difficulties in collection;&nbsp;</span></p> <p><span class="cls0">(2) as security for, or in total or partial satisfaction of, a preexisting claim;&nbsp;</span></p> <p><span class="cls0">(3) by accepting delivery under a preexisting contract for purchase; or&nbsp;</span></p> <p><span class="cls0">(4) in return for any consideration sufficient to support a simple contract.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 73, &sect; 1204. Amended by Laws 2005, c. 139, &sect; 11, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1205. Reasonable time - Seasonableness.&nbsp;</span></p> <p><span class="cls0">Reasonable Time; Seasonableness.&nbsp;</span></p> <p><span class="cls0">(a) Whether a time for taking an action required by the Uniform Commercial Code is reasonable depends on the nature, purpose, and circumstances of the action.&nbsp;</span></p> <p><span class="cls0">(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.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 73, &sect; 1205. Amended by Laws 2005, c. 139, &sect; 12, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A1206. Presumptions.&nbsp;</span></p> <p><span class="cls0">Presumptions.&nbsp;</span></p> <p><span class="cls0">Whenever the Uniform Commercial Code creates a &ldquo;presumption&rdquo; with respect to a fact, or provides that a fact is &ldquo;presumed&rdquo;, the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 74, &sect; 1206. Amended by Laws 1995, c. 242, &sect; 53, eff. Feb. 1, 1996; Laws 2005, c. 139, &sect; 13, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-207. Repealed by Laws 2005, c. 139, &sect; 39, eff. Jan. 1, 2006.&nbsp;</span></p> <p><span class="cls0">&sect;12A-1-208. Repealed by Laws 2005, c. 139, &sect; 39, eff. Jan. 1, 2006.&nbsp;</span></p> <p><span class="cls0">&sect;12A-1-209. Repealed by Laws 2005, c. 139, &sect; 39, eff. Jan. 1, 2006.&nbsp;</span></p> <p><span class="cls0">&sect;12A-1-301. Territorial applicability - Parties&rsquo; power to choose applicable law.&nbsp;</span></p> <p><span class="cls0">Territorial Applicability; Parties&rsquo; Power to Choose Applicable Law.&nbsp;</span></p> <p><span class="cls0">(a) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement, this title applies to transactions bearing an appropriate relation to this state.&nbsp;</span></p> <p><span class="cls0">(b) To the extent that the Uniform Commercial Code governs a transaction, if one of the following provisions of the Uniform Commercial Code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:&nbsp;</span></p> <p><span class="cls0">(1) Section 2-402 of this title;&nbsp;</span></p> <p><span class="cls0">(2) Sections 2A-105 and 2A-106 of this title;&nbsp;</span></p> <p><span class="cls0">(3) Section 4-102 of this title;&nbsp;</span></p> <p><span class="cls0">(4) Section 4A-507 of this title;&nbsp;</span></p> <p><span class="cls0">(5) Section 5-116 of this title;&nbsp;</span></p> <p><span class="cls0">(6) Section 8-110 of this title; and&nbsp;</span></p> <p><span class="cls0">(7) Sections 1-9-301 through 1-9-307 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 14, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-302. Variation by agreement.&nbsp;</span></p> <p><span class="cls0">Variation by Agreement.&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in subsection (b) of this section or elsewhere in the Uniform Commercial Code, the effect of the Uniform Commercial Code may be varied by agreement.&nbsp;</span></p> <p><span class="cls0">(b) The obligations of good faith, diligence, reasonableness, and care prescribed by the Uniform Commercial Code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever the Uniform Commercial Code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.&nbsp;</span></p> <p><span class="cls0">(c) The presence in certain provisions of the Uniform Commercial Code of the phrase &ldquo;unless otherwise agreed&rdquo; or words of similar import does not imply that the effect of other provisions may not be varied by agreement under this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 15, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-303. Course of Performance, Course of Dealing, and Usage of Trade.&nbsp;</span></p> <p><span class="cls0">Course of Performance, Course of Dealing, and Usage of Trade.&nbsp;</span></p> <p><span class="cls0">(a) A &ldquo;course of performance&rdquo; is a sequence of conduct between the parties to a particular transaction that exists if:&nbsp;</span></p> <p><span class="cls0">(1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and&nbsp;</span></p> <p><span class="cls0">(2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.&nbsp;</span></p> <p><span class="cls0">(b) A &ldquo;course of dealing&rdquo; is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. &nbsp;</span></p> <p><span class="cls0">(c) A &ldquo;usage of trade&rdquo; 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 must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.&nbsp;</span></p> <p><span class="cls0">(d) A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the agreement of the parties, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.&nbsp;</span></p> <p><span class="cls0">(e) Except as otherwise provided in subsection (f) of this section, the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:&nbsp;</span></p> <p><span class="cls0">(1) express terms prevail over course of performance, course of dealing, and usage of trade;&nbsp;</span></p> <p><span class="cls0">(2) course of performance prevails over course of dealing and usage of trade; and&nbsp;</span></p> <p><span class="cls0">(3) course of dealing prevails over usage of trade.&nbsp;</span></p> <p><span class="cls0">(f) Subject to Section 2-209 and Section 2A-208 of this title, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.&nbsp;</span></p> <p><span class="cls0">(g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 16, eff. Jan. 1, 2006. Amended by Laws 2009, c. 208, &sect; 1, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 1 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-304. Obligation of good faith - Breach.&nbsp;</span></p> <p><span class="cls0">Obligation of Good Faith.&nbsp;</span></p> <p><span class="cls0">Every contract of duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement. Breach of the obligation of good faith imposed by this section shall not give rise to a separate tort cause of action.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 17, eff. Jan. 1, 2006. Amended by Laws 2013, 1st Ex.Sess., c. 16, &sect; 2; Laws 2013, 1st Ex.Sess., c. 16, &sect; 3.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2009, c. 228, &sect; 21 was held unconstitutional by the Oklahoma Supreme Court in the case of Douglas v. Cox Retirement Properties, Inc., 2013 OK 37, 302 P.2d 789 (Okla. 2013) and repealed by Laws 2013, 1st Ex.Sess., c. 16, &sect; 1.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-1-305. Remedies to be liberally administered.&nbsp;</span></p> <p><span class="cls0">Remedies to Be Liberally Administered.&nbsp;</span></p> <p><span class="cls0">(a) The remedies provided by the Uniform Commercial Code must 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 Uniform Commercial Code or by other rule of law.&nbsp;</span></p> <p><span class="cls0">(b) Any right or obligation declared by the Uniform Commercial Code is enforceable by action unless the provision declaring it specifies a different and limited effect.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 18, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-306. Waiver or renunciation of claim or right after breach.&nbsp;</span></p> <p><span class="cls0">Waiver or Renunciation of Claim or Right after Breach.&nbsp;</span></p> <p><span class="cls0">A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 19, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-307. Prima facie evidence by third-party documents.&nbsp;</span></p> <p><span class="cls0">Prima Facie Evidence by Third-Party Documents.&nbsp;</span></p> <p><span class="cls0">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.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 20, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-308. Performance or acceptance under reservation of rights.&nbsp;</span></p> <p><span class="cls0">Performance or Acceptance Under Reservation of Rights.&nbsp;</span></p> <p><span class="cls0">(a) A party that 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.&nbsp;</span></p> <p><span class="cls0">(b) Subsection (a) of this section does not apply to an accord and satisfaction.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 21, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-309. Option to accelerate at will.&nbsp;</span></p> <p><span class="cls0">Option to Accelerate at Will.&nbsp;</span></p> <p><span class="cls0">A term providing that one party or that party&rsquo;s successor in interest may accelerate payment or performance or require collateral or additional collateral "at will" or when the party &ldquo;deems itself insecure", or in words of similar import, means that the party shall have power to do so only if that 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.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 22, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-1-310. Subordination of obligations.&nbsp;</span></p> <p><span class="cls0">Subordination of obligations.&nbsp;</span></p> <p><span class="cls0">An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance 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.&nbsp;</span></p> <p><span class="cls0">Added by Laws 2005, c. 139, &sect; 23, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2101. Short Title.&nbsp;</span></p> <p><span class="cls0">This article shall be known and may be cited as Uniform Commercial CodeSales.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 74, &sect; 2101. &nbsp;</span></p> <p><span class="cls0">&sect;12A2102. Scope; Certain Security and Other Transactions Excluded from this Article.&nbsp;</span></p> <p><span class="cls0">Unless the context otherwise requires, this article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 74, &sect; 2102. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-103. Definitions and Index of Definitions.&nbsp;</span></p> <p><span class="cls0">Definitions and Index of Definitions.&nbsp;</span></p> <p><span class="cls0">(1) In this article unless the context otherwise requires:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;&ldquo;Buyer&rdquo; means a person who buys or contracts to buy goods.&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;&ldquo;Receipt&rdquo; of goods means taking physical possession of them.&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;&ldquo;Seller&rdquo; means a person who sells or contracts to sell goods.&nbsp;</span></p> <p><span class="cls0">(2) Other definitions applying to this article or to specified parts thereof, and the sections in which they appear are:&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Acceptance&rdquo;. Section 2-606 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Banker's credit&rdquo;. Section 2-325 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Between merchants&rdquo;. Section 2-104 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Cancellation&rdquo;. Section 2-106(4) of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Commercial unit&rdquo;. Section 2-105 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Confirmed credit&rdquo;. Section 2-325 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Conforming to contract&rdquo;. Section 2-106 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Contract for sale&rdquo;. Section 2-106 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Cover&rdquo;. Section 2-712 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Entrusting&rdquo;. Section 2-403 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Financing agency&rdquo;. Section 2-104 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Future goods&rdquo;. Section 2-105 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Goods&rdquo;. Section 2-105 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Identification&rdquo;. Section 2-501 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Installment contract&rdquo;. Section 2-612 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Letter of credit&rdquo;. Section 2-325 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Lot&rdquo;. Section 2-105 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Merchant&rdquo;. Section 2-104 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Overseas&rdquo;. Section 2-323 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Person in position of seller&rdquo;. Section 2-707 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Present sale&rdquo;. Section 2-106 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Sale&rdquo;. Section 2-106 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Sale on approval&rdquo;. Section 2-326 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Sale or return&rdquo;. Section 2-326 of this title.&nbsp;</span></p> <p class="cls3"><span class="cls0">&ldquo;Termination&rdquo;. Section 2-106 of this title.&nbsp;</span></p> <p><span class="cls0">(3) &ldquo;Control&rdquo; as provided in Section 7-106 of this title and the following definitions in other articles apply to this article:&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Check&rdquo;. Section 3-104 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Consignee&rdquo;. Section 7-102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Consignor&rdquo;. Section 7-102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Consumer goods&rdquo;. Section 1-9-102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Dishonor&rdquo;. Section 3-502 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Draft&rdquo;. Section 3-104 of this title.&nbsp;</span></p> <p><span class="cls0">(4) In addition, Article 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 74, &sect; 2-103. Amended by Laws 1994, c. 46, &sect; 2, eff. Sept. 1, 1994; Laws 2000, c. 371, &sect; 148, eff. July 1, 2001; Laws 2005, c. 140, &sect; 42, eff. Jan. 1, 2006; Laws 2005, c. 473, &sect; 1, emerg. eff. June 9, 2005.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2005, c. 139, &sect; 24 repealed by Laws 2005, c. 473, &sect; 3, emerg. eff. June 9, 2005.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2104. Definitions: "Merchant"; "Between merchants"; "Financing agency".&nbsp;</span></p> <p><span class="cls0">Definitions: "Merchant"; "Between Merchants"; "Financing Agency".&nbsp;</span></p> <p><span class="cls0">(1) "Merchant" means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.&nbsp;</span></p> <p><span class="cls0">(2) "Financing agency" means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller's draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. "Financing agency" includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (Section 2707).&nbsp;</span></p> <p><span class="cls0">(3) "Between merchants" means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 75, &sect; 2104. Amended by Laws 2005, c. 140, &sect; 43, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2105. Definitions: Transferability; "Goods"; "Future" goods; "Lot"; "Commercial unit".&nbsp;</span></p> <p><span class="cls0">Definitions: Transferability; "Goods"; "Future" Goods; "Lot"; "Commercial Unit".&nbsp;</span></p> <p><span class="cls0">(1) "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2107) but does not include information.&nbsp;</span></p> <p><span class="cls0">(2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.&nbsp;</span></p> <p><span class="cls0">(3) There may be a sale of a part interest in existing identified goods.&nbsp;</span></p> <p><span class="cls0">(4) An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller's interest in the bulk be sold to the buyer who then becomes an owner in common.&nbsp;</span></p> <p><span class="cls0">(5) "Lot" means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.&nbsp;</span></p> <p><span class="cls0">(6) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 75, &sect; 2105. Amended by Laws 2005, c. 139, &sect; 25, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2106. Definitions: "Contract"; "Agreement"; "Contract for sale"; "Sale"; "Present sale"; "Conforming" to contract; "Termination"; "Cancellation".&nbsp;</span></p> <p><span class="cls0">Definitions: "Contract"; "Agreement"; "Contract for Sale"; "Sale"; "Present Sale"; "Conforming" to Contract; "Termination"; "Cancellation".&nbsp;</span></p> <p><span class="cls0">(1) In this article unless the context otherwise requires "contract" and "agreement" are limited to those relating to the present or future sale of goods. "Contract for sale" includes both a present sale of goods and a contract to sell goods at a future time but does not include a license of information. A "sale" consists in the passing of title from the seller to the buyer for a price (Section 2401). A "present sale" means a sale which is accomplished by the making of the contract.&nbsp;</span></p> <p><span class="cls0">(2) Goods or conduct including any part of a performance are "conforming" or conform to the contract when they are in accordance with the obligations under the contract.&nbsp;</span></p> <p><span class="cls0">(3) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On "termination" all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.&nbsp;</span></p> <p><span class="cls0">(4) "Cancellation" occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of "termination" except that the canceling party also retains any remedy for breach of the whole contract or any unperformed balance.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 76, &sect; 2106. Amended by Laws 2005, c. 139, &sect; 26, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2107. Goods to be Severed from Realty: Recording.&nbsp;</span></p> <p><span class="cls0">Goods to be Severed from Realty: Recording. (1) A contract for the sale of minerals or the like, including oil and gas, or a structure or its materials to be removed from realty is a contract for the sale of goods within this article if they are to be severed by the seller, but until severance, a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.&nbsp;</span></p> <p><span class="cls0">(2) A contract for the sale, apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto, but not described in subsection (1) of this section or of timber to be cut is a contract for the sale of goods within this article whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.&nbsp;</span></p> <p><span class="cls0">(3) The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded as a document transferring an interest in land and shall then constitute notice to third parties of the buyer's rights under the contract for sale.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 76, &sect; 2107; Laws 1981, c. 194, &sect; 3.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2201. Formal Requirements; Statute of Frauds.&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided in this section a contract for the sale of goods for the price of Five Hundred Dollars ($500.00) or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.&nbsp;</span></p> <p><span class="cls0">(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within ten (10) days after it is received.&nbsp;</span></p> <p><span class="cls0">(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable&nbsp;</span></p> <p><span class="cls0">(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or&nbsp;</span></p> <p><span class="cls0">(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or&nbsp;</span></p> <p><span class="cls0">(c) with respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2606).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 77, &sect; 2201. &nbsp;</span></p> <p><span class="cls0">&sect;12A2202. Final written expression: parol or extrinsic evidence.&nbsp;</span></p> <p><span class="cls0">Final Written Expression: Parol or Extrinsic Evidence.&nbsp;</span></p> <p><span class="cls0">Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:&nbsp;</span></p> <p><span class="cls0">(a) by course of performance, course of dealing or usage of trade (Section 16 of this act); and&nbsp;</span></p> <p><span class="cls0">(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 77, &sect; 2202. Amended by Laws 2005, c. 139, &sect; 27, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2203. Seals Inoperative.&nbsp;</span></p> <p><span class="cls0">The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 77, &sect; 2203. &nbsp;</span></p> <p><span class="cls0">&sect;12A2204. Formation in General.&nbsp;</span></p> <p><span class="cls0">(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.&nbsp;</span></p> <p><span class="cls0">(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.&nbsp;</span></p> <p><span class="cls0">(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 77, &sect; 2204. &nbsp;</span></p> <p><span class="cls0">&sect;12A2205. Firm Offers.&nbsp;</span></p> <p><span class="cls0">An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three (3) months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 77, &sect; 2205. &nbsp;</span></p> <p><span class="cls0">&sect;12A2206. Offer and Acceptance in Formation of Contract.&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise unambiguously indicated by the language or circumstances&nbsp;</span></p> <p><span class="cls0">(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;&nbsp;</span></p> <p><span class="cls0">(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.&nbsp;</span></p> <p><span class="cls0">(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 78, &sect; 2206. &nbsp;</span></p> <p><span class="cls0">&sect;12A2207. Additional Terms in Acceptance or Confirmation.&nbsp;</span></p> <p><span class="cls0">(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.&nbsp;</span></p> <p><span class="cls0">(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:&nbsp;</span></p> <p><span class="cls0">(a) the offer expressly limits acceptance to the terms of the offer;&nbsp;</span></p> <p><span class="cls0">(b) they materially alter it; or&nbsp;</span></p> <p><span class="cls0">(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.&nbsp;</span></p> <p><span class="cls0">(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 78, &sect; 2207. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-208. Repealed by Laws 2009, c. 208, &sect; 23, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 316, which repealed this section, was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009).&nbsp;</span></p> <p><span class="cls0">&sect;12A2209. Modification, Rescission and Waiver.&nbsp;</span></p> <p><span class="cls0">(1) An agreement modifying a contract within this article needs no consideration to be binding.&nbsp;</span></p> <p><span class="cls0">(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.&nbsp;</span></p> <p><span class="cls0">(3) The requirements of the statute of frauds section of this article (Section 2201) must be satisfied if the contract as modified is within its provisions.&nbsp;</span></p> <p><span class="cls0">(4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.&nbsp;</span></p> <p><span class="cls0">(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 78, &sect; 2209. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-210. Delegation of Performance; Assignment of Rights.&nbsp;</span></p> <p><span class="cls0">Delegation of Performance; Assignment of Rights.&nbsp;</span></p> <p><span class="cls0">(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided in Section 19406 of this title, unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise.&nbsp;</span></p> <p><span class="cls0">(3) The creation, attachment, perfection, or enforcement of a security interest in the seller&rsquo;s interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer&rsquo;s chance of obtaining return performance within the purview of paragraph (2) of this section unless, and then only to the extent that enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection, and enforcement of the security interest remain effective, but (i) the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer, and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.&nbsp;</span></p> <p><span class="cls0">(4) Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor's performance.&nbsp;</span></p> <p><span class="cls0">(5) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.&nbsp;</span></p> <p><span class="cls0">(6) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (Section 2609).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 79, &sect; 2-210. Amended by Laws 2000, c. 371, &sect; 149, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2301. General Obligations of Parties.&nbsp;</span></p> <p><span class="cls0">The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 79, &sect; 2301. &nbsp;</span></p> <p><span class="cls0">&sect;12A2302. Unconscionable Contract or Clause.&nbsp;</span></p> <p><span class="cls0">(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.&nbsp;</span></p> <p><span class="cls0">(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 79, &sect; 2302. &nbsp;</span></p> <p><span class="cls0">&sect;12A2303. Allocation or Division of Risks.&nbsp;</span></p> <p><span class="cls0">Where this article allocates a risk or a burden as between the parties "unless otherwise agreed", the agreement may not only shift the allocation but may also divide the risk or burden.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 79, &sect; 2303. &nbsp;</span></p> <p><span class="cls0">&sect;12A2304. Price Payable in Money, Goods, Realty, or Otherwise.&nbsp;</span></p> <p><span class="cls0">(1) The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.&nbsp;</span></p> <p><span class="cls0">(2) Even though all or part of the price is payable in an interest in realty the transfer of the goods and the seller's obligations with reference to them are subject to this article, but not the transfer of the interest in realty or the transferor's obligations in connection therewith.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 79, &sect; 2304. &nbsp;</span></p> <p><span class="cls0">&sect;12A2305. Open Price Term.&nbsp;</span></p> <p><span class="cls0">(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if&nbsp;</span></p> <p><span class="cls0">(a) nothing is said as to price; or&nbsp;</span></p> <p><span class="cls0">(b) the price is left to be agreed by the parties and they fail to agree; or&nbsp;</span></p> <p><span class="cls0">(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.&nbsp;</span></p> <p><span class="cls0">(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.&nbsp;</span></p> <p><span class="cls0">(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.&nbsp;</span></p> <p><span class="cls0">(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.&nbsp;</span></p> <p><span class="cls0">&sect;12A2306. Output, Requirements and Exclusive Dealings.&nbsp;</span></p> <p><span class="cls0">(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.&nbsp;</span></p> <p><span class="cls0">(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 80, &sect; 2306. &nbsp;</span></p> <p><span class="cls0">&sect;12A2307. Delivery in Single Lot or Several Lots.&nbsp;</span></p> <p><span class="cls0">Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to make or demand delivery in lots the price if it can be apportioned may be demanded for each lot.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 80, &sect; 2307. &nbsp;</span></p> <p><span class="cls0">&sect;12A2308. Absence of Specified Place for Delivery.&nbsp;</span></p> <p><span class="cls0">Unless otherwise agreed&nbsp;</span></p> <p><span class="cls0">(a) the place for delivery of goods is the seller's place of business or if he has none his residence; but&nbsp;</span></p> <p><span class="cls0">(b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and&nbsp;</span></p> <p><span class="cls0">(c) documents of title may be delivered through customary banking channels.&nbsp;</span></p> <p><span class="cls0">Laws 1961 P. 80, Sec. 2308.&nbsp;</span></p> <p><span class="cls0">&sect;12A2309. Absence of Specific Time Provisions; Notice of Termination.&nbsp;</span></p> <p><span class="cls0">(1) The time for shipment or delivery or any other action under a contract if not provided in this article or agreed upon shall be a reasonable time.&nbsp;</span></p> <p><span class="cls0">(2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.&nbsp;</span></p> <p><span class="cls0">(3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 80, &sect; 2309. &nbsp;</span></p> <p><span class="cls0">&sect;12A2310. Open time for payment or running of credit - Authority to ship under reservation.&nbsp;</span></p> <p><span class="cls0">Open Time for Payment or Running of Credit; Authority to Ship Under Reservation.&nbsp;</span></p> <p><span class="cls0">Unless otherwise agreed:&nbsp;</span></p> <p><span class="cls0">(a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and&nbsp;</span></p> <p><span class="cls0">(b) if the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (Section 2513); and&nbsp;</span></p> <p><span class="cls0">(c) if delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due regardless of where the goods are to be received (i) at the time and place at which the buyer is to receive delivery of the tangible documents or (ii) at the time the buyer is to receive delivery of the electronic documents and at the seller&rsquo;s place of business or if none, the seller&rsquo;s residence; and&nbsp;</span></p> <p><span class="cls0">(d) where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but postdating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 80, &sect; 2310. Amended by Laws 2005, c. 140, &sect; 44, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2311. Options and Cooperation Respecting Performance.&nbsp;</span></p> <p><span class="cls0">(1) An agreement for sale which is otherwise sufficiently definite (subsection (3) of Section 2204) to be a contract is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.&nbsp;</span></p> <p><span class="cls0">(2) Unless otherwise agreed specifications relating to assortment of the goods are at the buyer's option and except as otherwise provided in subsections (1) (c) and (3) of Section 2319 specifications or arrangements relating to shipment are at the seller's option.&nbsp;</span></p> <p><span class="cls0">(3) Where such specification would materially affect the other party's performance but is not seasonably made or where one party's cooperation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies&nbsp;</span></p> <p><span class="cls0">(a) is excused for any resulting delay in his own performance; and&nbsp;</span></p> <p><span class="cls0">(b) may also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 81, &sect; 2311. &nbsp;</span></p> <p><span class="cls0">&sect;12A2312. Warranty of Title and Against Infringement; Buyer's Obligation Against Infringement.&nbsp;</span></p> <p><span class="cls0">(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that&nbsp;</span></p> <p><span class="cls0">(a) the title conveyed shall be good, and its transfer rightful; and&nbsp;</span></p> <p><span class="cls0">(b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.&nbsp;</span></p> <p><span class="cls0">(2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 81, &sect; 2312. &nbsp;</span></p> <p><span class="cls0">&sect;12A2313. Express Warranties by Affirmation, Promise, Description, Sample.&nbsp;</span></p> <p><span class="cls0">(1) Express warranties by the seller are created as follows:&nbsp;</span></p> <p class="cls4"><span class="cls0">(a) Any affirmation of fact or promise made by the seller&nbsp;&nbsp;to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.&nbsp;</span></p> <p class="cls5"><span class="cls0">(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.&nbsp;</span></p> <p class="cls5"><span class="cls0">(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.&nbsp;</span></p> <p><span class="cls0">(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 81, &sect; 2313. &nbsp;</span></p> <p><span class="cls0">&sect;12A2314. Implied Warranty: Merchantability; Usage of Trade.&nbsp;</span></p> <p><span class="cls0">(1) Unless excluded or modified (Section 2316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.&nbsp;</span></p> <p><span class="cls0">(2) Goods to be merchantable must be at least such as&nbsp;</span></p> <p><span class="cls0">(a) pass without objection in the trade under the contract description; and&nbsp;</span></p> <p><span class="cls0">(b) in the case of fungible goods, are of fair average quality within the description; and&nbsp;</span></p> <p><span class="cls0">(c) are fit for the ordinary purposes for which such goods are used; and&nbsp;</span></p> <p><span class="cls0">(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and&nbsp;</span></p> <p><span class="cls0">(e) are adequately contained, packaged, and labeled as the agreement may require; and&nbsp;</span></p> <p><span class="cls0">(f) conform to the promises or affirmations of fact made on the container or label if any.&nbsp;</span></p> <p><span class="cls0">(3) Unless excluded or modified (Section 2316) other implied warranties may arise from course of dealing or usage of trade.&nbsp;</span></p> <p><span class="cls0">Laws 1961 P. 82, Sec. 2314.&nbsp;</span></p> <p><span class="cls0">&sect;12A-2-315. Implied Warranty: Fitness for Particular Purpose.&nbsp;</span></p> <p><span class="cls0">Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 82, &sect; 2-315.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2316. Exclusion or Modification of Warranties.&nbsp;</span></p> <p><span class="cls0">Exclusion or Modification of Warranties. (1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but, subject to the provisions of this Article on parol or extrinsic evidence (Section 2202) negation or limitation is inoperative to the extent that such construction is unreasonable.&nbsp;</span></p> <p><span class="cls0">(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."&nbsp;</span></p> <p><span class="cls0">(3) Notwithstanding subsection (2)&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade; and&nbsp;</span></p> <p><span class="cls0">(d)&nbsp;&nbsp;the implied warranties of merchantability and fitness do not apply to the sale or barter of livestock or its unborn young, provided that seller offers sufficient evidence that all state and federal regulations pertaining to the health of such animals were complied with; provided, however, that the implied warranties of merchantability and fitness shall apply to the sale or barter of horses.&nbsp;</span></p> <p><span class="cls0">(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2718 and 2719).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 82, &sect; 2316; Laws 1981, c. 181, &sect; 1. &nbsp;</span></p> <p><span class="cls0">&sect;12A2317. Cumulation and Conflict of Warranties Express or Implied.&nbsp;</span></p> <p><span class="cls0">Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:&nbsp;</span></p> <p><span class="cls0">(a) Exact or technical specifications displace an inconsistent sample or model or general language of description.&nbsp;</span></p> <p><span class="cls0">(b) A sample from an existing bulk displaces inconsistent general language of description.&nbsp;</span></p> <p><span class="cls0">(c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 82, &sect; 2317. &nbsp;</span></p> <p><span class="cls0">&sect;12A2318. Third Party Beneficiaries of Warranties Express or Implied.&nbsp;</span></p> <p><span class="cls0">Third Party Beneficiaries of Warranties Express or Implied.&nbsp;</span></p> <p><span class="cls0">(1) A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty.&nbsp;</span></p> <p><span class="cls0">(2) This section does not displace principles of law and equity that extend a warranty to or for the benefit of a buyer to other persons.&nbsp;</span></p> <p><span class="cls0">(3) The operation of this section may not be excluded, modified, or limited by a seller, but an exclusion, modification, or limitation of the warranty, including any with respect to rights and remedies, effective against the buyer is also effective against any beneficiary designated under this section.&nbsp;</span></p> <p class="cls2"><span class="cls0">Amended by Laws 1988, c. 86, &sect; 83, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2319. F.O.B. and F.A.S. Terms.&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise agreed the term F.O.B. (which means "free on board") at a named place, even though used only in connection with the stated price, is a delivery term under which&nbsp;</span></p> <p><span class="cls0">(a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this article (Section 2504) and bear the expense and risk of putting them into the possession of the carrier; or&nbsp;</span></p> <p><span class="cls0">(b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this article (Section 2503);&nbsp;</span></p> <p><span class="cls0">(c) when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term if F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this article on the form of bill of lading (Section 2323).&nbsp;</span></p> <p><span class="cls0">(2) Unless otherwise agreed the term F.A.S. vessel (which means "free alongside") at a named port, even though used only in connection with the stated price, is a delivery term under which the seller must&nbsp;</span></p> <p><span class="cls0">(a) at his own expense and risk deliver the goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer; and&nbsp;</span></p> <p><span class="cls0">(b) obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise agreed in any case falling within subsection (1) (a) or (c) or subsection (2) the buyer must seasonably give any needed instructions for making delivery, including when the term is F.A.S. or F.O.B. the loading berth of the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this article (Section 2311). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.&nbsp;</span></p> <p><span class="cls0">(4) Under the term F.O.B. vessel or F.A.S. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 83, &sect; 2319. d&nbsp;</span></p> <p><span class="cls0">&sect;12A2320. C.I.F. and C. and F. Terms.&nbsp;</span></p> <p><span class="cls0">(1) The term C.I.F. means that the price includes in a lump sum the cost of the goods and the insurance and freight to the named destination. The term C. and F. or C.F. means that the price so includes cost and freight to the named destination.&nbsp;</span></p> <p><span class="cls0">(2) Unless otherwise agreed and even though used only in connection with the stated price and destination, the term C.I.F. destination or its equivalent requires the seller at his own expense and risk to&nbsp;</span></p> <p><span class="cls0">(a) put the goods into the possession of a carrier at the port for shipment and obtain a negotiable bill or bills of lading covering the entire transportation to the named destination; and&nbsp;</span></p> <p><span class="cls0">(b) load the goods and obtain a receipt from the carrier (which may be contained in the bill of lading) showing that the freight has been paid or provided for; and&nbsp;</span></p> <p><span class="cls0">(c) obtain a policy or certificate of insurance, including any war risk insurance, of a kind and on terms then current at the port of shipment in the usual amount, in the currency of the contract, shown to cover the same goods covered by the bill of lading and providing for payment of loss to the order of the buyer or for the account of whom it may concern; but the seller may add to the price the amount of the premium for any such war risk insurance; and&nbsp;</span></p> <p><span class="cls0">(d) prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and&nbsp;</span></p> <p><span class="cls0">(e) forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer's rights.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise agreed the term C. and F. or its equivalent has the same effect and imposes upon the seller the same obligations and risks as a C.I.F. term except the obligation as to insurance.&nbsp;</span></p> <p><span class="cls0">(4) Under the term C.I.F. or C. and F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 83, &sect; 2320. &nbsp;</span></p> <p><span class="cls0">&sect;12A2321. C.I.F. or C. and F.: "Net Landed Weights"; "Payment on Arrival"; Warranty of Condition on Arrival.&nbsp;</span></p> <p><span class="cls0">Under a contract containing a term C.I.F. or C. and F.&nbsp;</span></p> <p><span class="cls0">(1) Where the price is based on or is to be adjusted according to "net landed weights", "delivered weights", "out turn" quantity or quality or the like, unless otherwise agreed the seller must reasonably estimate the price. The payment due on tender of the documents called for by the contract is the amount so estimated, but after final adjustment of the price a settlement must be made with commercial promptness.&nbsp;</span></p> <p><span class="cls0">(2) An agreement described in subsection (1) or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation but has no effect on the place or time of indentification to the contract for sale or delivery or on the passing of the risk of loss.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise agreed where the contract provides for payment on or after arrival of the goods the seller must before payment allow such preliminary inspection as is feasible; but if the goods are lost delivery of the documents and payment are due when the goods should have arrived.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 84, &sect; 2321. &nbsp;</span></p> <p><span class="cls0">&sect;12A2322. Delivery "ExShip".&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise agreed a term for delivery of goods "exship" (which means from the carrying vessel) or in equivalent language is not restricted to a particular ship and requires delivery from a ship which has reached a place at the named port of destination where goods of the kind are usually discharged.&nbsp;</span></p> <p><span class="cls0">(2) Under such a term unless otherwise agreed&nbsp;</span></p> <p><span class="cls0">(a) the seller must discharge all liens arising out of the carriage and furnish the buyer with a direction which puts the carrier under a duty to deliver the goods; and&nbsp;</span></p> <p><span class="cls0">(b) the risk of loss does not pass to the buyer until the goods leave the ship's tackle or are otherwise properly unloaded.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 84, &sect; 2322. &nbsp;</span></p> <p><span class="cls0">&sect;12A2323. Form of bill of lading required in overseas shipment - "Overseas".&nbsp;</span></p> <p><span class="cls0">Form of Bill of Lading Required in Overseas Shipment; "Overseas".&nbsp;</span></p> <p><span class="cls0">(1) Where the contract contemplates overseas shipment and contains a term C.I.F. or C. and F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. and F., received for shipment.&nbsp;</span></p> <p><span class="cls0">(2) Where in a case within subsection (1) a tangible bill of lading has been issued in a set of parts, unless otherwise agreed if the documents are not to be sent from abroad the buyer may demand tender of the full set; otherwise only one part of the bill of lading need be tendered. Even if the agreement expressly requires a full set.&nbsp;</span></p> <p><span class="cls0">(a) due tender of a single part is acceptable within the provisions of this article on cure of improper delivery (subsection (1) of Section 2508); and&nbsp;</span></p> <p><span class="cls0">(b) even though the full set is demanded, if the documents are sent from abroad the person tendering an incomplete set may nevertheless require payment upon furnishing an indemnity which the buyer in good faith deems adequate.&nbsp;</span></p> <p><span class="cls0">(3) A shipment by water or by air or a contract contemplating such shipment is "overseas" insofar as by usage of trade or agreement it is subject to the commercial, financing or shipping practices characteristic of international deep water commerce.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 84, &sect; 2323. Amended by Laws 2005, c. 140, &sect; 45, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2324. "No Arrival, No Sale" Term.&nbsp;</span></p> <p><span class="cls0">Under a term "no arrival, no sale" or terms of like meaning, unless otherwise agreed.&nbsp;</span></p> <p><span class="cls0">(a) the seller must properly ship conforming goods and if they arrive by any means he must tender them on arrival but he assumes no obligation that the goods will arrive unless he has caused the nonarrival; and&nbsp;</span></p> <p><span class="cls0">(b) where without fault of the seller the goods are in part lost or have so deteriorated as no longer to conform to the contract or arrive after the contract time, the buyer may proceed as if there had been casualty to identified goods (Section 2613).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 85, &sect; 2324. &nbsp;</span></p> <p><span class="cls0">&sect;12A2325. "Letter of Credit" Term; "Confirmed Credit".&nbsp;</span></p> <p><span class="cls0">(1) Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.&nbsp;</span></p> <p><span class="cls0">(2) The delivery to seller of a proper letter of credit suspends the buyer's obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from him.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise agreed the term "letter of credit" or "banker's credit" in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, where the shipment is overseas, of good international repute. The term "confirmed credit" means that the credit must also carry the direct obligation of such an agency which does business in the seller's financial market.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 85, &sect; 2325. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-326. Sale on Approval and Sale or Return; Consignment Sales and Rights of Creditors.&nbsp;</span></p> <p><span class="cls0">Sale on Approval and Sale or Return; Consignment Sales and Rights of Creditors.&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is&nbsp;</span></p> <p><span class="cls0">(a) a "sale on approval" if the goods are delivered primarily for use, and&nbsp;</span></p> <p><span class="cls0">(b) a "sale or return" if the goods are delivered primarily for resale.&nbsp;</span></p> <p><span class="cls0">(2) Goods held on approval are not subject to the claims of the buyer's creditors until acceptance; goods held on sale or return are subject to such claims while in the buyer's possession.&nbsp;</span></p> <p><span class="cls0">(3) Any "or return" term of a contract for sale is to be treated as a separate contract for sale within the statute of frauds section of this article (Section 2201 of this title) and as contradicting the sale aspect of the contract within the provisions of this article on parole or extrinsic evidence (Section 2202 of this title).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 85, &sect; 2-326. Amended by Laws 2000, c. 371, &sect; 150, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2327. Special Incidents of Sale on Approval and Sale or Return.&nbsp;</span></p> <p><span class="cls0">(1) Under a sale on approval unless otherwise agreed&nbsp;</span></p> <p><span class="cls0">(a) although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; and&nbsp;</span></p> <p><span class="cls0">(b) use of the goods consistent with the purpose of trial is not acceptance but failure seasonably to notify the seller of election to return the goods is acceptance, and if the goods conform to the contract acceptance of any part is acceptance of the whole; and&nbsp;</span></p> <p><span class="cls0">(c) after due notification of election to return, the return is at the seller's risk and expense but a merchant buyer must follow any reasonable instructions.&nbsp;</span></p> <p><span class="cls0">(2) Under a sale or return unless otherwise agreed&nbsp;</span></p> <p><span class="cls0">(a) the option to return extends to the whole or any commercial unit of the goods while in substantially their original condition, but must be exercised seasonably, and&nbsp;</span></p> <p><span class="cls0">(b) the return is at the buyer's risk and expense.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 86, &sect; 2327. &nbsp;</span></p> <p><span class="cls0">&sect;12A2328. Sale by Auction.&nbsp;</span></p> <p><span class="cls0">(1) In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.&nbsp;</span></p> <p><span class="cls0">(2) A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.&nbsp;</span></p> <p><span class="cls0">(3) Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case a bidder may retract his bid until the auctioneer's announcement of completion of the sale, but a bidder's retraction does not revive any previous bid.&nbsp;</span></p> <p><span class="cls0">(4) If the auctioneer knowingly receives a bid on the seller's behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 86, &sect; 2328. &nbsp;</span></p> <p><span class="cls0">&sect;12A2401. Passing of title - Reservation for security - Limited application of this section.&nbsp;</span></p> <p><span class="cls0">Passing of Title; Reservation for Security; Limited Application of this Section.&nbsp;</span></p> <p><span class="cls0">Each provision of this article with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title. Insofar as situations are not covered by the other provisions of this article and matters concerning title become material the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) Title to goods cannot pass under a contract for sale prior to their identification to the contract (Section 2501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this act. Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest. Subject to these provisions and to the provisions of the article on Secured Transactions (Article 9), title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties.&nbsp;</span></p> <p><span class="cls0">(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular and despite any reservation of a security interest by the bill of lading:&nbsp;</span></p> <p><span class="cls0">(a) if the contract requires or authorizes the seller to send the goods to the buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment; but&nbsp;</span></p> <p><span class="cls0">(b) if the contract requires delivery at destination, title passes on tender there.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods,&nbsp;</span></p> <p><span class="cls0">(a) if the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or&nbsp;</span></p> <p><span class="cls0">(b) if the goods are at the time of contracting already identified and no documents are to be delivered, title passes at the time and place of contracting.&nbsp;</span></p> <p><span class="cls0">(4) A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance revests title to the goods in the seller. Such revesting occurs by operation of law and is not a &ldquo;sale&rdquo;.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 86, &sect; 2401. Amended by Laws 2005, c. 140, &sect; 46, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2402. Rights of Seller's Creditors Against Sold Goods.&nbsp;</span></p> <p><span class="cls0">(1) Except as provided in subsections (2) and (3), rights of unsecured creditors of the seller with respect to goods which have been identified to a contract for sale are subject to the buyer's rights to recover the goods under this article (Sections 2502 and 2716).&nbsp;</span></p> <p><span class="cls0">(2) A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against him a retention of possession by the seller is fraudulent under any rule of law of the state where the goods are situated, except that retention of possession in good faith and current course of trade by a merchantseller for a commercially reasonable time after a sale or identification is not fraudulent.&nbsp;</span></p> <p><span class="cls0">(3) Nothing this article shall be deemed to impair the rights of creditors of the seller.&nbsp;</span></p> <p><span class="cls0">(a) under the provisions of the article on Secured Transactions (Article 9); or&nbsp;</span></p> <p><span class="cls0">(b) where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this article constitute the transaction a fraudulent transfer or voidable preference.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 87, &sect; 2402. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-403. Power to Transfer; Good Faith Purchase of Goods; "Entrusting".&nbsp;</span></p> <p><span class="cls0">Power to Transfer; Good Faith Purchase of Goods; "Entrusting".&nbsp;</span></p> <p><span class="cls0">(1) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;the transferor was deceived as to the identity of the purchaser, or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;the delivery was in exchange for a check which is later dishonored, or&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;it was agreed that the transaction was to be a "cash sale", or&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;the delivery was procured through fraud punishable as larcenous under the criminal law.&nbsp;</span></p> <p><span class="cls0">(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.&nbsp;</span></p> <p><span class="cls0">(3) "Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.&nbsp;</span></p> <p><span class="cls0">(4) The rights of other purchasers of goods and of lien creditors are governed by the articles on Secured Transactions (Article 9) and Documents of Title (Article 7).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 87, &sect; 2-403. Amended by Laws 1990, c. 273, &sect; 12, eff. Sept. 1, 1990; Laws 1997, c. 112, &sect; 2, eff. Nov. 1, 1997.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2501. Insurable Interest in Goods; Manner of Identification of Goods.&nbsp;</span></p> <p><span class="cls0">(1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming and he has an option to return or reject them. Such identification can be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement identification occurs&nbsp;</span></p> <p><span class="cls0">(a) when the contract is made if it is for the sale of goods already existing and identified;&nbsp;</span></p> <p><span class="cls0">(b) if the contract is for the sale of future goods other than those described in paragraph (c), when goods are shipped, marked or otherwise designated by the seller as goods to which the contract refers;&nbsp;</span></p> <p><span class="cls0">(c) when the crops are planted or otherwise become growing crops or the young are conceived if the contract is for the sale of unborn young to be born within twelve (12) months after contracting or for the Sale of crops to be harvested within twelve (12) months or the next normal harvest season after contracting whichever is longer.&nbsp;</span></p> <p><span class="cls0">(2) The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him and where the identification is by the seller alone he may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.&nbsp;</span></p> <p><span class="cls0">(3) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 88, &sect; 2501. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-502. Buyer's Right to Goods on Seller's Insolvency.&nbsp;</span></p> <p><span class="cls0">Buyer's Right to Goods on Seller's Insolvency.&nbsp;</span></p> <p><span class="cls0">(1) Subject to paragraphs (2) and (3) of this section and even though the goods have not been shipped a buyer who has paid a part or all of the price of goods in which the buyer has a special property under the provisions of Section 2-501 of this title may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:&nbsp;</span></p> <p><span class="cls0">(a) in the case of goods bought for personal, family, or household purposes, the seller repudiates or fails to deliver as required by the contract; or&nbsp;</span></p> <p><span class="cls0">(b) in all cases, the seller becomes insolvent within ten (10) days after receipt of the first installment on their price.&nbsp;</span></p> <p><span class="cls0">(2) The buyer&rsquo;s right to recover the goods under subparagraph (a) of paragraph (1) vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.&nbsp;</span></p> <p><span class="cls0">(3) If the identification creating his special property has been made by the buyer he acquires the right to recover the goods only if they conform to the contract for sale.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 88, &sect; 2-502. Amended by Laws 2000, c. 371, &sect; 151, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2503. Manner of seller's tender of delivery.&nbsp;</span></p> <p><span class="cls0">Manner of Seller's Tender of Delivery.&nbsp;</span></p> <p><span class="cls0">(1) Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable him to take delivery. The manner, time and place for tender are determined by the agreement and this article, and in particular:&nbsp;</span></p> <p><span class="cls0">(a) tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but&nbsp;</span></p> <p><span class="cls0">(b) unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.&nbsp;</span></p> <p><span class="cls0">(2) Where the case is within the next section respecting shipment tender requires that the seller comply with its provisions.&nbsp;</span></p> <p><span class="cls0">(3) Where the seller is required to deliver at a particular destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents as described in subsections (4) and (5) of this section.&nbsp;</span></p> <p><span class="cls0">(4) Where goods are in the possession of a bailee and are to be delivered without being moved.&nbsp;</span></p> <p><span class="cls0">(a) tender requires that the seller either tender a negotiable document of title covering such goods or procure acknowledgment by the bailee of the buyer's right to possession of the goods; but&nbsp;</span></p> <p><span class="cls0">(b) tender to the buyer of a nonnegotiable document of title or of a written direction to the bailee to deliver is sufficient tender unless the buyer seasonably objects, and receipt by the bailee of notification of the buyer's rights fixes those rights as against the bailee and all third persons; but risk of loss of the goods and of any failure by the bailee to honor the nonnegotiable document of title or to obey the direction remains on the seller until the buyer has had a reasonable time to present the document or direction, and a refusal by the bailee to honor the document or to obey the direction defeats the tender.&nbsp;</span></p> <p><span class="cls0">(5) Where the contract requires the seller to deliver documents&nbsp;</span></p> <p><span class="cls0">(a) he must tender all such documents in correct form, except as provided in this article with respect to bills of lading in a set (subsection (2) of Section 2323); and&nbsp;</span></p> <p><span class="cls0">(b) tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 88, &sect; 2503. Amended by Laws 2005, c. 140, &sect; 47, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2504. Shipment by Seller.&nbsp;</span></p> <p><span class="cls0">Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must&nbsp;</span></p> <p><span class="cls0">(a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and&nbsp;</span></p> <p><span class="cls0">(b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and&nbsp;</span></p> <p><span class="cls0">(c) promptly notify the buyer of the shipment. Failure to notify the buyer under paragraph (c) or to make a proper contract under paragraph (a) is a ground for rejection only if material delay or loss ensues.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 89, &sect; 2504. &nbsp;</span></p> <p><span class="cls0">&sect;12A2505. Seller's shipment under reservation.&nbsp;</span></p> <p><span class="cls0">Seller's Shipment Under Reservation.&nbsp;</span></p> <p><span class="cls0">(1) Where the seller has identified goods to the contract by or before shipment:&nbsp;</span></p> <p><span class="cls0">(a) his procurement of a negotiable bill of lading to his own order or otherwise reserves in him a security interest in the goods. His procurement of the bill to the order of a financing agency or of the buyer indicates in addition only the seller's expectation of transferring that interest to the person named.&nbsp;</span></p> <p><span class="cls0">(b) a nonnegotiable bill of lading to himself or his nominee reserves possession of the goods as security but except in a case of conditional delivery (subsection (2) of Section 2507) a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.&nbsp;</span></p> <p><span class="cls0">(2) When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within the preceding section but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller's powers as a holder of a negotiable document of title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 89, &sect; 2505. Amended by Laws 2005, c. 140, &sect; 48, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2506. Rights of financing agency.&nbsp;</span></p> <p><span class="cls0">Rights of Financing Agency.&nbsp;</span></p> <p><span class="cls0">(1) A financing agency by paying or purchasing for value a draft which relates to a shipment of goods acquires to the extent of the payment or purchase and in addition to its own rights under the draft and any document of title securing it any rights of the shipper in the goods including the right to stop delivery and the shipper's right to have the draft honored by the buyer.&nbsp;</span></p> <p><span class="cls0">(2) The right to reimbursement of a financing agency which has in good faith honored or purchased the draft under commitment to or authority from the buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 90, &sect; 2506. Amended by Laws 2005, c. 140, &sect; 49, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2507. Effect of Seller's Tender; Delivery on Condition.&nbsp;</span></p> <p><span class="cls0">1) Tender of delivery is a condition to the buyer's duty to accept the goods and, unless otherwise agreed, to his duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.&nbsp;</span></p> <p><span class="cls0">(2) Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 90, &sect; 2507. &nbsp;</span></p> <p><span class="cls0">&sect;12A2508. Cure by Seller of Improper Tender or Delivery; Replacement.&nbsp;</span></p> <p><span class="cls0">(1) Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may seasonably notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.&nbsp;</span></p> <p><span class="cls0">(2) Where the buyer rejects a nonconforming tender which the seller had reasonable grounds to believe would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 90, &sect; 2508. &nbsp;</span></p> <p><span class="cls0">&sect;12A2509. Risk of loss in the absence of breach.&nbsp;</span></p> <p><span class="cls0">Risk of Loss in the Absence of Breach.&nbsp;</span></p> <p><span class="cls0">(1) Where the contract requires or authorizes the seller to ship the goods by carrier:&nbsp;</span></p> <p><span class="cls0">(a) if it does not require him to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier even though the shipment is under reservation (Section 2505); but&nbsp;</span></p> <p><span class="cls0">(b) if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.&nbsp;</span></p> <p><span class="cls0">(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:&nbsp;</span></p> <p><span class="cls0">(a) on his receipt of a negotiable document of title covering the goods; or&nbsp;</span></p> <p><span class="cls0">(b) on acknowledgment by the bailee of the buyer's right to possession of the goods; or&nbsp;</span></p> <p><span class="cls0">(c) after his receipt of possession or control of a nonnegotiable document of title or other direction to deliver in a record, as provided in subsection (4) (b) of Section 2503.&nbsp;</span></p> <p><span class="cls0">(3) In any case not within subsection (1) or (2), the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.&nbsp;</span></p> <p><span class="cls0">(4) The provisions of this section are subject to contrary agreement of the parties and to the provisions of this article on sale on approval (Section 2327) and on effect of breach on risk of loss (Section 2510).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 90, &sect; 2509. Amended by Laws 2005, c. 140, &sect; 50, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2510. Effect of Breach on Risk of Loss.&nbsp;</span></p> <p><span class="cls0">(1) Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.&nbsp;</span></p> <p><span class="cls0">(2) Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.&nbsp;</span></p> <p><span class="cls0">(3) Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 90, &sect; 2510. &nbsp;</span></p> <p><span class="cls0">&sect;12A2511. Tender of Payment by Buyer; Payment by Check.&nbsp;</span></p> <p><span class="cls0">Tender of Payment by Buyer; Payment by Check.&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery.&nbsp;</span></p> <p><span class="cls0">(2) Tender of payment is sufficient when made by any means or in any manner current in the ordinary course of business unless the seller demands payment in legal tender and gives any extension of time reasonably necessary to procure it.&nbsp;</span></p> <p><span class="cls0">(3) Subject to the provisions of this act on the effect of an instrument on an obligation (Section 3-310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 91, &sect; 2511; Laws 1994, c. 46, &sect; 3, eff. Sept. 1, 1994.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-2-512. Payment by Buyer Before Inspection.&nbsp;</span></p> <p><span class="cls0">Payment by Buyer Before Inspection.&nbsp;</span></p> <p><span class="cls0">(1) Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;the nonconformity appears without inspection; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;despite tender of the required documents the circumstances would justify injunction against honor under the provisions of this act (subsection (b) of Section 5-109 of this title).&nbsp;</span></p> <p><span class="cls0">(2) Payment pursuant to subsection (1) of this section does not constitute an acceptance of goods or impair the buyer's right to inspect or any of his remedies.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 91, &sect; 2-512. Amended by Laws 1996, c. 56, &sect; 20, eff. Jan. 1, 1997.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2513. Buyer's Right to Inspection of Goods.&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise agreed and subject to subsection (3), where goods are tendered or delivered or identified to the contract for sale, the buyer has a right before payment or acceptance to inspect them at any reasonable place and time and in any reasonable manner. When the seller is required or authorized to send the goods to the buyer, the inspection may be after their arrival.&nbsp;</span></p> <p><span class="cls0">(2) Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.&nbsp;</span></p> <p><span class="cls0">(3) Unless otherwise agreed and subject to the provisions of this article on C.I.F. contracts (subsection (3) of Section 2321), the buyer is not entitled to inspect the goods before payment of the price when the contract provides&nbsp;</span></p> <p><span class="cls0">(a) for delivery "C.O.D." or on other like terms; or&nbsp;</span></p> <p><span class="cls0">(b) for payment against documents of title, except where such payment is due only after the goods are to become available for inspection.&nbsp;</span></p> <p><span class="cls0">(4) A place or method of inspection fixed by the parties is presumed to be exclusive but unless otherwise expressly agreed it does not postpone identification or shift the place for delivery or for passing the risk of loss. If compliance becomes impossible, inspection shall be as provided in this section unless the place or method fixed was clearly intended as an indispensable condition failure of which avoids the contract.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 91, &sect; 2513. &nbsp;</span></p> <p><span class="cls0">&sect;12A2514. When Documents Deliverable on Acceptance; When on Payment.&nbsp;</span></p> <p><span class="cls0">Unless otherwise agreed documents against which a draft is drawn are to be delivered to the drawee on acceptance of the draft if it is payable more than three (3) days after presentment; otherwise, only on payment.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 91, &sect; 2514. &nbsp;</span></p> <p><span class="cls0">&sect;12A2515. Preserving Evidence of Goods in Dispute.&nbsp;</span></p> <p><span class="cls0">In furtherance of the adjustment of any claim or dispute&nbsp;</span></p> <p><span class="cls0">(a) either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect, test and sample the goods including such of them as may be in the possession or control of the other; and&nbsp;</span></p> <p><span class="cls0">(b) the parties may agree to a third party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 91, &sect; 2515. &nbsp;</span></p> <p><span class="cls0">&sect;12A2601. Buyer's Rights on Improper Delivery.&nbsp;</span></p> <p><span class="cls0">Subject to the provisions of this article on breach in installment contracts (Section 2612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2718 and 2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may&nbsp;</span></p> <p><span class="cls0">(a) reject the whole; or&nbsp;</span></p> <p><span class="cls0">(b) accept the whole; or&nbsp;</span></p> <p><span class="cls0">(c) accept any commercial unit or units and reject the rest.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 92, &sect; 2601. &nbsp;</span></p> <p><span class="cls0">&sect;12A2602. Manner and Effect of Rightful Rejection.&nbsp;</span></p> <p><span class="cls0">(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.&nbsp;</span></p> <p><span class="cls0">(2) Subject to the provisions of the two following sections on rejected goods (Section 2603 and 2604),&nbsp;</span></p> <p><span class="cls0">(a) after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and&nbsp;</span></p> <p><span class="cls0">(b) if the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this article (subsection (3) of Section 2711), he is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them; but&nbsp;</span></p> <p><span class="cls0">(c) the buyer has no further obligations with regard to goods rightfully rejected.&nbsp;</span></p> <p><span class="cls0">(3) The seller's rights with respect to goods wrongfully rejected are governed by the provisions of this article on Seller's remedies in general (Section 2703).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 92, &sect; 2602. &nbsp;</span></p> <p><span class="cls0">&sect;12A2603. Merchant Buyer's Duties as to Rightfully Rejected Goods.&nbsp;</span></p> <p><span class="cls0">(1) Subject to any security interest in the buyer (subsection (3) of Section 2711), when the seller has no agent or place of business at the market of rejection a merchant buyer is under a duty after rejection of goods in his possession or control to follow any reasonable instructions received from the seller with respect to the goods and in the absence of such instructions to make reasonable efforts to sell them for the seller's account if they are perishable or threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.&nbsp;</span></p> <p><span class="cls0">(2) When the buyer sells goods under subsection (1), he is entitled to reimbursement from the seller or out of the proceeds for reasonable expenses of caring for and selling them, and if the expenses include no selling commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding ten percent (10%) on the gross proceeds.&nbsp;</span></p> <p><span class="cls0">(3) In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 92, &sect; 2603. &nbsp;</span></p> <p><span class="cls0">&sect;12A2604. Buyer's Options as to Salvage of Rightfully Rejected Goods.&nbsp;</span></p> <p><span class="cls0">Subject to the provisions of the immediately preceding section on perishables if the seller gives on instructions within a reasonable time after notification of rejection the buyer may store the rejected goods for the seller's account or reship them to him or resell them for the seller's account with reimbursement as provided in the preceding section. Such action is not acceptance or conversion.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 92, &sect; 2604. d&nbsp;</span></p> <p><span class="cls0">&sect;12A2605. Waiver of buyer's objections by failure to particularize.&nbsp;</span></p> <p><span class="cls0">Waiver of Buyer's Objections by Failure to Particularize.&nbsp;</span></p> <p><span class="cls0">(1) The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him from relying on the unstated defect to justify rejection or to establish breach:&nbsp;</span></p> <p><span class="cls0">(a) where the seller could have cured it if stated seasonably; or&nbsp;</span></p> <p><span class="cls0">(b) between merchants when the seller has after rejection made a request in writing for a full and final written statement of all defects on which the buyer proposes to rely.&nbsp;</span></p> <p><span class="cls0">(2) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 92, &sect; 2605. Amended by Laws 2005, c. 140, &sect; 51, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-2-606. What Constitutes Acceptance of Goods.&nbsp;</span></p> <p><span class="cls0">(1) Acceptance of goods occurs when the buyer&nbsp;</span></p> <p class="cls3"><span class="cls0">(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b) fails to make an effective rejection (subsection (1) of Section 2-602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.&nbsp;</span></p> <p><span class="cls0">(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 93, &sect; 2-606.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-2-607. Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice of Claim or Litigation to Person Answerable Over.&nbsp;</span></p> <p><span class="cls0">(1) The buyer must pay at the contract rate for any goods accepted.&nbsp;</span></p> <p><span class="cls0">(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this article for nonconformity.&nbsp;</span></p> <p><span class="cls0">(3) Where a tender has been accepted&nbsp;</span></p> <p class="cls3"><span class="cls0">(a) the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the litigation or be barred from any remedy over for liability established by the litigation.&nbsp;</span></p> <p><span class="cls0">(4) The burden is on the buyer to establish any breach with respect to the goods accepted.&nbsp;</span></p> <p><span class="cls0">(5) Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over&nbsp;</span></p> <p class="cls3"><span class="cls0">(a) he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.&nbsp;</span></p> <p class="cls3"><span class="cls0">(b) if the claim is one for infringement or the like (subsection (3) of Section 2-312) the original seller may demand in writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.&nbsp;</span></p> <p><span class="cls0">(6) The provisions of subsections (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subsection (3) (b) of Section 2-312).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 93, &sect; 2-607.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2608. Revocation of Acceptance in Whole or in Part.&nbsp;</span></p> <p><span class="cls0">(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it&nbsp;</span></p> <p><span class="cls0">(a) on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or&nbsp;</span></p> <p><span class="cls0">(b) without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.&nbsp;</span></p> <p><span class="cls0">(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.&nbsp;</span></p> <p><span class="cls0">(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 93, &sect; 2608. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-609. Right to Adequate Assurance of Performance.&nbsp;</span></p> <p><span class="cls0">(1) A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.&nbsp;</span></p> <p><span class="cls0">(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.&nbsp;</span></p> <p><span class="cls0">(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.&nbsp;</span></p> <p><span class="cls0">(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty (30) days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1961, p. 94, &sect; 2-609.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2610. Anticipatory Repudiation.&nbsp;</span></p> <p><span class="cls0">When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may&nbsp;</span></p> <p><span class="cls0">(a) for a commercially reasonable time await performance by the repudiating party; or&nbsp;</span></p> <p><span class="cls0">(b) resort to any remedy for breach (Section 2703 or Section 2711), even though he has notified the repudiating party that he would await the latter's performance and has urged retraction; and&nbsp;</span></p> <p><span class="cls0">(c) in either case suspend his own performance or proceed in accordance with the provisions of this article on the seller's right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (Section 2704).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 94, &sect; 2610. &nbsp;</span></p> <p><span class="cls0">&sect;12A2611. Retraction of Anticipatory Repudiation.&nbsp;</span></p> <p><span class="cls0">(1) Until the repudiating party's next performance is due he can retract his repudiation unless the aggrieved party has since the repudiation cancelled or materially changed his position or otherwise indicated that he considers the repudiation final.&nbsp;</span></p> <p><span class="cls0">(2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform, but must include any assurance justifiably demanded under the provisions of this article (Section 2609).&nbsp;</span></p> <p><span class="cls0">(3) Retraction reinstates the repudiating party's rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 94, &sect; 2611. &nbsp;</span></p> <p><span class="cls0">&sect;12A2612. "Installment Contract"; Breach.&nbsp;</span></p> <p><span class="cls0">(1) An "installment contract" is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause "each delivery is a separate contract" or its equivalent.&nbsp;</span></p> <p><span class="cls0">(2) The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.&nbsp;</span></p> <p><span class="cls0">(3) Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 94, &sect; 2612. &nbsp;</span></p> <p><span class="cls0">&sect;12A2613. Casualty to Identified Goods.&nbsp;</span></p> <p><span class="cls0">Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer, or in a proper case under a "no arrival, no sale" term (Section 2324) then&nbsp;</span></p> <p><span class="cls0">(a) if the loss is total the contract is avoided; and&nbsp;</span></p> <p><span class="cls0">(b) if the loss is partial or the goods have so deteriorated as no longer to conform to the contract the buyer may nevertheless demand inspection and at his option either treat the contract as avoided or accept the goods with due allowance from the contract price for the deterioration or the deficiency in quantity but without further right against the seller.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 95, &sect; 2613. &nbsp;</span></p> <p><span class="cls0">&sect;12A2614. Substituted Performance.&nbsp;</span></p> <p><span class="cls0">(1) Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable but a commercially reasonable substitute is available, such substitute performance must be tendered and accepted.&nbsp;</span></p> <p><span class="cls0">(2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer's obligation unless the regulation is discriminatory, oppressive or predatory.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 95, &sect; 2614. d&nbsp;</span></p> <p><span class="cls0">&sect;12A2615. Excuse by Failure of Presupposed Conditions.&nbsp;</span></p> <p><span class="cls0">Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:&nbsp;</span></p> <p><span class="cls0">(a) Delay in delivery on nondelivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.&nbsp;</span></p> <p><span class="cls0">(b) Where the clauses mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.&nbsp;</span></p> <p><span class="cls0">(c) The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 95, &sect; 2615. &nbsp;</span></p> <p><span class="cls0">&sect;12A2616. Procedure on Notice Claiming Excuse.&nbsp;</span></p> <p><span class="cls0">(1) Where the buyer receives notification of a material or indefinite delay or an allocation justified under the preceding section he may by written notification to the seller as to any delivery concerned, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this article relating to breach of installment contracts (Section 2612), then also as to the whole,&nbsp;</span></p> <p><span class="cls0">(a) terminate and thereby discharge any unexecuted portion of the contract; or&nbsp;</span></p> <p><span class="cls0">(b) modify the contract by agreeing to take his available quota in substitution.&nbsp;</span></p> <p><span class="cls0">(2) If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding thirty (30) days the contract lapses with respect to any deliveries affected.&nbsp;</span></p> <p><span class="cls0">(3) The provisions of this section may not be negated by agreement except in so far as the seller has assumed a greater obligation under the preceding section.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 95, &sect; 2616. &nbsp;</span></p> <p><span class="cls0">&sect;12A2701. Remedies for Breach of Collateral Contracts Not Impaired.&nbsp;</span></p> <p><span class="cls0">Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this article.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 96, &sect; 2701. &nbsp;</span></p> <p><span class="cls0">&sect;12A2702. Seller's Remedies on Discovery of Buyer's Insolvency.&nbsp;</span></p> <p><span class="cls0">(1) Where the seller discovers the buyer to be insolvent he may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this article (Section 2705).&nbsp;</span></p> <p><span class="cls0">(2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within ten (10) days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three (3) months before delivery the tenday limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer's fraudulent or innocent misrepresentation of solvency or of intent to pay.&nbsp;</span></p> <p><span class="cls0">(3) The seller's right to reclaim under subsection (2) is subject to the rights of a buyer in ordinary course or other good faith purchaser under this article (Section 2403). Successful reclamation of goods excludes all other remedies with respect to them.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 96, &sect; 2702; Laws 1970, c. 246, &sect; 1. &nbsp;</span></p> <p><span class="cls0">&sect;12A2703. Seller's Remedies in General.&nbsp;</span></p> <p><span class="cls0">Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (Section 2 612), then also with respect to the whole undelivered balance, the aggrieved seller may&nbsp;</span></p> <p><span class="cls0">(a) withhold delivery of such goods;&nbsp;</span></p> <p><span class="cls0">(b) stop delivery by any bailee as hereafter provided (Section 2705);&nbsp;</span></p> <p><span class="cls0">(c) proceed under the next section respecting goods still unidentified to the contract;&nbsp;</span></p> <p><span class="cls0">(d) resell and recover damages as hereafter provided (Section 2706);&nbsp;</span></p> <p><span class="cls0">(e) recover damages for nonacceptance (Section 2708) or in a proper case the price (Section 2709);&nbsp;</span></p> <p><span class="cls0">(f) cancel.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 96, &sect; 2703. &nbsp;</span></p> <p><span class="cls0">&sect;12A2704. Seller's Right to Identify Goods to the Contract Notwithstanding Breach or to Salvage Unfinished Goods.&nbsp;</span></p> <p><span class="cls0">(1) An aggrieved seller under the preceding section may&nbsp;</span></p> <p><span class="cls0">(a) identify to the contract conforming goods not already identified if at the time he learned of the breach they are in his possession or control;&nbsp;</span></p> <p><span class="cls0">(b) treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.&nbsp;</span></p> <p><span class="cls0">(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 96, &sect; 2704. &nbsp;</span></p> <p><span class="cls0">&sect;12A2705. Seller's stoppage of delivery in transit or otherwise.&nbsp;</span></p> <p><span class="cls0">Seller's Stoppage of Delivery in Transit or Otherwise.&nbsp;</span></p> <p><span class="cls0">(1) The seller may stop delivery of goods in the possession of a carrier or other bailee when he discovers the buyer to be insolvent (Section 2702) and may stop delivery of carload, truckload, planeload or larger shipments of express or freight when the buyer repudiates or fails to make a payment due before delivery or if for any other reason the seller has a right to withhold or reclaim the goods.&nbsp;</span></p> <p><span class="cls0">(2) As against such buyer the seller may stop delivery until&nbsp;</span></p> <p><span class="cls0">(a) receipt of the goods by the buyer; or&nbsp;</span></p> <p><span class="cls0">(b) acknowledgement to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or&nbsp;</span></p> <p><span class="cls0">(c) such acknowledgment to the buyer by a carrier by reshipment or as a warehouse; or&nbsp;</span></p> <p><span class="cls0">(d) negotiation to the buyer of any negotiable document of title covering the goods.&nbsp;</span></p> <p><span class="cls0">(3) (a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.&nbsp;</span></p> <p><span class="cls0">(b) After such notification the bailee must hold and deliver the goods according to the directions of the seller but the seller is liable to the bailee for any ensuing charges or damages.&nbsp;</span></p> <p><span class="cls0">(c) If a negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.&nbsp;</span></p> <p><span class="cls0">(d) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 96, &sect; 2705. Amended by Laws 2005, c. 140, &sect; 52, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2706. Seller's Resale Including Contract for Resale.&nbsp;</span></p> <p><span class="cls0">(1) Under the conditions stated in Section 2703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this article (Section 2710), but less expenses saved in consequence of the buyer's breach.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.&nbsp;</span></p> <p><span class="cls0">(3) Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.&nbsp;</span></p> <p><span class="cls0">(4) Where the resale is at public sale&nbsp;</span></p> <p><span class="cls0">(a) only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and&nbsp;</span></p> <p><span class="cls0">(b) it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and&nbsp;</span></p> <p><span class="cls0">(c) if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and&nbsp;</span></p> <p><span class="cls0">(d) the seller may buy.&nbsp;</span></p> <p><span class="cls0">(5) A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.&nbsp;</span></p> <p><span class="cls0">(6) The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (Section 2707) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined (subsection (3) of Section 2711).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 97, &sect; 2706. &nbsp;</span></p> <p><span class="cls0">&sect;12A2707. "Person in the Position of a Seller".&nbsp;</span></p> <p><span class="cls0">(1) A "person in the position of a seller" includes as against a principal an agent who has paid or become responsible for the price of goods on behalf of his principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.&nbsp;</span></p> <p><span class="cls0">(2) A person in the position of a seller may as provided in this article withhold or stop delivery (Section 2705) and resell (Section 2706) and recover incidental damages (Section 2710).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 98, &sect; 2707. &nbsp;</span></p> <p><span class="cls0">&sect;12A2708. Seller's Damages for Nonacceptance or Repudiation.&nbsp;</span></p> <p><span class="cls0">(1) Subject to subsection (2) and to the provisions of this article with respect to proof of market price (Section 2723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this article (Section 2710), but less expenses saved in consequence of the buyer's breach.&nbsp;</span></p> <p><span class="cls0">(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this article (Section 2710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 98, &sect; 2708.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2709. Action for the Price.&nbsp;</span></p> <p><span class="cls0">(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price&nbsp;</span></p> <p><span class="cls0">(a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and&nbsp;</span></p> <p><span class="cls0">(b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.&nbsp;</span></p> <p><span class="cls0">(2) Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and the payment of the judgment entitles him to any goods not resold.&nbsp;</span></p> <p><span class="cls0">(3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (Section 2610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under the preceding section.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 98, &sect; 2709. &nbsp;</span></p> <p><span class="cls0">&sect;12A2710. Seller's Incidental Damages.&nbsp;</span></p> <p><span class="cls0">Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 98, &sect; 2710. &nbsp;</span></p> <p><span class="cls0">&sect;12A2711. Buyer's Remedies in General; Buyer's Security Interest in Rejected Goods.&nbsp;</span></p> <p><span class="cls0">(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Section 2612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid&nbsp;</span></p> <p><span class="cls0">(a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or&nbsp;</span></p> <p><span class="cls0">(b) recover damages for nondelivery as provided in this article (Section 2713).&nbsp;</span></p> <p><span class="cls0">(2) Where the seller fails to deliver or repudiates the buyer may also&nbsp;</span></p> <p><span class="cls0">(a) if the goods have been identified recover them as provided in this article (Section 2502); or&nbsp;</span></p> <p><span class="cls0">(b) in a proper case obtain specific performance or replevy the goods as provided in this article (Section 2716).&nbsp;</span></p> <p><span class="cls0">(3) On rightful rejection or justifiable revocation of acceptance of buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller (Section 2706).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 98, &sect; 2711. &nbsp;</span></p> <p><span class="cls0">&sect;12A2712. "Cover"; Buyer's Procurement of Substitute Goods.&nbsp;</span></p> <p><span class="cls0">(1) After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.&nbsp;</span></p> <p><span class="cls0">(2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2715), but less expenses saved in consequence of the seller's breach.&nbsp;</span></p> <p><span class="cls0">(3) Failure of the buyer to effect cover within this section does not bar him from any other remedy.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 99, &sect; 2712. &nbsp;</span></p> <p><span class="cls0">&sect;12A2713. Buyer's Damages for Nondelivery or Repudiation.&nbsp;</span></p> <p><span class="cls0">(1) Subject to the provisions of this article with respect to proof of market price (Section 2723), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this article (Section 2715), but less expenses saved in consequence of the seller's breach.&nbsp;</span></p> <p><span class="cls0">(2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 99, &sect; 2713. &nbsp;</span></p> <p><span class="cls0">&sect;12A2714. Buyer's Damages for Breach in Regard to Accepted Goods.&nbsp;</span></p> <p><span class="cls0">(1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2607) he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.&nbsp;</span></p> <p><span class="cls0">(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.&nbsp;</span></p> <p><span class="cls0">(3) In a proper case any incidental and consequential damages under the next section may also be recovered.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 99, &sect; 2714. &nbsp;</span></p> <p><span class="cls0">&sect;12A2715. Buyer's Incidental and Consequential Damages.&nbsp;</span></p> <p><span class="cls0">(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.&nbsp;</span></p> <p><span class="cls0">(2) Consequential damages resulting from the seller's breach include&nbsp;</span></p> <p><span class="cls0">(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and&nbsp;</span></p> <p><span class="cls0">(b) injury to person or property proximately resulting from any breach of warranty.&nbsp;</span></p> <p><span class="cls0">Laws 1961 P. 99, Sec. 2715.&nbsp;</span></p> <p><span class="cls0">&sect;12A-2-716. Buyer's Right to Specific Performance or Replevin.&nbsp;</span></p> <p><span class="cls0">Buyer's Right to Specific Performance or Replevin.&nbsp;</span></p> <p><span class="cls0">(1) Specific performance may be decreed where the goods are unique or in other proper circumstances.&nbsp;</span></p> <p><span class="cls0">(2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.&nbsp;</span></p> <p><span class="cls0">(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer&rsquo;s right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 99, &sect; 2-716. Amended by Laws 2000, c. 371, &sect; 152, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2717. Deduction of Damages From the Price.&nbsp;</span></p> <p><span class="cls0">The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 100, &sect; 2717. &nbsp;</span></p> <p><span class="cls0">&sect;12A2718. Liquidation or Limitation of Damages; Deposits.&nbsp;</span></p> <p><span class="cls0">(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.&nbsp;</span></p> <p><span class="cls0">(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds&nbsp;</span></p> <p><span class="cls0">(a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or&nbsp;</span></p> <p><span class="cls0">(b) in the absence of such terms, twenty percent (20%) of the value of the total performance for which the buyer is obligated under the contract or Five Hundred Dollars ($500.00), whichever is smaller.&nbsp;</span></p> <p><span class="cls0">(3) The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes&nbsp;</span></p> <p><span class="cls0">(a) a right to recover damages under the provisions of this article other than subsection (1), and&nbsp;</span></p> <p><span class="cls0">(b) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.&nbsp;</span></p> <p><span class="cls0">(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this article on resale by an aggrieved seller (Section 2706).&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 100, &sect; 2718. &nbsp;</span></p> <p><span class="cls0">&sect;12A2719. Contractual Modification or Limitation of Remedy.&nbsp;</span></p> <p><span class="cls0">(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,&nbsp;</span></p> <p><span class="cls0">(a) the agreement may provide for remedies in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and&nbsp;</span></p> <p><span class="cls0">(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.&nbsp;</span></p> <p><span class="cls0">(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this act.&nbsp;</span></p> <p><span class="cls0">(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 100, &sect; 2719. &nbsp;</span></p> <p><span class="cls0">&sect;12A2720. Effect of "Cancellation" or "Rescission" on Claims for Antecedent Breach.&nbsp;</span></p> <p><span class="cls0">Unless the contrary intention clearly appears, expressions of "cancellation" or "rescission" of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 100, &sect; 2720. d&nbsp;</span></p> <p><span class="cls0">&sect;12A2721. Remedies for Fraud.&nbsp;</span></p> <p><span class="cls0">Remedies for material misrepresentation or fraud include all remedies available under this article for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 100, &sect; 2721. &nbsp;</span></p> <p><span class="cls0">&sect;12A2722. Who Can Sue Third Parties for Injury to Goods.&nbsp;</span></p> <p><span class="cls0">Where a third party so deals with goods which have been identified to a contract for sale as to cause actionable injury to a party to that contract&nbsp;</span></p> <p><span class="cls0">(a) a right of action against the third party is in either party to the contract for sale who has title to or a security interest or a special property or an insurable interest in the goods; and if the goods have been destroyed or converted a right of action is also in the party who either bore the risk of loss under the contract for sale or has since the injury assumed that risk as against the other;&nbsp;</span></p> <p><span class="cls0">(b) if at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the contract for sale and there is no arrangement between them for disposition of the recovery, his suit or settlement is, subject to his own interest, as a fiduciary for the other party to the contract;&nbsp;</span></p> <p><span class="cls0">(c) either party may with the consent of the other sue for the benefit of whom it may concern.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 101, &sect; 2722. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2-723. Proof of Market Price: Time and Place.&nbsp;</span></p> <p><span class="cls0">(1) If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price (Section 2-708 or Section 2-713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.&nbsp;</span></p> <p><span class="cls0">(2) If evidence of a price prevailing at the times or places described in this article is not readily available the price prevailing within any reasonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.&nbsp;</span></p> <p><span class="cls0">(3) Evidence of a relevant price prevailing at a time or place other than the one described in this article offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 101, &sect; 2-723.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2724. Admissibility of Market Quotations.&nbsp;</span></p> <p><span class="cls0">Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report, may be shown to affect its weight but not its admissibility.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 101, &sect; 2724. &nbsp;</span></p> <p><span class="cls0">&sect;12A2725. Statute of Limitations in Contracts for Sale.&nbsp;</span></p> <p><span class="cls0">(1) An action for breach of any contract for sale must be commenced within five (5) years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one (1) year but may not extend it.&nbsp;</span></p> <p><span class="cls0">(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.&nbsp;</span></p> <p><span class="cls0">(3) Where an action commenced within the time limited by subsection (1) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within one (1) year after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.&nbsp;</span></p> <p><span class="cls0">(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this act becomes effective.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 101, &sect; 2725. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-101. Short title.&nbsp;</span></p> <p><span class="cls0">This article shall be known and may be cited as the Uniform Commercial Code &ndash; Leases.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 1, eff. Nov. 1, 1988.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A102. Scope.&nbsp;</span></p> <p class="cls1"><span class="cls0">SCOPE&nbsp;</span></p> <p><span class="cls0">This article applies to any transaction, regardless of form, that creates a lease of goods.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 2, eff. Nov. 1, 1988. 8&nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-103. Definitions and Index of Definitions.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFINITIONS AND INDEX OF DEFINITIONS&nbsp;</span></p> <p><span class="cls0">(1) In this article unless the context otherwise requires:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;&ldquo;Buyer in the ordinary course of business&rdquo; means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in the ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. &ldquo;Buying&rdquo; may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;&ldquo;Cancellation&rdquo; occurs when either party puts an end to the lease contract for default by the other party.&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;&ldquo;Commercial unit&rdquo; means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole.&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;&ldquo;Conforming&rdquo; goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.&nbsp;</span></p> <p class="cls3"><span class="cls0">(e)&nbsp;&nbsp;&ldquo;Consumer lease&rdquo; means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed Forty-five Thousand Dollars ($45,000.00).&nbsp;</span></p> <p class="cls3"><span class="cls0">(f)&nbsp;&nbsp;&ldquo;Fault&rdquo; means wrongful act, omission, breach, or default.&nbsp;</span></p> <p class="cls3"><span class="cls0">(g)&nbsp;&nbsp;&ldquo;Finance lease&rdquo; means a lease with respect to which:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;the lessor does not select, manufacture or supply the goods;&nbsp;</span></p> <p class="cls4"><span class="cls0">(ii)&nbsp;&nbsp;the lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and&nbsp;</span></p> <p class="cls4"><span class="cls0">(iii)&nbsp;&nbsp;one of the following occurs:&nbsp;</span></p> <p class="cls5"><span class="cls0">(A)&nbsp;&nbsp;the lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;&nbsp;</span></p> <p class="cls5"><span class="cls0">(B)&nbsp;&nbsp;the lessee's approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;&nbsp;</span></p> <p class="cls5"><span class="cls0">(C)&nbsp;&nbsp;the lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or&nbsp;</span></p> <p class="cls5"><span class="cls0">(D)&nbsp;&nbsp;if the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing (a) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (b) that the lessee is entitled under this article to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (c) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.&nbsp;</span></p> <p class="cls3"><span class="cls0">(h)&nbsp;&nbsp;&ldquo;Goods&rdquo; means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 2A-309 of this title). The term includes future goods, specially manufactured goods, and the unborn young of animals. The term does not include information, the money in which the price is to be paid, investment securities under Article 8 of the Uniform Commercial Code, minerals or the like, including oil and gas, before extraction, or choses in action.&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;&ldquo;Installment lease contract&rdquo; means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause &ldquo;each delivery is a separate lease&rdquo; or its equivalent.&nbsp;</span></p> <p class="cls3"><span class="cls0">(j)&nbsp;&nbsp;&ldquo;Lease&rdquo; means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest or license of information is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease.&nbsp;</span></p> <p class="cls3"><span class="cls0">(k)&nbsp;&nbsp;&ldquo;Lease agreement&rdquo; means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing of usage of trade or course of performance as provided in this article. Unless the context clearly indicates otherwise, the term includes a sublease agreement.&nbsp;</span></p> <p class="cls3"><span class="cls0">(l)&nbsp;&nbsp;&ldquo;Lease contract&rdquo; means the total legal obligation that results from the lease agreement as affected by this article and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.&nbsp;</span></p> <p class="cls3"><span class="cls0">(m)&nbsp;&nbsp;&ldquo;Leasehold interest&rdquo; means the interest of the lessor or the lessee under a lease contract.&nbsp;</span></p> <p class="cls3"><span class="cls0">(n)&nbsp;&nbsp;&ldquo;Lessee&rdquo; means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee.&nbsp;</span></p> <p class="cls3"><span class="cls0">(o)&nbsp;&nbsp;&ldquo;Lessee in the ordinary course of business&rdquo; means a person who in good faith and without knowledge that the lease to him is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in the ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. &ldquo;Leasing&rdquo; may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.&nbsp;</span></p> <p class="cls3"><span class="cls0">(p)&nbsp;&nbsp;&ldquo;Lessor&rdquo; means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.&nbsp;</span></p> <p class="cls3"><span class="cls0">(q)&nbsp;&nbsp;&ldquo;Lessor's residual interest&rdquo; means the lessor's interest in the goods after expiration, termination, or cancellation of the lease contract.&nbsp;</span></p> <p class="cls3"><span class="cls0">(r)&nbsp;&nbsp;&ldquo;Lien&rdquo; means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.&nbsp;</span></p> <p class="cls3"><span class="cls0">(s)&nbsp;&nbsp;&ldquo;Lot&rdquo; means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.&nbsp;</span></p> <p class="cls3"><span class="cls0">(t)&nbsp;&nbsp;&ldquo;Merchant lessee&rdquo; means a lessee that is a merchant with respect to goods of the kind subject to the lease.&nbsp;</span></p> <p class="cls3"><span class="cls0">(u)&nbsp;&nbsp;&ldquo;Present value&rdquo; 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 was not manifestly unreasonable at the time the transaction was 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.&nbsp;</span></p> <p class="cls3"><span class="cls0">(v)&nbsp;&nbsp;&ldquo;Purchase&rdquo; includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods.&nbsp;</span></p> <p class="cls3"><span class="cls0">(w)&nbsp;&nbsp;&ldquo;Sublease&rdquo; means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.&nbsp;</span></p> <p class="cls3"><span class="cls0">(x)&nbsp;&nbsp;&ldquo;Supplier&rdquo; means a person from whom a lessor buys or leases goods to be leased under a finance lease.&nbsp;</span></p> <p class="cls3"><span class="cls0">(y)&nbsp;&nbsp;&ldquo;Supply contract&rdquo; means a contract under which a lessor buys or leases goods to be leased.&nbsp;</span></p> <p class="cls3"><span class="cls0">(z)&nbsp;&nbsp;&ldquo;Termination&rdquo; occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.&nbsp;</span></p> <p><span class="cls0">(2) Other definitions applying to this article and the sections in which they appear are:&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Accessions&rdquo;. Subsection (1) of Section 2A-310 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Construction mortgage&rdquo;. Paragraph (d) of subsection (1) of Section 2A-309 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Encumbrance&rdquo;. Paragraph (e) of subsection (1) of Section 2A-309 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Fixtures&rdquo;. Paragraph (a) of subsection (1) of Section 2A-309 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Fixture filing&rdquo;. Paragraph (b) of subsection (1) of Section 2A-309 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Purchase money lease&rdquo;. Paragraph (c) of subsection (1) of Section 2A-309 of this title.&nbsp;</span></p> <p><span class="cls0">(3) The following definitions in other articles apply to this article:&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Account&rdquo;. Paragraph (2) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Between merchants&rdquo;. Subsection (3) of Section 2-104 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Buyer&rdquo;. Paragraph (a) of subsection (1) of Section 2-103 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Chattel paper&rdquo;. Paragraph (11) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Consumer goods&rdquo;. Paragraph (23) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Document&rdquo;. Paragraph (30) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Entrusting&rdquo;. Paragraph (3) of Section 2-403 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;General intangible&rdquo;. Paragraph (42) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Instrument&rdquo;. Paragraph (47) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Merchant&rdquo;. Subsection (1) of Section 2-104 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Mortgage&rdquo;. Paragraph (55) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Pursuant to commitment&rdquo;. Paragraph (68) of subsection (a) of Section 19102 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Receipt&rdquo;. Subsection (c) of paragraph (1) of Section 2-103 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Sale&rdquo;. Paragraph (1) of Section 2-106 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Sale on approval&rdquo;. Section 2-326 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Sale or return&rdquo;. Section 2-326 of this title.&nbsp;</span></p> <p class="cls6"><span class="cls0">&ldquo;Seller&rdquo;. Subparagraph (d) of paragraph (1) of Section 2-103 of this title.&nbsp;</span></p> <p><span class="cls0">(4) In addition, Article 1 of this title, contains general definitions and principles of construction and interpretation applicable throughout this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 3, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 3, eff. Jan. 1, 1992; Laws 2000, c. 371, &sect; 153, eff. July 1, 2001; Laws 2005, c. 140, &sect; 53, eff. Jan. 1, 2006; Laws 2005, c. 473, &sect; 2, emerg. eff. June 9, 2005.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2005, c. 139, &sect; 28 repealed by Laws 2005, c. 473, &sect; 3, emerg. eff. June 9, 2005.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2A104. Leases Subject to Other Law.&nbsp;</span></p> <p class="cls1"><span class="cls0">LEASES SUBJECT TO OTHER LAW&nbsp;</span></p> <p><span class="cls0">(1) A lease, although subject to this article, is also subject to any applicable:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;certificate of title statute of this state;&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;certificate of title statute of another jurisdiction (Section 2A-105 of this title); or&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;consumer protection statute of this state, or final consumer protection decision of a court of this state existing on January 1, 1992.&nbsp;</span></p> <p><span class="cls0">(2) In case of conflict between this article, other than Section 2A-105, subsection (3) of Section 2A-304, and subsection (3) of Section 2A-305 of this title, and a statute or decision referred to in subsection (1) of this section, the statute or decision controls.&nbsp;</span></p> <p><span class="cls0">(3) Failure to comply with an applicable law has only the effect specified therein.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 4, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 4, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A105. Territorial application of article to goods covered by certificate of title.&nbsp;</span></p> <p class="cls1"><span class="cls0">TERRITORIAL APPLICATION OF ARTICLE TO GOODS&nbsp;</span></p> <p class="cls1"><span class="cls0">COVERED BY CERTIFICATE OF TITLE&nbsp;</span></p> <p><span class="cls0">Subject to the provisions of subsections (3) of Sections 34 and 35 of this act, with respect to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law, including the conflict of laws rules, of the jurisdiction issuing the certificate until the earlier of:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;surrender of the certificate, or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;four (4) months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 5, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A106. Limitation on power of parties to consumer lease to choose applicable law and judicial forum.&nbsp;</span></p> <p class="cls1"><span class="cls0">LIMITATION ON POWER OF PARTIES TO CONSUMER LEASE&nbsp;</span></p> <p class="cls1"><span class="cls0">TO CHOOSE APPLICABLE LAW AND JUDICIAL FORUM&nbsp;</span></p> <p><span class="cls0">(1) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within thirty (30) days thereafter or in which the goods are to be used, the choice is not enforceable.&nbsp;</span></p> <p><span class="cls0">(2) If the judicial forum chosen by the parties to a consumer lease is a forum that would not otherwise have jurisdiction over the lessee, the choice is not enforceable.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 6, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A107. Waiver or renunciation of claim or right after default.&nbsp;</span></p> <p class="cls1"><span class="cls0">WAIVER OR RENUNCIATION OF CLAIM OR RIGHT AFTER DEFAULT&nbsp;</span></p> <p><span class="cls0">Any claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 7, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A108. Unconscionability.&nbsp;</span></p> <p class="cls1"><span class="cls0">UNCONSCIONABILITY&nbsp;</span></p> <p><span class="cls0">(1) If the court as a matter of law finds a lease contract or any clause of a lease contract to have been unconscionable at the time it was made the court may refuse to enforce the lease contract, or it may enforce the remainder of the lease contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.&nbsp;</span></p> <p><span class="cls0">(2) With respect to a consumer lease, if the court as a matter of law finds that a lease contract or any clause of a lease contract has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract, the court may grant appropriate relief.&nbsp;</span></p> <p><span class="cls0">(3) Before making a finding of unconscionability under subsection (1) or (2) of this section, the court, on its own motion or that of a party, shall afford the parties a reasonable opportunity to present evidence as to the setting, purpose, and effect of the lease contract or clause thereof, or of the conduct.&nbsp;</span></p> <p><span class="cls0">(4) In an action in which the lessee claims unconscionability with respect to a consumer lease:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;If the court finds unconscionability under subsection (1) or (2) of this section, the court shall award reasonable attorney's fees to the lessee.&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;If the court does not find unconscionability and the lessee claiming unconscionability has brought or maintained an action he knew to be groundless, the court shall award reasonable attorney's fees to the party against whom the claim is made.&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;In determining attorney's fees, the amount of the recovery on behalf of the claimant under subsections (1) and (2) of this section is not controlling.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 8, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A109. Option to accelerate at will.&nbsp;</span></p> <p class="cls1"><span class="cls0">OPTION TO ACCELERATE AT WILL&nbsp;</span></p> <p><span class="cls0">(1) 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 must be construed to mean that he has power to do so only if he in good faith believes that the prospect of payment or performance is impaired.&nbsp;</span></p> <p><span class="cls0">(2) With respect to a consumer lease, the burden of establishing good faith under subsection (1) of this section is on the party who exercised the power; otherwise the burden of establishing lack of good faith is on the party against whom the power has been exercised.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 9, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A201. Statute of frauds.&nbsp;</span></p> <p class="cls1"><span class="cls0">STATUTE OF FRAUDS&nbsp;</span></p> <p><span class="cls0">(1) A lease contract is not enforceable by way of action or defense unless:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than One Thousand Dollars ($1,000.00); or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;there is a writing, signed by the party against whom enforcement is sought or by that party's authorized agent, sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the lease term.&nbsp;</span></p> <p><span class="cls0">(2) Any description of leased goods or of the lease term is sufficient and satisfies paragraph (b) of subsection (1) of this section, whether or not it is specific, if it reasonably identifies what is described.&nbsp;</span></p> <p><span class="cls0">(3) A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under paragraph (b) of subsection (1) of this section beyond the lease term and the quantity of goods shown in the writing.&nbsp;</span></p> <p><span class="cls0">(4) A lease contract that does not satisfy the requirements of subsection (1) of this section, but which is valid in other respects, is enforceable:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;if the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor's business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if the party against whom enforcement is sought admits in that party's pleading, testimony or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this provision beyond the quantity of goods admitted; or&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;with respect to goods that have been received and accepted by the lessee.&nbsp;</span></p> <p><span class="cls0">(5) The lease term under a lease contract referred to in subsection (4) of this section is:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;if there is a writing signed by the party against whom enforcement is sought or by that party's authorized agent specifying the lease term, the term so specified;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if the party against whom enforcement is sought admits in that party's pleading, testimony, or otherwise in court a lease term, the term so admitted; or&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;a reasonable lease term.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 10, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A202. Final written expression; parol or extrinsic evidence.&nbsp;</span></p> <p class="cls1"><span class="cls0">FINAL WRITTEN EXPRESSION; PAROL OR EXTRINSIC EVIDENCE&nbsp;</span></p> <p><span class="cls0">Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;by course of dealing or usage of trade or by course of performance; and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 11, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A203. Seals inoperative.&nbsp;</span></p> <p class="cls1"><span class="cls0">SEALS INOPERATIVE&nbsp;</span></p> <p><span class="cls0">The affixing of a seal to a writing evidencing a lease contract or an offer to enter into a lease contract does not render the writing a sealed instrument and the law with respect to sealed instruments does not apply to the lease contract or offer.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 12, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A204. Formation in general.&nbsp;</span></p> <p class="cls1"><span class="cls0">FORMATION IN GENERAL&nbsp;</span></p> <p><span class="cls0">(1) A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a lease contract.&nbsp;</span></p> <p><span class="cls0">(2) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.&nbsp;</span></p> <p><span class="cls0">(3) Although one or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 13, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A205. Firm offers.&nbsp;</span></p> <p class="cls1"><span class="cls0">FIRM OFFERS&nbsp;</span></p> <p><span class="cls0">An offer by a merchant to lease goods to or from another person in a signed writing that by its terms gives assurance it will be held open is not revocable, for lack of consideration, during the time stated or, if no time is stated, for a reasonable time, but in no event may the period of irrevocability exceed three (3) months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 14, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A206. Offer and acceptance in formation of lease contract.&nbsp;</span></p> <p class="cls1"><span class="cls0">OFFER AND ACCEPTANCE IN FORMATION OF LEASE CONTRACT&nbsp;</span></p> <p><span class="cls0">(1) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.&nbsp;</span></p> <p><span class="cls0">(2) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 15, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-207. Repealed by Laws 2005, c. 139, &sect; 40, eff. Jan. 1, 2006.&nbsp;</span></p> <p><span class="cls0">&sect;12A2A208. Modification, rescission and waiver.&nbsp;</span></p> <p class="cls1"><span class="cls0">MODIFICATION, RESCISSION AND WAIVER&nbsp;</span></p> <p><span class="cls0">(1) An agreement modifying a lease contract needs no consideration to be binding.&nbsp;</span></p> <p><span class="cls0">(2) A signed lease agreement that excludes modification or rescission except by a signed writing may not be otherwise modified or rescinded, but, except as between merchants, such a requirement on a form supplied by a merchant must be separately signed by the other party.&nbsp;</span></p> <p><span class="cls0">(3) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) of this section, it may operate as a waiver.&nbsp;</span></p> <p><span class="cls0">(4) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 17, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A209. Lessee Under Finance Lease as Beneficiary of Supply Contract.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE UNDER FINANCE LEASE AS BENEFICIARY OF SUPPLY CONTRACT&nbsp;</span></p> <p><span class="cls0">(1) The benefit of the supplier's promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of any third party provided in connection with or as part of the supply contract, extends to the lessee to the extent of the lessee's leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom.&nbsp;</span></p> <p><span class="cls0">(2) The extension of the benefit of a supplier's promises and of warranties to the lessee (subsection (1) of this section) does not:&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or&nbsp;</span></p> <p class="cls3"><span class="cls0"> (ii)&nbsp;&nbsp;impose any duty or liability under the supply contract on the lessee.&nbsp;</span></p> <p><span class="cls0">(3) Any modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.&nbsp;</span></p> <p><span class="cls0">(4) In addition to the extension of the benefit of the supplier's promises and of warranties to the lessee under subsection (1) of this section, the lessee retains all rights that the lessee may have against the supplier which arise from an agreement between the lessee and the supplier or under other law.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 18, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 5, eff. Jan. 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A210. Express warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">EXPRESS WARRANTIES&nbsp;</span></p> <p><span class="cls0">(1) Express warranties by the lessor are created as follows:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise.&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description.&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model.&nbsp;</span></p> <p><span class="cls0">(2) It is not necessary to the creation of an express warranty that the lessor use formal words, such as "warrant" or "guarantee", or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor's opinion or commendation of the goods does not create a warranty.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 19, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A211. Warranties against interference and against infringement; lessee's obligation against infringement.&nbsp;</span></p> <p class="cls1"><span class="cls0">WARRANTIES AGAINST INTERFERENCE AND AGAINST&nbsp;</span></p> <p class="cls1"><span class="cls0">INFRINGEMENT; LESSEE'S OBLIGATION AGAINST&nbsp;</span></p> <p class="cls1"><span class="cls0">INFRINGEMENT&nbsp;</span></p> <p><span class="cls0">(1) There is in a lease contract a warranty that for the lease term no person holds a claim to or interest in the goods that arose from an act or omission of the lessor, other than a claim by way of infringement or the like, which will interfere with the lessee's enjoyment of its leasehold interest.&nbsp;</span></p> <p><span class="cls0">(2) Except in a finance lease there is in a lease contract by a lessor who is a merchant regularly dealing in goods of the kind a warranty that the goods are delivered free of the rightful claim of any person by way of infringement or the like.&nbsp;</span></p> <p><span class="cls0">(3) A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and the supplier harmless against any claim by way of infringement or the like that arises out of compliance with the specifications.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 20, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A212. Implied warranty of merchantability.&nbsp;</span></p> <p class="cls1"><span class="cls0">IMPLIED WARRANTY OF MERCHANTABILITY&nbsp;</span></p> <p><span class="cls0">(1) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind.&nbsp;</span></p> <p><span class="cls0">(2) Goods to be merchantable must be at least such as:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;pass without objection in the trade under the description in the lease agreement;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;in the case of fungible goods, are of fair average quality within the description;&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;are fit for the ordinary purposes for which goods of that type are used;&nbsp;</span></p> <p><span class="cls0">(d)&nbsp;&nbsp;run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;&nbsp;</span></p> <p><span class="cls0">(e)&nbsp;&nbsp;are adequately contained, packaged, and labeled as the lease agreement may require; and&nbsp;</span></p> <p><span class="cls0">(f)&nbsp;&nbsp;conform to any promises or affirmations of fact made on the container or label.&nbsp;</span></p> <p><span class="cls0">(3) Other implied warranties may arise from course of dealing or usage of trade.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 21, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A213. Implied warranty of fitness for particular purpose.&nbsp;</span></p> <p class="cls1"><span class="cls0">IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE&nbsp;</span></p> <p><span class="cls0">Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor's skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 22, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A214. Exclusion or modification of warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">EXCLUSION OR MODIFICATION OF WARRANTIES&nbsp;</span></p> <p><span class="cls0">(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty must be construed wherever reasonable as consistent with each other; but, subject to the provisions of Section 11 of this act on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable.&nbsp;</span></p> <p><span class="cls0">(2) Subject to subsection (3) of this section, to exclude or modify the implied warranty of merchantability or any part of it the language must mention "merchantability", be by a writing, and be conspicuous. Subject to subsection (3) of this section, to exclude or modify any implied warranty of fitness the exclusion must be by a writing and be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it is in writing, is conspicuous and states, for example, "There is no warranty that the goods will be fit for a particular purpose."&nbsp;</span></p> <p><span class="cls0">(3) Notwithstanding subsection (2) of this section, but subject to subsection (4) of this section:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", or "with all faults", or by other language that in common understanding calls the lessee's attention to the exclusion of warranties and makes plain that there is no implied warranty, if in writing and conspicuous;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if the lessee before entering into the lease contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed; and&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;an implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade.&nbsp;</span></p> <p class="cls2"><span class="cls0">(4) To exclude or modify a warranty against interference or against infringement (Section 20 of this act) or any part of it, the language must be specific, be by a writing, and be conspicuous, unless the circumstances, including course of performance, course of dealing, or usage of trade, give the lessee reason to know that the goods are being leased subject to a claim or interest of any person. Added by Laws 1988, c. 86, &sect; 23, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A215. Cumulation and conflict of warranties express or implied.&nbsp;</span></p> <p class="cls1"><span class="cls0">CUMULATION AND CONFLICT OF WARRANTIES EXPRESS&nbsp;</span></p> <p class="cls1"><span class="cls0">OR IMPLIED&nbsp;</span></p> <p><span class="cls0">Warranties, whether express or implied, must be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;Exact or technical specifications displace an inconsistent sample or model or general language of description.&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;A sample from an existing bulk displaces inconsistent general language of description.&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 24, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A216. Third party beneficiaries of express and implied warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">THIRD PARTY BENEFICIARIES OF EXPRESS AND&nbsp;</span></p> <p class="cls1"><span class="cls0">IMPLIED WARRANTIES&nbsp;</span></p> <p><span class="cls0">(1) A warranty to or for the benefit of a lessee under this article, whether express or implied, extends to any natural person who is in the family or household of the lessee or who is a guest in the lessee's home if it is reasonable to expect that such person may use, consume, or be affected by the goods and who is injured in person by breach of the warranty.&nbsp;</span></p> <p><span class="cls0">(2) This section does not displace principles of law and equity that extend a warranty to or for the benefit of a lessee to other persons.&nbsp;</span></p> <p><span class="cls0">(3) The operation of this section may not be excluded, modified, or limited, but an exclusion, modification, or limitation of the warranty, including any with respect to rights and remedies, effective against the lessee is also effective against any beneficiary designated under this section.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 25, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A217. Identification.&nbsp;</span></p> <p class="cls1"><span class="cls0">IDENTIFICATION&nbsp;</span></p> <p><span class="cls0">Identification of goods as goods to which a lease contract refers may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;when the lease contract is made if the lease contract is for a lease of goods that are existing and identified;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;when the goods are shipped, marked, or otherwise designated by the lessor as goods to which the lease contract refers, if the lease contract is for a lease of goods that are not existing and identified; or&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;when the young are conceived, if the lease contract is for a lease of unborn young of animals.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 26, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A218. Insurance and proceeds.&nbsp;</span></p> <p class="cls1"><span class="cls0">INSURANCE AND PROCEEDS&nbsp;</span></p> <p><span class="cls0">(1) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them.&nbsp;</span></p> <p><span class="cls0">(2) If a lessee has an insurable interest only by reason of the lessor's identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified.&nbsp;</span></p> <p><span class="cls0">(3) Notwithstanding a lessee's insurable interest under subsections (1) and (2) of this section, the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee.&nbsp;</span></p> <p><span class="cls0">(4) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.&nbsp;</span></p> <p><span class="cls0">(5) The parties by agreement may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 27, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A219. Risk of loss.&nbsp;</span></p> <p class="cls1"><span class="cls0">RISK OF LOSS&nbsp;</span></p> <p><span class="cls0">(1) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee.&nbsp;</span></p> <p><span class="cls0">(2) Subject to the provisions of this article on the effect of default on risk of loss (Section 29 of this act), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;If the lease contract requires or authorizes the goods to be shipped by carrier:&nbsp;</span></p> <p><span class="cls0">(i)&nbsp;&nbsp;and it does not require delivery at a particular destination, the risk of loss passes to the lessee when the goods are duly delivered to the carrier; but&nbsp;</span></p> <p><span class="cls0">(ii)&nbsp;&nbsp;if it does require delivery at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the lessee when the goods are there duly so tendered as to enable the lessee to take delivery.&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;If the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee's right to possession of the goods.&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;In any case not within paragraph (a) or (b) of this subsection, the risk of loss passes to the lessee on the lessee's receipt of the goods if the lessor, or, in the case of a finance lease, the supplier, is a merchant; otherwise the risk passes to the lessee on tender of delivery.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 28, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A220. Effect of default on risk of loss.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF DEFAULT ON RISK OF LOSS&nbsp;</span></p> <p><span class="cls0">(1) Where risk of loss is to pass to the lessee and the time of passage is not stated:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;If a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection, the risk of their loss remains with the lessor, or, in the case of a finance lease, the supplier, until cure or acceptance.&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;If the lessee rightfully revokes acceptance, he, to the extent of any deficiency in his effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.&nbsp;</span></p> <p><span class="cls0">(2) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of any deficiency in his effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 29, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A221. Casualty to identified goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">CASUALTY TO IDENTIFIED GOODS&nbsp;</span></p> <p><span class="cls0">If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee pursuant to the lease agreement or Section 29 of this act, then:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;if the loss is total, the lease contract is avoided; and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his option either treat the lease contract as avoided or, except in a finance lease that is not a consumer lease, accept the goods with due allowance from the rent payable for the balance of the lease term for the deterioration or the deficiency in quantity but without further right against the lessor.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 30, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A301. Enforceability of lease contract.&nbsp;</span></p> <p class="cls1"><span class="cls0">ENFORCEABILITY OF LEASE CONTRACT&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in this article, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods and against creditors of the parties.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 31, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A302. Title to and possession of goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">TITLE TO AND POSSESSION OF GOODS&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in this article, each provision of this article applies whether the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third party has possession of the goods, notwithstanding any statute or rule of law that possession or the absence of possession is fraudulent.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 32, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-303. Alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights.&nbsp;</span></p> <p class="cls1"><span class="cls0">ALIENABILITY OF PARTY'S INTEREST UNDER LEASE CONTRACT&nbsp;</span></p> <p class="cls1"><span class="cls0">OR OF LESSOR'S RESIDUAL INTEREST IN GOODS;&nbsp;</span></p> <p class="cls1"><span class="cls0">DELEGATION OF PERFORMANCE; TRANSFER OF RIGHTS&nbsp;</span></p> <p><span class="cls0">(1) As used in this section, "creation of a security interest" includes the sale of a lease contract that is subject to Article 9 of this title, Secured Transactions, by reason of paragraph (3) of subsection (a) of Section 19109 of this title.&nbsp;</span></p> <p><span class="cls0">(2) Except as provided in subsection (3) of Section 19407 of this title, a provision in a lease agreement which (i) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor's residual interest in the goods, or (ii) makes such a transfer an event of default, gives rise to the rights and remedies provided in subsection (4) of this section, but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.&nbsp;</span></p> <p><span class="cls0">(3) A provision in a lease agreement which (i) prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor's due performance of the transferor's entire obligation, or (ii) makes such a transfer an event of default, is not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden of risk imposed on, the other party to the lease contract within the purview of subsection (4) of this section.&nbsp;</span></p> <p><span class="cls0">(4) Subject to subsection (3) of this section and Section 19407 of this article:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;if a transfer is made which is made an event of default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies described in subsection (2) of Section 2A-501 of this title; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;if paragraph (a) of this subsection is not applicable and if a transfer is made that (i) is prohibited under a lease agreement or (ii) materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, (i) the transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.&nbsp;</span></p> <p><span class="cls0">(5) A transfer of "the lease" or of "all my rights under the lease", or a transfer in similar general terms, is a transfer of rights and, unless the language or the circumstances, as in a transfer for security, indicate the contrary, the transfer is a delegation of duties by the transferor to the transferee. Acceptance by the transferee constitutes a promise by the transferee to perform those duties. The promise is enforceable by either the transferor or the other party to the lease contract.&nbsp;</span></p> <p><span class="cls0">(6) Unless otherwise agreed by the lessor and the lessee, a delegation of performance does not relieve the transferor as against the other party of any duty to perform or of any liability for default.&nbsp;</span></p> <p><span class="cls0">(7) In a consumer lease, to prohibit the transfer of an interest of a party under the lease contract or to make a transfer an event of default, the language must be specific, by a writing, and conspicuous.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 33, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 6, eff. Jan. 1, 1992; Laws 2000, c. 371, &sect; 154, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2A304. Subsequent Lease of Goods by Lessor.&nbsp;</span></p> <p class="cls1"><span class="cls0">SUBSEQUENT LEASE OF GOODS BY LESSOR&nbsp;</span></p> <p><span class="cls0">(1) Subject to Section 2A-303 of this title, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and except as provided in subsection (2) of this section and subsection (4) of Section 2A-527 of this title, takes subject to the existing lease contract. A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set forth in the preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that power even though:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;the lessor's transferor was deceived as to the identity of the lessor;&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;the delivery was in exchange for a check which is later dishonored;&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;it was agreed that the transaction was to be a "cash sale"; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;the delivery was procured through fraud punishable as larcenous under the criminal law.&nbsp;</span></p> <p><span class="cls0">(2) A subsequent lessee in the ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor's and the existing lessee's rights to the goods, and takes free of the existing lease contract.&nbsp;</span></p> <p><span class="cls0">(3) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 34, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 7, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A305. Sale or sublease of goods by lessee.&nbsp;</span></p> <p class="cls1"><span class="cls0">SALE OR SUBLEASE OF GOODS BY LESSEE&nbsp;</span></p> <p><span class="cls0">(1) Subject to the provisions of Section 33 of this act, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer, and except as provided in subsection (2) of this section and subsection (4) of Section 58 of this act, takes subject to the existing lease contract. A lessee with a voidable leasehold interest has power to transfer a good leasehold interest to a good faith buyer for value or a good faith sublessee for value, but only to the extent provided for a buyer or sublessee from the lessee of goods under an existing lease contract. When goods have been delivered under a transaction of lease the lessee has that power even though:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the lessor was deceived as to the identity of the lessee;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;the delivery was in exchange for a check which is later dishonored; or&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;the delivery was procured through fraud punishable as larcenous under the criminal law.&nbsp;</span></p> <p><span class="cls0">(2) A buyer in the ordinary course of business or a sublessee in the ordinary course of business from a lessee who is a merchant dealing in goods of that kind to whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the lessor's and lessee's rights to the goods, and takes free of the existing lease contract.&nbsp;</span></p> <p><span class="cls0">(3) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 35, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A306. Priority of certain liens arising by operation of law.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW&nbsp;</span></p> <p><span class="cls0">If a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this article unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 36, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-307. Priority of Liens Arising by Attachment or Levy on, Security Interests in, and Other Claims to Goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY OF LIENS ARISING BY ATTACHMENT OR LEVY&nbsp;</span></p> <p class="cls1"><span class="cls0">ON, SECURITY INTERESTS IN, AND OTHER CLAIMS TO GOODS&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided in Section 2A-306 of this title, a creditor of a lessee takes subject to the lease contract.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided in subsection (3) of this section and in Sections 2A-306 and 2A-308 of this title, a creditor of a lessor takes subject to the lease contract unless the creditor holds a lien that attached to the goods before the lease contract became enforceable.&nbsp;</span></p> <p><span class="cls0">(3) Except as otherwise provided in Sections 19317, 19321, and 19323 of this title, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 37, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 8, eff. Jan. 1, 1992; Laws 2000, c. 371, &sect; 155, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2A308. Special rights of creditors.&nbsp;</span></p> <p class="cls1"><span class="cls0">SPECIAL RIGHTS OF CREDITORS&nbsp;</span></p> <p><span class="cls0">(1) A creditor of a lessor in possession of goods subject to a lease contract may treat the lease contract as void if as against the creditor retention of possession by the lessor is fraudulent under any statute or rule of law, but retention of possession in good faith and current course of trade by the lessor for a commercially reasonable time after the lease contract becomes enforceable is not fraudulent.&nbsp;</span></p> <p><span class="cls0">(2) Nothing in this article impairs the rights of creditors of a lessor if the lease contract:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;becomes enforceable, not in current course of trade but in satisfaction of or as security for a preexisting claim for money, security, or the like, and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;is made under circumstances which under any statute or rule of law apart from this article would constitute the transaction a fraudulent transfer or voidable preference.&nbsp;</span></p> <p><span class="cls0">(3) A creditor of a seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor retention of possession by the seller is fraudulent under any statute or rule of law, but retention of possession of the goods pursuant to a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods is not fraudulent if the buyer bought for value and in good faith.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 38, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-309. Lessor's and Lessee's Rights When Goods Become Fixtures.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME FIXTURES&nbsp;</span></p> <p class="cls6"><span class="cls0">(1)&nbsp;&nbsp;In this section:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law;&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;a "fixture filing" is the filing, in the office where a mortgage on the real estate would be filed or recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of subsections (a) and (b) of Section 19502 of this title, as applicable;&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;a lease is a "purchase money lease" unless the lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable;&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;a mortgage is a "construction mortgage" to the extent it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(e)&nbsp;&nbsp;"encumbrance" includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests.&nbsp;</span></p> <p><span class="cls0">(2) Under this article a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this article of ordinary building materials incorporated into an improvement on land.&nbsp;</span></p> <p><span class="cls0">(3) This article does not prevent creation of a lease of fixtures pursuant to real estate law.&nbsp;</span></p> <p><span class="cls0">(4) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;the lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within ten (10) days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;the interest of the lessor is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the lessor's interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate.&nbsp;</span></p> <p><span class="cls0">(5) The interest of a lessor of fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the real estate if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;the fixtures are readily removable factory or office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease, and before the goods become fixtures the lease contract is enforceable; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;the conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;the encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;the lessee has a right to remove the goods as against the encumbrancer or owner. If the lessee's right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.&nbsp;</span></p> <p><span class="cls0">(6) Notwithstanding paragraph (a) of subsection (4) of this section but otherwise subject to subsections (4) and (5) of this section, the interest of a lessor of fixtures, including the lessor's residual interest, is subordinate to the conflicting interest of an encumbrancer of the real estate under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent given to refinance a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this priority to the same extent as the encumbrancer of the real estate under the construction mortgage.&nbsp;</span></p> <p><span class="cls0">(7) In cases other than those described in subsections (1) through (6) of this section, priority between the interest of a lessor of fixtures, including the lessor's residual interest, and the conflicting interest of an encumbrancer or owner of the real estate who is not the lessee is determined by the priority rules governing conflicting interests in real estate.&nbsp;</span></p> <p><span class="cls0">(8) If the interest of a lessor of fixtures, including the lessor's residual interest, has priority over all conflicting interests of all owners and encumbrancers of the real estate, the lessor or the lessee may (i) on default, expiration, termination, or cancellation of the lease agreement but subject to the lease agreement and this article, or (ii) if necessary to enforce other rights and remedies of the lessor or lessee under this article, remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate, but the lessor or lessee must reimburse any encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real estate caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.&nbsp;</span></p> <p><span class="cls0">(9) Even though the lease agreement does not create a security interest, the interest of a lessor of fixtures, including the lessor's residual interest, is perfected by filing a financing statement as a fixture filing for leased goods that are or are to become fixtures in accordance with the relevant provisions of the Uniform Commercial Code - Secured Transactions.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 39, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 9, eff. Jan. 1, 1992; Laws 2000, c. 371, &sect; 156, eff. July 1, 2001.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A2A310. Lessor's and lessee's rights when goods become accessions.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME ACCESSIONS&nbsp;</span></p> <p><span class="cls0">(1) Goods are "accessions" when they are installed in or affixed to other goods.&nbsp;</span></p> <p><span class="cls0">(2) The interest of a lessor or a lessee under a lease contract entered into before the goods became accessions is superior to all interests in the whole except as stated in subsection (4) of this section.&nbsp;</span></p> <p><span class="cls0">(3) The interest of a lessor or a lessee under a lease contract entered into at the time or after the goods became accessions is superior to all subsequently acquired interests in the whole except as stated in subsection (4) of this section but is subordinate to interests in the whole existing at the time the lease contract was made unless the holders of such interests in the whole have in writing consented to the lease or disclaimed an interest in the goods as part of the whole.&nbsp;</span></p> <p><span class="cls0">(4) The interest of a lessor or a lessee under a lease contract described in subsection (2) or (3) of this section is subordinate to the interest of:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;a buyer in the ordinary course of business or a lessee in the ordinary course of business of any interest in the whole acquired after the goods became accessions; or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;a creditor with a security interest in the whole perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.&nbsp;</span></p> <p><span class="cls0">(5) When under subsections (2) or (3), and (4) of this section a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;on default, expiration, termination, or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this article, or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if necessary to enforce his other rights and remedies under this article,&nbsp;</span></p> <p><span class="cls0">may remove the goods from the whole, free and clear of all interests in the whole, but he must reimburse any holder of an interest in the whole who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 40, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-311. Priority Subject to Subordination.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIORITY SUBJECT TO SUBORDINATION.&nbsp;</span></p> <p><span class="cls0">Nothing in this article prevents subordination by agreement by any person entitled to priority.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 10, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A401. Insecurity; adequate assurance of performance.&nbsp;</span></p> <p class="cls1"><span class="cls0">INSECURITY; ADEQUATE ASSURANCE OF PERFORMANCE&nbsp;</span></p> <p><span class="cls0">(1) A lease contract imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired.&nbsp;</span></p> <p><span class="cls0">(2) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable the insecure party may suspend any performance for which he has not already received the agreed return.&nbsp;</span></p> <p><span class="cls0">(3) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed thirty (30) days after receipt of a demand by the other party.&nbsp;</span></p> <p><span class="cls0">(4) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards.&nbsp;</span></p> <p><span class="cls0">(5) Acceptance of any nonconforming delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 41, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A402. Anticipatory repudiation.&nbsp;</span></p> <p class="cls1"><span class="cls0">ANTICIPATORY REPUDIATION&nbsp;</span></p> <p><span class="cls0">(1) If either party repudiates a lease contract with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;for a commercially reasonable time, await retraction of repudiation and performance by the repudiating party;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;make demand pursuant to Section 41 of this act and await assurance of future performance adequate under the circumstances of the particular case; or&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;resort to any right or remedy upon default under the lease contract or this article, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party's performance and assurance and has urged retraction.&nbsp;</span></p> <p><span class="cls0">(2) In addition, whether or not the aggrieved party is pursuing one of the remedies provided for in subsection (1) of this section, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed in accordance with the provisions of this article on the lessor's right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods (Section 71 of this act).&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 42, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A403. Retraction of anticipatory repudiation.&nbsp;</span></p> <p class="cls1"><span class="cls0">RETRACTION OF ANTICIPATORY REPUDIATION&nbsp;</span></p> <p><span class="cls0">(1) Until the repudiating party's next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has cancelled the lease contract or materially changed the aggrieved party's position or otherwise indicated that the aggrieved party considers the repudiation final.&nbsp;</span></p> <p><span class="cls0">(2) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance demanded under Section 41 of this act.&nbsp;</span></p> <p><span class="cls0">(3) Retraction reinstates a repudiating party's rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 43, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A404. Substituted performance.&nbsp;</span></p> <p class="cls1"><span class="cls0">SUBSTITUTED PERFORMANCE&nbsp;</span></p> <p><span class="cls0">(1) If without fault of the lessee, the lessor and the supplier, the agreed berthing, loading, or unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable, but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted.&nbsp;</span></p> <p><span class="cls0">(2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent; and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee's obligation unless the regulation is discriminatory, oppressive, or predatory.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 44, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A405. Excused performance.&nbsp;</span></p> <p class="cls1"><span class="cls0">EXCUSED PERFORMANCE&nbsp;</span></p> <p><span class="cls0">Subject to Section 44 of this act on substituted performance, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with paragraphs (b) and (c) of this section is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid.&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;If the causes mentioned in paragraph (a) of this section affect only part of the lessor's or the supplier's capacity to perform, he shall allocate production and deliveries among his customers but at his option may include regular customers not then under contract for sale or lease as well as his own requirements for further manufacture. He may so allocate in any manner that is fair and reasonable.&nbsp;</span></p> <p><span class="cls0">(c)&nbsp;&nbsp;The lessor seasonably shall notify the lessee and in the case of a finance lease the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under paragraph (b) of this section, of the estimated quota thus made available for the lessee.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 45, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A406. Procedure on excused performance.&nbsp;</span></p> <p class="cls1"><span class="cls0">PROCEDURE ON EXCUSED PERFORMANCE&nbsp;</span></p> <p><span class="cls0">(1) If the lessee receives notification of a material or indefinite delay or an allocation justified under Section 45 of this act, the lessee, by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 57 of this act) may:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;terminate the lease contract (subsection (2) of Section 52 of this act); or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;except in a finance lease that is not a consumer lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor.&nbsp;</span></p> <p><span class="cls0">(2) If, after receipt of a notification from the lessor under Section 45 of this act, the lessee fails so to modify the lease agreement within a reasonable time not exceeding thirty (30) days, the lease contract lapses with respect to any deliveries affected.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 46, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A407. Irrevocable Promises; Finance Leases.&nbsp;</span></p> <p class="cls1"><span class="cls0">IRREVOCABLE PROMISES; FINANCE LEASES&nbsp;</span></p> <p><span class="cls0">(1) In the case of a finance lease that is not a consumer lease the lessee's promises under the lease contract become irrevocable and independent upon the lessee's acceptance of the goods.&nbsp;</span></p> <p><span class="cls0">(2) A promise that has become irrevocable and independent under subsection (1) of this section:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;is effective and enforceable between the parties, and by or against third parties including assignees of the parties, and&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;is not subject to cancellation, termination, modification, repudiation, excuse, or substitution without the consent of the party to whom the promise runs.&nbsp;</span></p> <p><span class="cls0">(3) This section does not affect the validity under any other law of a covenant in any lease contract making the lessee's promises irrevocable and independent upon the lessee's acceptance of the goods.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 47, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 11, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A501. Default - Procedure.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFAULT; PROCEDURE&nbsp;</span></p> <p><span class="cls0">(1) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this article.&nbsp;</span></p> <p><span class="cls0">(2) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this article and, except as limited by this article, as provided in the lease agreement.&nbsp;</span></p> <p><span class="cls0">(3) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement may reduce the party's claim to judgment, or otherwise enforce the lease contract by self-help or any available judicial procedure or nonjudicial procedure, including administrative proceeding, arbitration, or the like, in accordance with this article.&nbsp;</span></p> <p><span class="cls0">(4) Except as otherwise provided in subsection (a) of Section 18 of this act or this article or the lease agreement, the rights and remedies referred to in subsections (2) and (3) of this section are cumulative.&nbsp;</span></p> <p><span class="cls0">(5) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this Part as to the goods, or under other applicable law as to both the real property and the goods in accordance with that party's rights and remedies in respect of the real property, in which case this Part does not apply.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 48, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 12, eff. Jan. 1, 1992; Laws 2005, c. 139, &sect; 29, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A502. Notice after default.&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTICE AFTER DEFAULT&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in this article or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 49, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A503. Modification or Impairment of Rights and Remedies.&nbsp;</span></p> <p class="cls1"><span class="cls0">MODIFICATION OR IMPAIRMENT OF RIGHTS AND REMEDIES&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided in this article, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article.&nbsp;</span></p> <p><span class="cls0">(2) Resort to a remedy provided under this article or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, remedy may be had as provided in this article.&nbsp;</span></p> <p><span class="cls0">(3) Consequential damages may be liquidated under Section 2A-504 of this title, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. Limitation, alteration, or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation, alteration, or exclusion of damages where the loss is commercial is not prima facie unconscionable.&nbsp;</span></p> <p><span class="cls0">(4) Rights and remedies on default by the lessor or the lessee with respect to any obligation or promise collateral or ancillary to the lease contract are not impaired by this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 50, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 13, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A504. Liquidation of damages.&nbsp;</span></p> <p class="cls1"><span class="cls0">LIQUIDATION OF DAMAGES&nbsp;</span></p> <p><span class="cls0">(1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor's residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.&nbsp;</span></p> <p><span class="cls0">(2) If the lease agreement provides for liquidation of damages, and such provision does not comply with subsection (1) of this section, or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this article.&nbsp;</span></p> <p><span class="cls0">(3) If the lessor justifiably withholds or stops delivery of goods because of the lessee's default or insolvency (Section 72 or 73 of this act), the lessee is entitled to restitution of any amount by which the sum of his payments exceeds:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the amount to which the lessor is entitled by virtue of terms liquidating the lessor's damages in accordance with subsection (1) of this section; or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;in the absence of those terms, twenty percent (20%) of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or Five Hundred Dollars ($500.00).&nbsp;</span></p> <p><span class="cls0">(4) A lessee's right to restitution under subsection (3) of this section is subject to offset to the extent the lessor establishes:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;a right to recover damages under the provisions of this article other than subsection (1) of this section; and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;the amount of value of any benefits received by the lessee directly or indirectly by reason of the lease contract.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 51, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A505. Cancellation and termination and effect of cancellation, termination, rescission, or fraud on rights and remedies.&nbsp;</span></p> <p class="cls1"><span class="cls0">CANCELLATION AND TERMINATION AND EFFECT OF&nbsp;</span></p> <p class="cls1"><span class="cls0">CANCELLATION, TERMINATION, RESCISSION, OR FRAUD ON&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTS AND REMEDIES&nbsp;</span></p> <p><span class="cls0">(1) On cancellation of the lease contract, all obligations that are still executory on both sides are discharged, but any right based on prior default or performance survives, and the canceling party also retains any remedy for default of the whole lease contract or any unperformed balance.&nbsp;</span></p> <p><span class="cls0">(2) On termination of the lease contract, all obligations that are still executory on both sides are discharged but any right based on prior default or performance survives.&nbsp;</span></p> <p><span class="cls0">(3) Unless the contrary intention clearly appears, expressions of "cancellation", "rescission", or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for an antecedent default.&nbsp;</span></p> <p><span class="cls0">(4) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this article for default.&nbsp;</span></p> <p><span class="cls0">(5) Neither rescission nor a claim for rescission of the lease contract nor rejection or return of the goods may bar or be deemed inconsistent with a claim for damages or other right or remedy.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 52, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A506. Statute of limitations.&nbsp;</span></p> <p class="cls1"><span class="cls0">STATUTE OF LIMITATIONS&nbsp;</span></p> <p><span class="cls0">(1) An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four (4) years after the cause of action accrued. By the original lease contract the parties may reduce the period of limitation to not less than one (1) year.&nbsp;</span></p> <p><span class="cls0">(2) A cause of action for default accrues when the act or omission on which the default or breach of warranty is based is or should have been discovered by the aggrieved party, or when the default occurs, whichever is later. A cause of action for indemnity accrues when the act or omission on which the claim for indemnity is based is or should have been discovered by the indemnified party, whichever is later.&nbsp;</span></p> <p><span class="cls0">(3) If an action commenced within the time limited by subsection (1) of this section is so terminated as to leave available a remedy by another action for the same default or breach of warranty or indemnity, the other action may be commenced after the expiration of the time limited and within six (6) months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.&nbsp;</span></p> <p><span class="cls0">(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action that have accrued before this article becomes effective.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 53, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A507. Proof of Market Rent; Time and Place.&nbsp;</span></p> <p class="cls1"><span class="cls0">PROOF OF MARKET RENT; TIME AND PLACE&nbsp;</span></p> <p><span class="cls0">(1) Damages based on market rent (Section 2A-519 or 2A-528 of this title) are determined according to the rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times specified in Sections 2A-519 and 2A-528 of this title.&nbsp;</span></p> <p><span class="cls0">(2) If evidence of rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times or places described in this article is not readily available, the rent prevailing within any reasonable time before or after the time described or at any other place or for a different lease term which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the difference, including the cost of transporting the goods to or from the other place.&nbsp;</span></p> <p><span class="cls0">(3) Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this article offered by one party is not admissible unless and until he has given the other party notice the court finds sufficient to prevent unfair surprise.&nbsp;</span></p> <p><span class="cls0">(4) If the prevailing rent or value of any goods regularly leased in any established market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of that market are admissible in evidence. The circumstances of the preparation of the report may be shown to affect its weight but not its admissibility.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 54, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 14, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A508. Lessee's Remedies.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S REMEDIES&nbsp;</span></p> <p><span class="cls0">(1) If a lessor fails to deliver the goods in conformity to the lease contract (Section 2A-509 of this title) or repudiates the lease contract (Section 2A-402 of this title), or a lessee rightfully rejects the goods (Section 2A-509 of this title) or justifiably revokes acceptance of the goods (Section 2A-517 of this title), then with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 2A-510 of this title), the lessor is in default under the lease contract and the lessee may:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;cancel the lease contract (subsection (1) of Section 2A-505 of this title);&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;recover so much of the rent and security as has been paid and is just under the circumstances;&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (Sections 2A-518 and 2A-520 of this title), or recover damages for nondelivery (Sections 2A-519 and 2A-520 of this title);&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;exercise any other rights or pursue any other remedies provided in the lease contract.&nbsp;</span></p> <p><span class="cls0">(2) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;if the goods have been identified, recover them (Section 2A-522 of this title); or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;in a proper case, obtain specific performance or replevy the goods (Section 2A-521 of this title).&nbsp;</span></p> <p><span class="cls0">(3) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease, and in subsection (3) of Section 2A-519 of this title.&nbsp;</span></p> <p><span class="cls0">(4) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages (subsection (4) of Section 2A-519 of this title).&nbsp;</span></p> <p><span class="cls0">(5) On rightful rejection or justifiable revocation or acceptance, a lessee has a security interest in goods in the lessee's possession or control for any rent and security that has been paid and any expenses reasonably incurred in their inspection, receipt, transportation, and care and custody and may hold those goods and dispose of them in good faith and in a commercially reasonable manner, subject to subsection (5) of Section 2A-527 of this title.&nbsp;</span></p> <p><span class="cls0">(6) Subject to the provisions of Section 2A-407 of this title, a lessee, on notifying the lessor of the lessee's intention to do so, may deduct all or any part of the damages resulting from any default under the lease contract from any part of the rent still due under the same lease contract.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 55, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 15, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A509. Lessee's rights on improper delivery; rightful rejection.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S RIGHTS ON IMPROPER DELIVERY; RIGHTFUL REJECTION&nbsp;</span></p> <p><span class="cls0">(1) Subject to the provisions of Section 58 of this act, a lessee, on default in installment lease contracts, if the goods or the tender or delivery fail in any respect to conform to the lease contract, the lessee may reject or accept the goods or accept any commercial unit or units and reject the rest of the goods.&nbsp;</span></p> <p><span class="cls0">(2) Rejection of goods is ineffective unless it is within a reasonable time after tender or delivery of the goods and the lessee seasonably notifies the lessor.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 56, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A510. Installment lease contracts; rejection and default.&nbsp;</span></p> <p class="cls1"><span class="cls0">INSTALLMENT LEASE CONTRACTS; REJECTION AND&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFAULT&nbsp;</span></p> <p><span class="cls0">(1) Under an installment lease contract a lessee may reject any delivery that is nonconforming if the nonconformity substantially impairs the value of that delivery and cannot be cured or the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (2) of this section and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.&nbsp;</span></p> <p><span class="cls0">(2) Whenever nonconformity or default with respect to one or more deliveries substantially impairs the value of the installment lease contract as a whole there is a default with respect to the whole. But, the aggrieved party reinstates the installment lease contract as a whole if the aggrieved party accepts a nonconforming delivery without seasonably notifying of cancellation or brings an action with respect only to past deliveries or demands performance as to future deliveries.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 57, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A511. Merchant lessee's duties as to rightfully rejected goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">MERCHANT LESSEE'S DUTIES AS TO&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHTFULLY REJECTED GOODS&nbsp;</span></p> <p><span class="cls0">(1) Subject to any security interest of a lessee (subsection (5) of Section 55 of this act), if a lessor or a supplier has no agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in his possession or control, shall follow any reasonable instructions received from the lessor or the supplier with respect to the goods. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor's account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.&nbsp;</span></p> <p><span class="cls0">(2) If a merchant lessee (subsection (1) of this section) or any other lessee (Section 59 of this act) disposes of goods, he is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses include no disposition commission, to such commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding ten percent (10%) of the gross proceeds.&nbsp;</span></p> <p><span class="cls0">(3) In complying with this section or Section 59 of this act, the lessee is held only to good faith. Good faith conduct hereunder is neither acceptance or conversion nor the basis of an action for damages.&nbsp;</span></p> <p><span class="cls0">(4) A purchaser who purchases in good faith from a lessee pursuant to this section or Section 59 of this act takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one or more of the requirements of this article.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 58, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A512. Lessee's duties as to rightfully rejected goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S DUTIES AS TO RIGHTFULLY REJECTED GOODS&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided with respect to goods that threaten to decline in value speedily (Section 58 of this act) and subject to any security interest of a lessee (subsection (5) of Section 55 of this act):&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the lessee, after rejection of goods in the lessee's possession, shall hold them with reasonable care at the lessor's or the supplier's disposition for a reasonable time after the lessee's seasonable notification of rejection;&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;if the lessor or the supplier gives no instructions within a reasonable time after notification of rejection, the lessee may store the rejected goods for the lessor's or the supplier's account or ship them to the lessor or the supplier or dispose of them for the lessor's or the supplier's account with reimbursement in the manner provided in Section 58 of this act; but (c) the lessee has no further obligations with regard to goods rightfully rejected. (2) Action by the lessee pursuant to subsection (1) of this section is not acceptance or conversion.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 59, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A513. Cure by lessor of improper tender or delivery; replacement.&nbsp;</span></p> <p class="cls1"><span class="cls0">CURE BY LESSOR OF IMPROPER TENDER&nbsp;</span></p> <p class="cls1"><span class="cls0">OR DELIVERY; REPLACEMENT&nbsp;</span></p> <p><span class="cls0">(1) If any tender or delivery by the lessor or the supplier is rejected because nonconforming and the time for performance has not yet expired, the lessor or the supplier may seasonably notify the lessee of the lessor's or the supplier's intention to cure and may then make a conforming delivery within the time provided in the lease contract.&nbsp;</span></p> <p><span class="cls0">(2) If the lessee rejects a nonconforming tender that the lessor or the supplier had reasonable grounds to believe would be acceptable with or without money allowance, the lessor or the supplier may have a further reasonable time to substitute a conforming tender if he seasonably notifies the lessee.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 60, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A514. Waiver of lessee's objections.&nbsp;</span></p> <p class="cls1"><span class="cls0">WAIVER OF LESSEE'S OBJECTIONS&nbsp;</span></p> <p><span class="cls0">(1) In rejecting goods, a lessee's failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default:&nbsp;</span></p> <p><span class="cls0">(a) if, stated seasonably, the lessor or the supplier could have cured it (Section 2A-213 of this title); or&nbsp;</span></p> <p><span class="cls0">(b) between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely.&nbsp;</span></p> <p><span class="cls0">(2) A lessee's failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 61, eff. Nov. 1, 1988. Amended by Laws 2005, c. 140, &sect; 54, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A515. Acceptance of goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCEPTANCE OF GOODS&nbsp;</span></p> <p><span class="cls0">(1) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;the lessee fails to make an effective rejection of the goods (subsection (2) of Section 56 of this act).&nbsp;</span></p> <p><span class="cls0">(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 62, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A516. Effect of Acceptance of Goods; Notice of Default; Burden of Establishing Default After Acceptance; Notice of Claim or Litigation to Person Answerable Over.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF ACCEPTANCE OF GOODS; NOTICE OF DEFAULT;&nbsp;</span></p> <p class="cls1"><span class="cls0">BURDEN OF ESTABLISHING DEFAULT AFTER ACCEPTANCE;&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTICE OF CLAIM OR LITIGATION TO PERSON&nbsp;</span></p> <p class="cls1"><span class="cls0">ANSWERABLE OVER&nbsp;</span></p> <p><span class="cls0">(1) A lessee must pay rent for any goods accepted in accordance with the lease contract, with due allowance for goods rightfully rejected or not delivered.&nbsp;</span></p> <p><span class="cls0">(2) A lessee's acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it. In any other case, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair any other remedy provided by this article or the lease agreement for nonconformity.&nbsp;</span></p> <p><span class="cls0">(3) If a tender has been accepted:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;within a reasonable time after the lessee discovers or should have discovered any default, the lessee shall notify the lessor and the supplier, if any, or be barred from any remedy against the party not notified;&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;except in the case of a consumer lease, within a reasonable time after the lessee receives notice of litigation for infringement or the like (Section 2A-211 of this title) the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;the burden is on the lessee to establish any default.&nbsp;</span></p> <p><span class="cls0">(4) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over the following apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;the lessee may give the lessor or the supplier, or both, written notice of the litigation. If the notice states that the person notified may come in and defend and that if the person notified does not do so that person will be bound in any action against that person by the lessee by any determination of fact common to the two litigations, then unless the person notified after seasonable receipt of the notice does come in and defend that person is so bound.&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;the lessor or the supplier may demand in writing that the lessee turn over control of the litigation including settlement if the claim is one for infringement or the like (Section 2A-211 of this title) or else be barred from any remedy over. If the demand states that the lessor or the supplier agrees to bear all expense and to satisfy any adverse judgment, then unless the lessee after seasonable receipt of the demand does turn over control the lessee is so barred.&nbsp;</span></p> <p><span class="cls0">(5) Subsections (3) and (4) of this section apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (Section 2A-211 of this title).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 63, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 16, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A517. Revocation of Acceptance of Goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">REVOCATION OF ACCEPTANCE OF GOODS&nbsp;</span></p> <p><span class="cls0">(1) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if the lessee has accepted it:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;except in the case of a finance lease, on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;without discovery of the nonconformity if the lessee's acceptance was reasonably induced either by the lessor's assurances or, except in the case of a finance lease, by the difficulty of discovery before acceptance.&nbsp;</span></p> <p><span class="cls0">(2) Except in the case of a finance lease that is not a consumer lease, a lessee may revoke acceptance of a lot or commercial unit if the lessor defaults under the lease contract and the default substantially impairs the value of that lot or commercial unit to the lessee.&nbsp;</span></p> <p><span class="cls0">(3) If the lease agreement so provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor.&nbsp;</span></p> <p><span class="cls0">(4) Revocation of acceptance must occur within a reasonable time after the lessee discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by the nonconformity. Revocation is not effective until the lessee notifies the lessor.&nbsp;</span></p> <p><span class="cls0">(5) A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 64, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 17, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A518. Cover - Substitute goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">COVER; SUBSTITUTE GOODS&nbsp;</span></p> <p><span class="cls0">(1) After a default by a lessor under the lease contract of the type described in subsection (1) of Section 2A-508 of this title, or, if agreed, after other default by the lessor, the lessee may cover by making any purchase or lease of or contract to purchase or lease goods in substitution for those due from the lessor.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 2A-504 of this title) or otherwise determined pursuant to agreement of the parties (subsection (c) of Section 15 of this act and Section 2A-503 of this title), if a lessee's cover is by a lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages:&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement, and&nbsp;</span></p> <p class="cls3"><span class="cls0"> (ii)&nbsp;&nbsp;any incidental or consequential damages less expenses saved in consequence of the lessor's default.&nbsp;</span></p> <p><span class="cls0">(3) If a lessee's cover is by lease agreement that for any reason does not qualify for treatment under subsection (2) of this section, or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and Section 2A-519 of this title governs.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 65, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 18, eff. Jan. 1, 1992; Laws 2005, c. 139, &sect; 30, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A519. Lessee's damages for nondelivery, repudiation, default and breach of warranty in regard to accepted goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S DAMAGES FOR NONDELIVERY, &nbsp;</span></p> <p class="cls1"><span class="cls0">REPUDIATION, DEFAULT AND BREACH OF&nbsp;</span></p> <p class="cls1"><span class="cls0">WARRANTY IN REGARD TO ACCEPTED GOODS&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 2A-504 of this title) or otherwise determined pursuant to agreement of the parties (subsection (c) of Section 15 of this act and Section 2A-503 of this title), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under subsection (2) of Section 2A-518 of this title, or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.&nbsp;</span></p> <p><span class="cls0">(2) Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.&nbsp;</span></p> <p><span class="cls0">(3) Except as otherwise agreed, if the lessee has accepted goods and given notification (subsection (3) of Section 2A-516 of this title), the measure of damages for nonconforming tender or delivery or other default by a lessor is the loss resulting in the ordinary course of events from the lessor's default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor's default.&nbsp;</span></p> <p><span class="cls0">(4) Except as otherwise agreed, the measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor's default or breach of warranty.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 66, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 19, eff. Jan. 1, 1992; Laws 2005, c. 139, &sect; 31, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A520. Lessee's incidental and consequential damages.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S INCIDENTAL AND CONSEQUENTIAL DAMAGES&nbsp;</span></p> <p><span class="cls0">(1) Incidental damages resulting from a lessor's default include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the default.&nbsp;</span></p> <p><span class="cls0">(2) Consequential damages resulting from a lessor's default include:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;injury to person or property proximately resulting from any breach of warranty.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 67, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A521. Lessee's right to specific performance or replevin.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S RIGHT TO SPECIFIC PERFORMANCE OR REPLEVIN&nbsp;</span></p> <p><span class="cls0">(1) Specific performance may be decreed if the goods are unique or in other proper circumstances.&nbsp;</span></p> <p><span class="cls0">(2) A decree for specific performance may include any terms and conditions as to payment of the rent, damages, or other relief that the court deems just.&nbsp;</span></p> <p><span class="cls0">(3) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 68, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A522. Lessee's right to goods on lessor's insolvency.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSEE'S RIGHT TO GOODS ON LESSOR'S INSOLVENCY&nbsp;</span></p> <p><span class="cls0">(1) Subject to subsection (2) of this section and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract (Section 26 of this act) on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within ten (10) days after receipt of the first installment of rent and security.&nbsp;</span></p> <p><span class="cls0">(2) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 69, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A523. Lessor's remedies.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S REMEDIES&nbsp;</span></p> <p><span class="cls0">(1) If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 2A-510 of this title), the lessee is in default under the lease contract and the lessor may:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;cancel the lease contract (subsection (1) of Section 2A-505 of this title);&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;proceed respecting goods not identified to the lease contract (Section 2A-524 of this title);&nbsp;</span></p> <p class="cls3"><span class="cls0">(c)&nbsp;&nbsp;withhold delivery of the goods and take possession of goods previously delivered (Section 2A-525 of this title);&nbsp;</span></p> <p class="cls3"><span class="cls0">(d)&nbsp;&nbsp;stop delivery of the goods by any bailee (Section 2A-526 of this title);&nbsp;</span></p> <p class="cls3"><span class="cls0">(e)&nbsp;&nbsp;dispose of the goods and recover damages (Section 2A-527 of this title), or retain the goods and recover damages (Section 2A-528 of this title), or in a proper case recover rent (Section 2A-529 of this title); or&nbsp;</span></p> <p class="cls3"><span class="cls0">(f)&nbsp;&nbsp;exercise any other rights or pursue any other remedies provided in the lease contract.&nbsp;</span></p> <p><span class="cls0">(2) If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under subsection (1) of this section, the lessor may recover the loss resulting in the ordinary course of events from the lessee's default as determined in any reasonable manner, together with incidental damages, less expenses saved in consequence of the lessee's default.&nbsp;</span></p> <p><span class="cls0">(3) If a lessee is otherwise in default under a lease contract, the lessor may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease. In addition, unless otherwise provided in the lease contract:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;if the default substantially impairs the value of the lease contract to the lessor, the lessor may exercise the rights and pursue the remedies provided in subsection (1) or (2) of this section; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;if the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in subsection (2) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 70, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 20, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A524. Lessor's right to identify goods to lease contract.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S RIGHT TO IDENTIFY GOODS TO LEASE CONTRACT&nbsp;</span></p> <p><span class="cls0">(1) After default by the lessee under the lease contract of the type described in either subsection (1) of Section 2A-523 of this title or paragraph (a) of subsection (3) of Section 2A-523 of this title, or, if agreed, after other default by the lessee, the lessor may:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor's or the supplier's possession or control; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;dispose of goods (subsection (1) of Section 2A-527 of this title) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.&nbsp;</span></p> <p><span class="cls0">(2) If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor or the supplier may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell, or otherwise dispose of the goods for scrap or salvage value or proceed in any other reasonable manner.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 71, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 135, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A525. Lessor's right to possession of goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S RIGHT TO POSSESSION OF GOODS&nbsp;</span></p> <p><span class="cls0">(1) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.&nbsp;</span></p> <p><span class="cls0">(2) After a default by the lessee under the lease contract of the type described in subsection (1) of Section 2A-523 or paragraph (a) of subsection (3) of Section 2A-523 of this title or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract so provides, the lessor may require the lessee to assemble the goods and make them available to the lessor at a place to be designated by the lessor which is reasonably convenient to both parties. Without removal, the lessor may render unusable any goods employed in trade or business, and may dispose of goods on the lessee's premises (Section 2A-527 of this title).&nbsp;</span></p> <p><span class="cls0">(3) The lessor may proceed under subsection (2) of this section without judicial process if it can be done without breach of the peace or the lessor may proceed by action.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 72, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 21, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A526. Lessor's stoppage of delivery in transit or otherwise.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S STOPPAGE OF DELIVERY IN TRANSIT OR OTHERWISE&nbsp;</span></p> <p><span class="cls0">(1) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods.&nbsp;</span></p> <p><span class="cls0">(2) In pursuing its remedies under subsection (1) of this section, the lessor may stop delivery until:&nbsp;</span></p> <p><span class="cls0">(a) receipt of the goods by the lessee;&nbsp;</span></p> <p><span class="cls0">(b) acknowledgement to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or&nbsp;</span></p> <p><span class="cls0">(c) such an acknowledgment to the lessee by a carrier via reshipment or as a warehouse.&nbsp;</span></p> <p><span class="cls0">(3) (a) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.&nbsp;</span></p> <p><span class="cls0">(b) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages.&nbsp;</span></p> <p><span class="cls0">(c) A carrier who has issued a nonnegotiable bill of lading is not obligated to obey a notification to stop received from a person other than the consignor.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 73, eff. Nov. 1, 1988. Amended by Laws 2005, c. 140, &sect; 55, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A527. Lessor's rights to dispose of goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S RIGHTS TO DISPOSE OF GOODS&nbsp;</span></p> <p><span class="cls0">(1) After a default by a lessee under the lease contract of the type described in subsection (1) of Section 2A-523 of this title or paragraph (a) of subsection (3) of Section 2A-523 of this title or after the lessor refuses to deliver or takes possession of goods (Section 2A-525 or 2A-526 of this title), or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale, or otherwise.&nbsp;</span></p> <p><span class="cls0">(2) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 2A-504 of this title) or otherwise determined pursuant to agreement of the parties (subsection (c) of Section 15 of this act and Section 2A-503 of this title), if the disposition is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages:&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement,&nbsp;</span></p> <p class="cls3"><span class="cls0"> (ii)&nbsp;&nbsp;the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement, and&nbsp;</span></p> <p class="cls3"><span class="cls0"> (iii)&nbsp;&nbsp;any incidental damages allowed under Section 2A-530 of this title, less expenses saved in consequence of the lessee's default.&nbsp;</span></p> <p><span class="cls0">(3) If the lessor's disposition is by lease agreement that for any reason does not qualify for treatment under subsection (2) of this section, or is by sale or otherwise, the lessor may recover from the lessee as if the lessor had elected not to dispose of the goods and Section 2A-528 of this title governs.&nbsp;</span></p> <p><span class="cls0">(4) A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one or more of the requirements of this article.&nbsp;</span></p> <p><span class="cls0">(5) The lessor is not accountable to the lessee for any profit made on any disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee's security interest (subsection (5) of Section 2A-508 of this title).&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 74, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 22, eff. Jan. 1, 1992; Laws 2005, c. 139, &sect; 32, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A528. Lessor's damages for nonacceptance, failure to pay, repudiation, or other default.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S DAMAGES FOR NONACCEPTANCE, FAILURE TO PAY,&nbsp;</span></p> <p class="cls1"><span class="cls0"> REPUDIATION, OR OTHER DEFAULT&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 2A-504 of this title) or otherwise determined pursuant to agreement of the parties (subsection (c) of Section 15 of this act and Section 2A-503 of this title), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under subsection (2) of Section 2A-527 of this title, or is by sale or otherwise, the lessor may recover from the lessee as damages for a default of the type described in subsection (1) of Section 2A-523 or paragraph (a) of subsection (3) of Section 2A-523, or, if agreed, for other default of the lessee:&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor,&nbsp;</span></p> <p class="cls3"><span class="cls0"> (ii)&nbsp;&nbsp;the present value as of the date determined under clause (i) of this subsection of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located computed for the same lease term, and&nbsp;</span></p> <p class="cls3"><span class="cls0"> (iii)&nbsp;&nbsp;any incidental damages allowed under Section 2A-530 of this title, less expenses saved in consequence of the lessee's default.&nbsp;</span></p> <p><span class="cls0">(2) If the measure of damages provided in subsection (1) of this section is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under Section 2A-530 of this title, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 75, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 23, eff. Jan. 1, 1992; Laws 2005, c. 139, &sect; 33, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A529. Lessor's action for the rent.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S ACTION FOR THE RENT&nbsp;</span></p> <p><span class="cls0">(1) After default by the lessee under the lease contract of the type described in subsection (1) of Section 2A-523 or paragraph (a) of subsection (3) of Section 2A-523 of this title, or, if agreed, after other default by the lessee, if the lessor complies with subsection (2) of this section, the lessor may recover from the lessee as damages:&nbsp;</span></p> <p class="cls3"><span class="cls0">(a)&nbsp;&nbsp;for goods accepted by the lessee and not repossessed by or tendered to the lessor, and for conforming goods lost or damaged within a commercially reasonable time after risk of loss passes to the lessee (Section 2A-219 of this title):&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;accrued and unpaid rent as of the date of entry of judgment in favor of the lessor,&nbsp;</span></p> <p class="cls4"><span class="cls0"> (ii)&nbsp;&nbsp;the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and&nbsp;</span></p> <p class="cls4"><span class="cls0"> (iii)&nbsp;&nbsp;any incidental damages allowed under Section 2A-530 of this title, less expenses saved in consequence of the lessee's default; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(b)&nbsp;&nbsp;for goods identified to the lease contract if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that effort will be unavailing:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;accrued and unpaid rent as of the date of entry of judgment in favor of the lessor,&nbsp;</span></p> <p class="cls4"><span class="cls0"> (ii)&nbsp;&nbsp;the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and&nbsp;</span></p> <p class="cls4"><span class="cls0"> (iii)&nbsp;&nbsp;any incidental damages allowed under Section 2A-530 of this title, less expenses saved in consequence of the lessee's default.&nbsp;</span></p> <p><span class="cls0">(2) Except as provided in subsection (3) of this section, the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor's control.&nbsp;</span></p> <p><span class="cls0">(3) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to subsection (1) of this section. If the disposition is before the end of the remaining lease term of the lease agreement, the lessor's recovery against the lessee for damages is governed by Section 2A-527 or 2A-528 of this title, and the lessor will cause an appropriate credit to be provided against a judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to Section 2A-527 or 2A-528 of this title.&nbsp;</span></p> <p><span class="cls0">(4) Payment of the judgment for damages obtained pursuant to subsection (1) of this section entitles the lessee to the use and possession of the goods not then disposed of for the remaining lease term of and in accordance with the lease agreement.&nbsp;</span></p> <p><span class="cls0">(5) After default by the lessee under the lease contract of the type described in either subsection (1) of Section 2A-523 of this title or paragraph (a) of subsection (3) of Section 2A-523 of this title or, if agreed, after other default by the lessee, a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for nonacceptance under Sections 2A-527 or 2A-528 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1988, c. 86, &sect; 76, eff. Nov. 1, 1988. Amended by Laws 1991, c. 117, &sect; 24, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A2A530. Lessor's incidental damages.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S INCIDENTAL DAMAGES&nbsp;</span></p> <p><span class="cls0">Incidental damages to an aggrieved lessor include any commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the lessee's default, in connection with return or disposition of the goods, or otherwise resulting from the default.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 77, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A2A531. Standing to sue third parties for injury to goods.&nbsp;</span></p> <p class="cls1"><span class="cls0">STANDING TO SUE THIRD PARTIES FOR INJURY TO GOODS&nbsp;</span></p> <p><span class="cls0">(1) If a third party so deals with goods that have been identified to a lease contract as to cause actionable injury to a party to the lease contract:&nbsp;</span></p> <p><span class="cls0">(a)&nbsp;&nbsp;the lessor has a right of action against the third party, and&nbsp;</span></p> <p><span class="cls0">(b)&nbsp;&nbsp;the lessee also has a right of action against the third party if the lessee:&nbsp;</span></p> <p><span class="cls0">(i)&nbsp;&nbsp;has a security interest in the goods;&nbsp;</span></p> <p><span class="cls0">(ii)&nbsp;&nbsp;has an insurable interest in the goods; or&nbsp;</span></p> <p><span class="cls0">(iii)&nbsp;&nbsp;bears the risk of loss under the lease contract or has since the injury assumed that risk as against the lessor and the goods have been converted or destroyed.&nbsp;</span></p> <p><span class="cls0">(2) If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the lease contract and there is no arrangement between them for disposition of the recovery, his suit or settlement, subject to his own interest, is as a fiduciary for the other party to the lease contract.&nbsp;</span></p> <p><span class="cls0">(3) Either party with the consent of the other may sue for the benefit of whom it may concern.&nbsp;</span></p> <p class="cls2"><span class="cls0">Added by Laws 1988, c. 86, &sect; 78, eff. Nov. 1, 1988. &nbsp;</span></p> <p><span class="cls0">&sect;12A-2A-532. Lessor's rights to residual interest.&nbsp;</span></p> <p class="cls1"><span class="cls0">LESSOR'S RIGHTS TO RESIDUAL INTEREST&nbsp;</span></p> <p><span class="cls0">In addition to any other recovery permitted by this article or other law, the lessor may recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor's residual interest in the goods caused by the default of the lessee.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 25, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3101. Short Title.&nbsp;</span></p> <p class="cls1"><span class="cls0">SHORT TITLE&nbsp;</span></p> <p><span class="cls0">This article may be cited as Uniform Commercial Code Negotiable Instruments.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 102, &sect; 3101; Laws 1991, c. 117, &sect; 26, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3102. Subject Matter.&nbsp;</span></p> <p class="cls1"><span class="cls0">SUBJECT MATTER&nbsp;</span></p> <p><span class="cls0">(a) This article applies to negotiable instruments. It does not apply to money, to payment orders governed by Article 4A of this title, or to securities governed by Article 8 of this title.&nbsp;</span></p> <p><span class="cls0">(b) If there is conflict between this article and Article 4 or 9, Articles 4 and 9 govern.&nbsp;</span></p> <p><span class="cls0">(c) Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supercede any inconsistent provision of this article to the extent of the inconsistency.&nbsp;</span></p> <p><span class="cls0">Amended by Laws 1988, c. 39, &sect; 1, emerg. eff. March 21, 1988; Laws 1991, c. 117, &sect; 27, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-103. Definitions.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFINITIONS&nbsp;</span></p> <p><span class="cls0">(a) In this article:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;"Acceptor" means a drawee who has accepted a draft;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;"Drawee" means a person ordered in a draft to make payment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;"Drawer" means a person who signs or is identified in a draft as a person ordering payment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;Reserved;&nbsp;</span></p> <p class="cls3"><span class="cls0">(5)&nbsp;&nbsp;"Maker" means a person who signs or is identified in a note as a person undertaking to pay;&nbsp;</span></p> <p class="cls3"><span class="cls0">(6)&nbsp;&nbsp;"Order" means a written instruction to pay money signed by the person giving the instruction. The instruction may be addressed to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession. An authorization to pay is not an order unless the person authorized to pay is also instructed to pay;&nbsp;</span></p> <p class="cls3"><span class="cls0">(7)&nbsp;&nbsp;"Ordinary care" in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged. In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank's prescribed procedures and the bank's procedures do not vary unreasonably from general banking usage not disapproved by this article or Article 4 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(8)&nbsp;&nbsp;"Party" means a party to an instrument;&nbsp;</span></p> <p class="cls3"><span class="cls0">(9)&nbsp;&nbsp;&ldquo;Principal obligor&rdquo;, with respect to an instrument, means the accommodated party or any other party to the instrument against whom a secondary obligor has recourse under this article;&nbsp;</span></p> <p class="cls3"><span class="cls0">(10)&nbsp;&nbsp;"Promise" means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation;&nbsp;</span></p> <p class="cls3"><span class="cls0">(11)&nbsp;&nbsp;"Prove", with respect to a fact, means to meet the burden of establishing the fact (subsection (8) of Section 1-201 of this title); &nbsp;</span></p> <p class="cls3"><span class="cls0">(12)&nbsp;&nbsp;Reserved;&nbsp;</span></p> <p class="cls3"><span class="cls0">(13)&nbsp;&nbsp;"Remitter" means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(14)&nbsp;&nbsp;&ldquo;Secondary obligor&rdquo;, with respect to an instrument, means (i) an indorser or an accommodation party, (ii) a drawer having the obligation described in subsection (d) of Section 3-414 of this title, or (iii) any other party to the instrument that has recourse against another party to the instrument pursuant to subsection (b) of Section 3-116 of this title.&nbsp;</span></p> <p><span class="cls0">(b) Other definitions applying to this article and the sections in which they appear in this title are:&nbsp;</span></p> <p><span class="cls0">"Acceptance"&nbsp;&nbsp;Section 3-409&nbsp;</span></p> <p><span class="cls0">"Accommodated party"&nbsp;&nbsp;Section 3-419&nbsp;</span></p> <p><span class="cls0">"Accommodation party"&nbsp;&nbsp;Section 3-419&nbsp;</span></p> <p><span class="cls0">&ldquo;Account&rdquo;&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">"Alteration"&nbsp;&nbsp;Section 3-407&nbsp;</span></p> <p><span class="cls0">"Anomalous indorsement"&nbsp;&nbsp;Section 3-205&nbsp;</span></p> <p><span class="cls0">"Blank indorsement"&nbsp;&nbsp;Section 3-205&nbsp;</span></p> <p><span class="cls0">"Cashier's check"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Certificate of deposit"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Certified check"&nbsp;&nbsp;Section 3-409&nbsp;</span></p> <p><span class="cls0">"Check"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Consideration"&nbsp;&nbsp;Section 3-303&nbsp;</span></p> <p><span class="cls0">"Draft"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Holder in due course"&nbsp;&nbsp;Section 3-302&nbsp;</span></p> <p><span class="cls0">"Incomplete instrument"&nbsp;&nbsp;Section 3-115&nbsp;</span></p> <p><span class="cls0">"Indorsement"&nbsp;&nbsp;Section 3-204&nbsp;</span></p> <p><span class="cls0">"Indorser"&nbsp;&nbsp;Section 3-204&nbsp;</span></p> <p><span class="cls0">"Instrument"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Issue"&nbsp;&nbsp;Section 3-105&nbsp;</span></p> <p><span class="cls0">"Issuer"&nbsp;&nbsp;Section 3-105&nbsp;</span></p> <p><span class="cls0">"Negotiable instrument"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Negotiation"&nbsp;&nbsp;Section 3-201&nbsp;</span></p> <p><span class="cls0">"Note"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Payable at a definite time"&nbsp;&nbsp;Section 3-108&nbsp;</span></p> <p><span class="cls0">"Payable on demand"&nbsp;&nbsp;Section 3-108&nbsp;</span></p> <p><span class="cls0">"Payable to bearer"&nbsp;&nbsp;Section 3-109&nbsp;</span></p> <p><span class="cls0">"Payable to order"&nbsp;&nbsp;Section 3-109&nbsp;</span></p> <p><span class="cls0">"Payment"&nbsp;&nbsp;Section 3-602&nbsp;</span></p> <p><span class="cls0">"Person entitled to enforce"&nbsp;&nbsp;Section 3-301&nbsp;</span></p> <p><span class="cls0">"Presentment"&nbsp;&nbsp;Section 3-501&nbsp;</span></p> <p><span class="cls0">"Reacquisition"&nbsp;&nbsp;Section 3-207&nbsp;</span></p> <p><span class="cls0">"Special indorsement"&nbsp;&nbsp;Section 3-205&nbsp;</span></p> <p><span class="cls0">"Teller's check"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Transfer of instrument"&nbsp;&nbsp;Section 3-203&nbsp;</span></p> <p><span class="cls0">"Traveler's check"&nbsp;&nbsp;Section 3-104&nbsp;</span></p> <p><span class="cls0">"Value"&nbsp;&nbsp;Section 3-303&nbsp;</span></p> <p><span class="cls0">(c) The following definitions in other articles of this title apply to this article:&nbsp;</span></p> <p><span class="cls0">"Banking day"&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">"Clearing house"&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">"Collecting bank"&nbsp;&nbsp;Section 4-105&nbsp;</span></p> <p><span class="cls0">"Depositary bank"&nbsp;&nbsp;Section 4-105&nbsp;</span></p> <p><span class="cls0">"Documentary draft"&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">"Intermediary bank"&nbsp;&nbsp;Section 4-105&nbsp;</span></p> <p><span class="cls0">"Item"&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">"Payor bank"&nbsp;&nbsp;Section 4-105&nbsp;</span></p> <p><span class="cls0">"Suspends payments"&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">(d) In addition, Article 1 of the Uniform Commercial Code, this title, contains general definitions and principles of construction and interpretation applicable throughout this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 102, &sect; 3-103. Amended by Laws 1991, c. 117, &sect; 28, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 2, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 2 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A3104. Negotiable Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">NEGOTIABLE INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) Except as provided in subsections (c) and (d) of this section, "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;is payable to bearer or to order at the time it is issued or first comes into possession of a holder;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;is payable on demand or at a definite time; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.&nbsp;</span></p> <p><span class="cls0">(b) "Instrument" means a negotiable instrument.&nbsp;</span></p> <p><span class="cls0">(c) An order that meets all of the requirements of subsection (a) of this section, except paragraph (1), and otherwise falls within the definition of "check" in subsection (f) of this section is a negotiable instrument and a check.&nbsp;</span></p> <p><span class="cls0">(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this article.&nbsp;</span></p> <p><span class="cls0">(e) An instrument is a "note" if it is a promise and is a "draft" if it is an order. If an instrument falls within the definition of both "note" and "draft", a person entitled to enforce the instrument may treat it as either.&nbsp;</span></p> <p><span class="cls0">(f) "Check" means (i) a draft, other than a documentary draft, payable on demand and drawn on a bank or (ii) a cashier's check or teller's check. An instrument may be a check even though it is described on its face by another term, such as "money order".&nbsp;</span></p> <p><span class="cls0">(g) "Cashier's check" means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.&nbsp;</span></p> <p><span class="cls0">(h) "Teller's check" means a draft drawn by a bank (i) on another bank, or (ii) payable at or through a bank.&nbsp;</span></p> <p><span class="cls0">(i) "Traveler's check" means an instrument that (i) is payable on demand, (ii) is drawn on or payable at or through a bank, (iii) is designated by the term "traveler's check" or by a substantially similar term, and (iv) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.&nbsp;</span></p> <p><span class="cls0">(j) "Certificate of deposit" means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 103, &sect; 3104; Laws 1991, c. 117, &sect; 29, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3105. Issue of Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">ISSUE OF INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) "Issue" means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.&nbsp;</span></p> <p><span class="cls0">(b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.&nbsp;</span></p> <p><span class="cls0">(c) "Issuer" applies to issued and unissued instruments and means a maker or drawer of an instrument.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 103, &sect; 3105; Laws 1991, c. 117, &sect; 30, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-106. Unconditional Promise or Order.&nbsp;</span></p> <p class="cls1"><span class="cls0">UNCONDITIONAL PROMISE OR ORDER&nbsp;</span></p> <p><span class="cls0">(a) Except as provided in this section, for the purposes of subsection (a) of Section 3-104 of this title, a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another record, or (iii) that rights or obligations with respect to the promise or order are stated in another record. A reference to another record does not of itself make the promise or order conditional.&nbsp;</span></p> <p><span class="cls0">(b) A promise or order is not made conditional (i) by a reference to another record for a statement of rights with respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source.&nbsp;</span></p> <p><span class="cls0">(c) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of subsection (a) of Section 3-104 of this title. If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.&nbsp;</span></p> <p><span class="cls0">(d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of subsection (a) of Section 3-104 of this title; but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 103, &sect; 3-106. Amended by Laws 1991, c. 117, &sect; 31, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 3, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 3 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A3107. Instrument Payable in Foreign Money.&nbsp;</span></p> <p class="cls1"><span class="cls0">INSTRUMENT PAYABLE IN FOREIGN MONEY&nbsp;</span></p> <p><span class="cls0">Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 104, &sect; 3107; Laws 1991, c. 117, &sect; 32, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3108. Payable on Demand or at Definite Time.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYABLE ON DEMAND OR AT DEFINITE TIME&nbsp;</span></p> <p><span class="cls0">(a) A promise or order is "payable on demand" if it (i) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (ii) does not state any time of payment.&nbsp;</span></p> <p><span class="cls0">(b) A promise or order is "payable at a definite time" if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of (i) prepayment, (ii) acceleration, (iii) extension at the option of the holder, or (iv) extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.&nbsp;</span></p> <p><span class="cls0">(c) If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 104, &sect; 3108; Laws 1991, c. 117, &sect; 33, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3109. Payable to Bearer or to Order.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYABLE TO BEARER OR TO ORDER&nbsp;</span></p> <p><span class="cls0">(a) A promise or order is payable to bearer if it:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;states that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;does not state a payee; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.&nbsp;</span></p> <p><span class="cls0">(b) A promise or order that is not payable to bearer is payable to order if it is payable (i) to the order of an identified person or (ii) to an identified person or order. A promise or order that is payable to order is payable to the identified person.&nbsp;</span></p> <p><span class="cls0">(c) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to subsection (a) of Section 3-205 of this title. An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to subsection (b) of Section 3-205 of this title.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 104, &sect; 3109; Laws 1991, c. 117, &sect; 34, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3110. Identification of Person to Whom Instrument is Payable.&nbsp;</span></p> <p class="cls1"><span class="cls0">IDENTIFICATION OF PERSON TO WHOM INSTRUMENT IS PAYABLE&nbsp;</span></p> <p><span class="cls0">(a) The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one or more of the signers.&nbsp;</span></p> <p><span class="cls0">(b) If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.&nbsp;</span></p> <p><span class="cls0">(c) A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office, or account number. For the purpose of determining the holder of an instrument, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number.&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;If an instrument is payable to:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;a trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named;&nbsp;</span></p> <p class="cls4"><span class="cls0"> (ii)&nbsp;&nbsp;a person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;&nbsp;</span></p> <p class="cls4"><span class="cls0"> (iii)&nbsp;&nbsp;a fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or&nbsp;</span></p> <p class="cls4"><span class="cls0"> (iv)&nbsp;&nbsp;an office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.&nbsp;</span></p> <p><span class="cls0">(d) If an instrument is payable to two or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 104, &sect; 3110; Laws 1991, c. 117, &sect; 35, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3111. Place of payment.&nbsp;</span></p> <p class="cls1"><span class="cls0">PLACE OF PAYMENT&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided for items in Article 4 of this title, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 104, &sect; 3111; Laws 1991, c. 117, &sect; 36, eff. Jan. 1, 1992. &nbsp;</span></p> <p><span class="cls0">&sect;12A3112. Interest.&nbsp;</span></p> <p class="cls1"><span class="cls0">INTEREST&nbsp;</span></p> <p><span class="cls0">(a) Unless otherwise provided in the instrument, (i) an instrument is not payable with interest, and (ii) interest on an interest-bearing instrument is payable from the date of the instrument.&nbsp;</span></p> <p><span class="cls0">(b) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 104, &sect; 3112; Laws 1991, c. 117, &sect; 37, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3113. Date of Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">DATE OF INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after date. Except as provided in subsection (c) of Section 4-401 of this title, an instrument payable on demand is not payable before the date of the instrument.&nbsp;</span></p> <p><span class="cls0">(b) If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 105, &sect; 3113; Laws 1991, c. 117, &sect; 38, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-114. Contradictory terms of instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONTRADICTORY TERMS OF INSTRUMENT&nbsp;</span></p> <p><span class="cls0">If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 105, &sect; 3-114; Amended by Laws 1991, c. 117, &sect; 39, eff. January 1, 1992.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A3115. Incomplete Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">INCOMPLETE INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) "Incomplete instrument" means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (c) of this section, if an incomplete instrument is an instrument under Section 3-104 of this title, it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under Section 3-104 of this title, but, after completion, the requirements of Section 3-104 of this title, are met, the instrument may be enforced according to its terms as augmented by completion.&nbsp;</span></p> <p><span class="cls0">(c) If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under Section 3-407 of this title.&nbsp;</span></p> <p><span class="cls0">(d) The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 105, &sect; 3115; Laws 1991, c. 117, &sect; 40, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-116. Joint and Several Liability; Contribution.&nbsp;</span></p> <p class="cls1"><span class="cls0">JOINT AND SEVERAL LIABILITY; CONTRIBUTION&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in the instrument, two or more persons who have the same liability on an instrument as makers, drawers, acceptors, endorsers who indorse as joint payees, or anomalous indorsers are jointly and severally liable in the capacity in which they sign.&nbsp;</span></p> <p><span class="cls0">(b) Except as provided in subsection (f) of Section 3-419 of this title or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 105, &sect; 3-116. Amended by Laws 1991, c. 117, &sect; 41, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 4, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 4 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A3117. Other Agreements Affecting Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">OTHER AGREEMENTS AFFECTING INSTRUMENT&nbsp;</span></p> <p><span class="cls0">Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented, or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented, or nullified by an agreement under this section, the agreement is a defense to the obligation.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 105, &sect; 3117; Laws 1991, c. 117, &sect; 42, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3118. Statute of Limitations.&nbsp;</span></p> <p class="cls1"><span class="cls0">STATUTE OF LIMITATIONS&nbsp;</span></p> <p><span class="cls0">(a) Except as provided in subsection (e) of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.&nbsp;</span></p> <p><span class="cls0">(b) Except as provided in subsection (d) or (e) of this section, if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six (6) years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten (10) years.&nbsp;</span></p> <p><span class="cls0">(c) Except as provided in subsection (d) of this section, an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three (3) years after dishonor of the draft or ten (10) years after the date of the draft, whichever period expires first.&nbsp;</span></p> <p><span class="cls0">(d) An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller's check, cashier's check, or traveler's check must be commenced within three (3) years after demand for payment is made to the acceptor or issuer, as the case may be.&nbsp;</span></p> <p><span class="cls0">(e) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six (6) years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six-year period begins when a demand for payment is in effect and the due date has passed.&nbsp;</span></p> <p><span class="cls0">(f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced (i) within six (6) years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (ii) within six (6) years after the date of the acceptance if the obligation of the acceptor is payable on demand.&nbsp;</span></p> <p><span class="cls0">(g) Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty, or right arising under this article and not governed by this section must be commenced within three (3) years after the claim for relief accrues.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 105, &sect; 3118; Laws 1991, c. 117, &sect; 43, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-119. Notice of Right to Defend Action.&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTICE OF RIGHT TO DEFEND ACTION&nbsp;</span></p> <p><span class="cls0">In an action for breach of an obligation for which a third person is answerable over pursuant to this article or Article 4 of this title, the defendant may give the third person notice of the litigation in a record, and the person notified may then give similar notice to any other person who is answerable over. If the notice states (i) that the person notified may come in and defend and (ii) that failure to do so will bind the person notified in an action later brought by the person giving the notice as to any determination of fact common to the two litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 106, &sect; 3-119. Amended by Laws 1991, c. 117, &sect; 44, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 5, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 5 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-3-120. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-121. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-122. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A3201. Negotiation.&nbsp;</span></p> <p class="cls1"><span class="cls0">NEGOTIATION&nbsp;</span></p> <p><span class="cls0">(a) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.&nbsp;</span></p> <p><span class="cls0">(b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 106, &sect; 3201; Laws 1991, c. 117, &sect; 45, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3202. Negotiation Subject to Rescission.&nbsp;</span></p> <p class="cls1"><span class="cls0">NEGOTIATION SUBJECT TO RESCISSION&nbsp;</span></p> <p><span class="cls0">(a) Negotiation is effective even if obtained (i) from an infant, a corporation exceeding its powers, or a person without capacity, (ii) by fraud, duress, or mistake, or (iii) in breach of duty or as part of an illegal transaction.&nbsp;</span></p> <p><span class="cls0">(b) To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 107, &sect; 3202; Laws 1991, c. 117, &sect; 46, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3203. Transfer of Instrument; Rights Acquired by Transfer.&nbsp;</span></p> <p class="cls1"><span class="cls0">TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY TRANSFER&nbsp;</span></p> <p><span class="cls0">(a) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.&nbsp;</span></p> <p><span class="cls0">(b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.&nbsp;</span></p> <p><span class="cls0">(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.&nbsp;</span></p> <p><span class="cls0">(d) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this article and has only the rights of a partial assignee.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 107, &sect; 3203; Laws 1991, c. 117, &sect; 47, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3204. Indorsement.&nbsp;</span></p> <p class="cls1"><span class="cls0">INDORSEMENT&nbsp;</span></p> <p><span class="cls0">(a) "Indorsement" means a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser's liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.&nbsp;</span></p> <p><span class="cls0">(b) "Indorser" means a person who makes an indorsement.&nbsp;</span></p> <p><span class="cls0">(c) For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.&nbsp;</span></p> <p><span class="cls0">(d) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name stated in the instrument or in the holder's name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 107, &sect; 3204; Laws 1991, c. 117, &sect; 48, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3205. Special Indorsement; Blank Indorsement; Anomalous Indorsement.&nbsp;</span></p> <p class="cls1"><span class="cls0">SPECIAL INDORSEMENT; BLANK INDORSEMENT; ANOMALOUS INDORSEMENT&nbsp;</span></p> <p><span class="cls0">(a) If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a "special indorsement". When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in Section 3-110 of this title apply to special indorsements.&nbsp;</span></p> <p><span class="cls0">(b) If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a "blank indorsement". When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.&nbsp;</span></p> <p><span class="cls0">(c) The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.&nbsp;</span></p> <p><span class="cls0">(d) "Anomalous indorsement" means an indorsement made by a person who is not the holder of the instrument. An anomalous indorsement does not affect the manner in which the instrument may be negotiated.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 107, &sect; 3205; Laws 1991, c. 117, &sect; 49, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3206. Restrictive Indorsement.&nbsp;</span></p> <p class="cls1"><span class="cls0">RESTRICTIVE INDORSEMENT&nbsp;</span></p> <p><span class="cls0">(a) An indorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.&nbsp;</span></p> <p><span class="cls0">(b) An indorsement stating a condition to the right of the indorsee to receive payment does not affect the right of the indorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.&nbsp;</span></p> <p><span class="cls0">(c) If an instrument bears an indorsement (i) described in subsection (b) of Section 4-201 of this title, or (ii) in blank or to a particular bank using the words "for deposit", "for collection", or other words indicating a purpose of having the instrument collected by a bank for the indorser or for a particular account, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;A person, other than a bank, who purchases the instrument when so indorsed converts the instrument unless the amount paid for the instrument is received by the indorser or applied consistently with the indorsement;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;A depositary bank that purchases the instrument or takes it for collection when so indorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the indorser or applied consistently with the indorsement;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;A payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the indorser or applied consistently with the indorsement; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;Except as otherwise provided in paragraph (3) of this subsection, a payor bank or intermediary bank may disregard the indorsement and is not liable if the proceeds of the instrument are not received by the indorser or applied consistently with the indorsement.&nbsp;</span></p> <p><span class="cls0">(d) Except for an indorsement covered by subsection (c) of this section, if an instrument bears an indorsement using words to the effect that payment is to be made to the indorsee as agent, trustee, or other fiduciary for the benefit of the indorser or another person, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Unless there is notice of breach of fiduciary duty as provided in Section 3-307 of this title, a person who purchases the instrument from the indorsee or takes the instrument from the indorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;A subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the indorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.&nbsp;</span></p> <p><span class="cls0">(e) The presence on an instrument of an indorsement to which this section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a converter under subsection (c) of this section or has notice or knowledge of breach of fiduciary duty as stated in subsection (d) of this section.&nbsp;</span></p> <p><span class="cls0">(f) In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment would violate an indorsement to which this section applies and the payment is not permitted by this section.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 107, &sect; 3206; Laws 1991, c. 117, &sect; 50, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3207. Reacquisition.&nbsp;</span></p> <p class="cls1"><span class="cls0">REACQUISITION&nbsp;</span></p> <p><span class="cls0">Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel indorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An indorser whose indorsement is canceled is discharged, and the discharge is effective against any subsequent holder.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 108, &sect; 3207; Laws 1991, c. 117, &sect; 51, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-208. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A3301. Person Entitled to Enforce Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">PERSON ENTITLED TO ENFORCE INSTRUMENT&nbsp;</span></p> <p><span class="cls0">"Person entitled to enforce" an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or subsection (d) of Section 3-418 of this title. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 108, &sect; 3301; Laws 1991, c. 117, &sect; 52, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3302. Holder in Due Course.&nbsp;</span></p> <p class="cls1"><span class="cls0">HOLDER IN DUE COURSE&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (c) of this section and subsection (d) of Section 3-106 of this title, "holder in due course" means the holder of an instrument if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;the instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;the holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in Section 3-306 of this title, and (vi) without notice that any party has a defense or claim in recoupment described in subsection (a) of Section 3-305 of this title.&nbsp;</span></p> <p><span class="cls0">(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a) of this section, but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument.&nbsp;</span></p> <p><span class="cls0">(c) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken (i) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding, (ii) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organization.&nbsp;</span></p> <p><span class="cls0">(d) If, under paragraph (1) of subsection (a) of Section 3-303 of this title, the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.&nbsp;</span></p> <p><span class="cls0">(e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument and (ii) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.&nbsp;</span></p> <p><span class="cls0">(f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.&nbsp;</span></p> <p><span class="cls0">(g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 108, &sect; 3302; Laws 1991, c. 117, &sect; 53, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3303. Value and Consideration.&nbsp;</span></p> <p class="cls1"><span class="cls0">VALUE AND CONSIDERATION&nbsp;</span></p> <p><span class="cls0">(a) An instrument is issued or transferred for value if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;the instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;the transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;the instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;the instrument is issued or transferred in exchange for a negotiable instrument; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(5)&nbsp;&nbsp;the instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.&nbsp;</span></p> <p><span class="cls0">(b) "Consideration" means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in subsection (a) of this section, the instrument is also issued for consideration.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 108, &sect; 3303; Laws 1991, c. 117, &sect; 54, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3304. Overdue Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">OVERDUE INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) An instrument payable on demand becomes overdue at the earliest of the following times:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;on the day after the day demand for payment is duly made;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;if the instrument is a check, ninety (90) days after its date; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;if the instrument is not a check, when the instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.&nbsp;</span></p> <p><span class="cls0">(b) With respect to an instrument payable at a definite time the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;If the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.&nbsp;</span></p> <p><span class="cls0">(c) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 108, &sect; 3304; Laws 1991, c. 117, &sect; 55, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-305. Defenses and Claims in Recoupment.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFENSES AND CLAIMS IN RECOUPMENT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this section, the right to enforce the obligation of a party to pay an instrument is subject to the following:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;a defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;a defense of the obligor stated in another section of this article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;a claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.&nbsp;</span></p> <p><span class="cls0">(b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in paragraph (1) of subsection (a) of this section, but is not subject to defenses of the obligor stated in paragraph (2) of subsection (a) of this section or claims in recoupment stated in paragraph (3) of subsection (a) of this section against a person other than the holder.&nbsp;</span></p> <p><span class="cls0">(c) Except as stated in subsection (d) of this section, in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (Section 3-306 of this title) of another person, but the other person's claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.&nbsp;</span></p> <p><span class="cls0">(d) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection (a) of this section that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.&nbsp;</span></p> <p><span class="cls0">(e) This section is subject to law other than this article that establishes a different rule for consumer transactions.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 109, &sect; 3-305. Amended by Laws 1991, c. 117, &sect; 56, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 6, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 6 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A3306. Claims to an Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">CLAIMS TO AN INSTRUMENT&nbsp;</span></p> <p><span class="cls0">A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 109, &sect; 3306; Laws 1991, c. 117, &sect; 57, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3307. Notice of Breach of Fiduciary.&nbsp;</span></p> <p class="cls1"><span class="cls0">NOTICE OF BREACH OF FIDUCIARY DUTY&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;"Fiduciary" means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;"Represented person" means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph (1) of this subsection is owed.&nbsp;</span></p> <p><span class="cls0">(b) If (i) an instrument is taken from a fiduciary for payment or collection or for value, (ii) the taker has knowledge of the fiduciary status of the fiduciary, and (iii) the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;In the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;If an instrument is issued by the represented person or the fiduciary as such, and made payable to the fiduciary personally, the taker does not have notice of the breach of fiduciary duty unless the taker knows of the breach of fiduciary duty; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;If an instrument is issued by the represented person or the fiduciary as such, to the taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 110, &sect; 3307. Amended by Laws 1991, c. 117, &sect; 58, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-308. Proof of Signatures and Status as Holder in Due Course.&nbsp;</span></p> <p class="cls1"><span class="cls0">PROOF OF SIGNATURES AND STATUS AS HOLDER IN DUE COURSE&nbsp;</span></p> <p><span class="cls0">(a) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under subsection (a) of Section 65 of this act.&nbsp;</span></p> <p><span class="cls0">(b) If the validity of signatures is admitted or proved and there is compliance with subsection (a) of this section, a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under Section 52 of this act, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 59, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-309. Enforcement of Lost, Destroyed, or Stolen Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">ENFORCEMENT OF LOST, DESTROYED, OR STOLEN INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) A person not in possession of an instrument is entitled to enforce the instrument if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;the person seeking to enforce the instrument:&nbsp;</span></p> <p class="cls4"><span class="cls0">(A)&nbsp;&nbsp;was entitled to enforce the instrument when loss of possession occurred; or&nbsp;</span></p> <p class="cls4"><span class="cls0">(B)&nbsp;&nbsp;has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;the loss of possession was not the result of a transfer by the person or a lawful seizure; and &nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.&nbsp;</span></p> <p><span class="cls0">(b) A person seeking enforcement of an instrument under subsection (a) of this section must prove the terms of the instrument and the person's right to enforce the instrument. If that proof is made, Section 3-308 of this title applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 60, eff. Jan. 1, 1992. Amended by Laws 2009, c. 208, &sect; 7, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 7 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-3-310. Effect of Instrument on Obligation for Which Taken.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF INSTRUMENT ON OBLIGATION FOR WHICH TAKEN&nbsp;</span></p> <p><span class="cls0">(a) Unless otherwise agreed, if a certified check, cashier's check, or teller's check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an indorser of the instrument.&nbsp;</span></p> <p><span class="cls0">(b) Unless otherwise agreed and except as provided in subsection (a) of this section, if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;In the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in discharge of the obligation to the extent of the payment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;Except as provided in paragraph (4) of this subsection, if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation. In the case of an instrument of a third person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;If the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended. If the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen, or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee's rights against the obligor are limited to enforcement of the instrument.&nbsp;</span></p> <p><span class="cls0">(c) If an instrument other than one described in subsection (a) or (b) of this section is taken for an obligation, the effect is (i) that stated in subsection (a) of this section if the instrument is one on which a bank is liable as maker or acceptor, or (ii) that stated in subsection (b) of this section in any other case.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 61, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-311. Accord and Satisfaction by Use of Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCORD AND SATISFACTION BY USE OF INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) If a person against whom a claim is asserted proves that (i)&nbsp;</span></p> <p><span class="cls0">that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.&nbsp;</span></p> <p><span class="cls0">(b) Unless subsection (c) of this section applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.&nbsp;</span></p> <p><span class="cls0">(c) Subject to subsection (d) of this section, a claim is not discharged under subsection (b) of this section if either of the following applies:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The claimant, if an organization, proves that (i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (ii) the instrument or accompanying communication was not received by that designated person, office or place; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The claimant, whether or not an organization, proves that within ninety (90) days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with subparagraph (i) of paragraph (1) of this subsection.&nbsp;</span></p> <p><span class="cls0">(d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 62, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-312. Lost, Destroyed, or Stolen Cashier's Check, Teller's Check, or Certified Check.&nbsp;</span></p> <p class="cls1"><span class="cls0">LOST, DESTROYED, OR STOLEN CASHIER'S CHECK,&nbsp;</span></p> <p class="cls1"><span class="cls0">TELLER'S CHECK, OR CERTIFIED CHECK&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;"Check" means a cashier's check, teller's check, or certified check;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;"Claimant" means a person who claims the right to receive the amount of a cashier's check, teller's check, or certified check that was lost, destroyed, or stolen;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;"Declaration of loss" means a statement, made in a record under penalty of perjury, to the effect that (i) the declarer lost possession of a check, (ii) the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier's or teller's check, (iii) the loss of possession was not the result of a transfer by the declarer or a lawful seizure, and (iv) the declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;"Obligated bank" means the issuer of a cashier's check or a teller's check or the acceptor of a certified check.&nbsp;</span></p> <p><span class="cls0">(b) A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if (i) the claimant is the drawer or payee of a certified check or the remitter or payee of a cashier's check or teller's check, (ii) the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check, (iii) the communication is received at a time and in a manner affording the bank reasonable time to act on it before the check is paid, and (iv) the claimant provides reasonable identification if requested by the obligated bank. Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration. If a claim is asserted in compliance with this subsection, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The claim becomes enforceable at the later of (i) the time the claim is asserted, or (ii) the ninetieth (90th) day following the date of the check, in the case of a cashier's check or teller's check, or the ninetieth (90th) day following the date of the acceptance, in the case of a certified check;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller's check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;When the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to paragraph (1) of subsection (a) of Section 4-302 of this title, payment to the claimant discharges all liability of the obligated bank with respect to the check.&nbsp;</span></p> <p><span class="cls0">(c) If the obligated bank pays the amount of a check to a claimant under paragraph (4) of subsection (b) of this section and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to (i) refund the payment to the obligated bank if the check is paid, or (ii) pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.&nbsp;</span></p> <p><span class="cls0">(d) If a claimant has the right to assert a claim under subsection (b) of this section and is also a person entitled to enforce a cashier's check, teller's check, or certified check which is lost, destroyed, or stolen, the claimant may assert rights with respect to the check either under this section or Section 3-309 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 63, eff. Jan. 1, 1992. Amended by Laws 2009, c. 208, &sect; 8, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 8 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3401. Signature.&nbsp;</span></p> <p class="cls1"><span class="cls0">SIGNATURE&nbsp;</span></p> <p><span class="cls0">(a) A person is not liable on an instrument unless (i) the person signed the instrument, or (ii) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under Section 3-402 of this title.&nbsp;</span></p> <p><span class="cls0">(b) A signature may be made (i) manually or by means of a device or machine, and (ii) by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 110, &sect; 3401; Laws 1991, c. 117, &sect; 64, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3402. Signature by Representative.&nbsp;</span></p> <p class="cls1"><span class="cls0">SIGNATURE BY REPRESENTATIVE&nbsp;</span></p> <p><span class="cls0">(a) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the "authorized signature of the represented person" and the represented person is liable on the instrument, whether or not identified in the instrument.&nbsp;</span></p> <p><span class="cls0">(b) If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Subject to subsection (c) of this section, if (i) the form of the signature does not show unambiguously that the signature is made in a representative capacity or (ii) the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.&nbsp;</span></p> <p><span class="cls0">(c) If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 110, &sect; 3402; Laws 1991, c. 117, &sect; 65, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3403. Unauthorized Signature.&nbsp;</span></p> <p class="cls1"><span class="cls0">UNAUTHORIZED SIGNATURE&nbsp;</span></p> <p><span class="cls0">(a) Unless otherwise provided in this article or Article 4 of this title, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this article.&nbsp;</span></p> <p><span class="cls0">(b) If the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.&nbsp;</span></p> <p><span class="cls0">(c) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this article which makes the unauthorized signature effective for the purposes of this article.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 110, &sect; 3-403; Laws 1991, c. 117, &sect; 66, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3404. Impostors; Fictitious Payees.&nbsp;</span></p> <p class="cls1"><span class="cls0">IMPOSTORS; FICTITIOUS PAYEES&nbsp;</span></p> <p><span class="cls0">(a) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an indorsement of the instrument by any person in the name of the payee is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.&nbsp;</span></p> <p><span class="cls0">(b) If (i) a person whose intent determines to whom an instrument is payable (subsection (a) or (b) of Section 3-110 of this title) does not intend the person identified as payee to have any interest in the instrument, or (ii) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special indorsement:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Any person in possession of the instrument is its holder; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;An indorsement by any person in the name of the payee stated in the instrument is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.&nbsp;</span></p> <p><span class="cls0">(c) Under subsection (a) or (b) of this section, an indorsement is made in the name of a payee if (i) it is made in a name substantially similar to that of the payee or (ii) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.&nbsp;</span></p> <p><span class="cls0">(d) With respect to an instrument to which subsection (a) or (b) of this section applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 110, &sect; 3-404; Laws 1991, c. 117, &sect; 67, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3405. Employer's Responsibility for Fraudulent Indorsement by Employee.&nbsp;</span></p> <p class="cls1"><span class="cls0">EMPLOYER'S RESPONSIBILITY FOR FRAUDULENT&nbsp;</span></p> <p class="cls5"><span class="cls0"> INDORSEMENT BY EMPLOYEE&nbsp;</span></p> <p><span class="cls0">(a) In this section:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;"Employee" includes an independent contractor and employee of an independent contractor retained by the employer;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;"Fraudulent indorsement" means (i) in the case of an instrument payable to the employer, a forged indorsement purporting to be that of the employer, or (ii) in the case of an instrument with respect to which the employer is the issuer, a forged indorsement purporting to be that of the person identified as payee; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;"Responsibility" with respect to instruments means authority (i) to sign or indorse instruments on behalf of the employer, (ii) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (iii) to prepare or process instruments for issue in the name of the employer, (iv) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (v) to control the disposition of instruments to be issued in the name of the employer, or (vi) to act otherwise with respect to instruments in a responsible capacity. "Responsibility" does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.&nbsp;</span></p> <p><span class="cls0">(b) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent indorsement of the instrument, the indorsement is effective as the indorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.&nbsp;</span></p> <p><span class="cls0">(c) Under subsection (b) of this section, an indorsement is made in the name of the person to whom an instrument is payable if (i) it is made in a name substantially similar to the name of that person or (ii) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 111, &sect; 3405; Laws 1991, c. 117, &sect; 68, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3406. Negligence Contributing to Forged Signature or Alteration of Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">NEGLIGENCE CONTRIBUTING TO FORGED SIGNATURE&nbsp;</span></p> <p class="cls1"><span class="cls0">OR ALTERATION OF INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.&nbsp;</span></p> <p><span class="cls0">(b) Under subsection (a) of this section, if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.&nbsp;</span></p> <p><span class="cls0">(c) Under subsection (a) of this section, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b) of this section, the burden of proving failure to exercise ordinary care is on the person precluded.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 111, &sect; 3406; Laws 1991, c. 117, &sect; 69, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3407. Alteration.&nbsp;</span></p> <p class="cls1"><span class="cls0">ALTERATION&nbsp;</span></p> <p><span class="cls0">(a) "Alteration" means (i) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or (ii) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.&nbsp;</span></p> <p><span class="cls0">(b) Except as provided in subsection (c) of this section, an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.&nbsp;</span></p> <p><span class="cls0">(c) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument (i) according to its original terms, or (ii) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 111, &sect; 3407; Laws 1991, c. 117, &sect; 70, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3408. Drawee Not Liable on Unaccepted Draft.&nbsp;</span></p> <p class="cls1"><span class="cls0">DRAWEE NOT LIABLE ON UNACCEPTED DRAFT&nbsp;</span></p> <p><span class="cls0">A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 111, &sect; 3408; Laws 1991, c. 117, &sect; 71, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3409. Acceptance of Draft; Certified Check.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCEPTANCE OF DRAFT; CERTIFIED CHECK&nbsp;</span></p> <p><span class="cls0">(a) "Acceptance" means the drawee's signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee's signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.&nbsp;</span></p> <p><span class="cls0">(b) A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.&nbsp;</span></p> <p><span class="cls0">(c) If a draft is payable at a fixed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith.&nbsp;</span></p> <p><span class="cls0">(d) "Certified check" means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection (a) of this section or by a writing on the check which indicates that the check is certified. The drawee of a check has no obligation to certify the check, and refusal to certify is not dishonor of the check.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 111, &sect; 3409; Laws 1991, c. 117, &sect; 72, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3410. Acceptance Varying Draft.&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCEPTANCE VARYING DRAFT&nbsp;</span></p> <p><span class="cls0">(a) If the terms of a drawee's acceptance vary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the drawee may cancel the acceptance.&nbsp;</span></p> <p><span class="cls0">(b) The terms of a draft are not varied by an acceptance to pay at a particular bank or place in the United States, unless the acceptance states that the draft is to be paid only at that bank or place.&nbsp;</span></p> <p><span class="cls0">(c) If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and indorser that does not expressly assent to the acceptance is discharged.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 111, &sect; 3410; Laws 1991, c. 117, &sect; 73, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3411. Refusal to Pay Cashier's Checks, Teller's Checks, and Certified Checks.&nbsp;</span></p> <p class="cls1"><span class="cls0">REFUSAL TO PAY CASHIER'S CHECKS,&nbsp;</span></p> <p class="cls1"><span class="cls0">TELLER'S CHECKS, AND CERTIFIED CHECKS&nbsp;</span></p> <p><span class="cls0">(a) In this section, "obligated bank" means the acceptor of a certified check or the issuer of a cashier's check or teller's check bought from the issuer.&nbsp;</span></p> <p><span class="cls0">(b) If the obligated bank wrongfully (i) refuses to pay a cashier's check or certified check, (ii) stops payment of a teller's check, or (iii) refuses to pay a dishonored teller's check, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.&nbsp;</span></p> <p><span class="cls0">(c) Expenses or consequential damages under subsection (b) of this section are not recoverable if the refusal of the obligated bank to pay occurs because (i) the bank suspends payments, (ii) the obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument, (iii) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or (iv) payment is prohibited by law.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 112, &sect; 3411; Laws 1991, c. 117, &sect; 74, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3412. Obligation of Issuer of Note or Cashier's Check.&nbsp;</span></p> <p class="cls1"><span class="cls0"> OBLIGATION OF ISSUER OF NOTE OR CASHIER'S CHECK&nbsp;</span></p> <p><span class="cls0">The issuer of a note or cashier's check or other draft drawn on the drawer is obliged to pay the instrument (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407 of this title. The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under Section 3-415 of this title.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 112, &sect; 3412; Laws 1991, c. 117, &sect; 75, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3413. Obligation of Acceptor.&nbsp;</span></p> <p class="cls1"><span class="cls0">OBLIGATION OF ACCEPTOR&nbsp;</span></p> <p><span class="cls0">(a) The acceptor of a draft is obliged to pay the draft (i) according to its terms at the time it was accepted, even though the acceptance states that the draft is payable "as originally drawn" or equivalent terms, (ii) if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or (iii) if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407 of this title. The obligation is owed to a person entitled to enforce the draft or to the drawer or an indorser who paid the draft under Section 3-414 or 3-415 of this title.&nbsp;</span></p> <p><span class="cls0">(b) If the certification of a check or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If (i) the certification or acceptance does not state an amount, (ii) the amount of the instrument is subsequently raised, and (iii) the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it was taken by the holder in due course.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 112, &sect; 3413; Laws 1991, c. 117, &sect; 76, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3414. Obligation of Drawer.&nbsp;</span></p> <p class="cls1"><span class="cls0"> OBLIGATION OF DRAWER&nbsp;</span></p> <p><span class="cls0">(a) This section does not apply to cashier's checks or other drafts drawn on the drawer.&nbsp;</span></p> <p><span class="cls0">(b) If an unaccepted draft is dishonored, the drawer is obliged to pay the draft (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407 of this title. The obligation is owed to a person entitled to enforce the draft or to an indorser who paid the draft under Section 3-415 of this title.&nbsp;</span></p> <p><span class="cls0">(c) If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.&nbsp;</span></p> <p><span class="cls0">(d) If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an indorser under subsections (a) and (c) of Section 3-415 of this title.&nbsp;</span></p> <p><span class="cls0">(e) If a draft states that it is drawn "without recourse" or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under subsection (b) of this section to pay the draft if the draft is not a check. A disclaimer of the liability stated in subsection (b) of this section is not effective if the draft is a check.&nbsp;</span></p> <p><span class="cls0">(f) If (i) a check is not presented for payment or given to a depositary bank for collection within thirty (30) days after its date, (ii) the drawee suspends payments after expiration of the thirty-day period without paying the check, and (iii) because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge its obligation to pay the check by assigning to the person entitled to enforce the check the rights of the drawer against the drawee with respect to the funds.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 112, &sect; 3414; Laws 1991, c. 117, &sect; 77, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3415. Obligation of Indorser.&nbsp;</span></p> <p class="cls1"><span class="cls0">OBLIGATION OF INDORSER&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsections (b), (c), (d), and (e) of this section and to subsection (d) of Section 3-419 of this title, if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in Section 3-115 and 3-407 of this title. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section.&nbsp;</span></p> <p><span class="cls0">(b) If an indorsement states that it is made "without recourse" or otherwise disclaims liability of the indorser, the indorser is not liable under subsection (a) of this section to pay the instrument.&nbsp;</span></p> <p><span class="cls0">(c) If notice of dishonor of an instrument is required by Section 3-503 of this title and notice of dishonor complying with that section is not given to an indorser, the liability of the indorser under subsection (a) of this section is discharged.&nbsp;</span></p> <p><span class="cls0">(d) If a draft is accepted by a bank after an indorsement is made, the liability of the indorser under subsection (a) of this section is discharged.&nbsp;</span></p> <p><span class="cls0">(e) If an indorser of a check is liable under subsection (a) of this section and the check is not presented for payment, or given to a depositary bank for collection, within thirty (30) days after the day the indorsement was made, the liability of the indorser under subsection (a) of this section is discharged.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 112, &sect; 3415; Laws 1991, c. 117, &sect; 78, eff. Jan. 1, 1992; Laws 1994, c. 46, &sect; 4, eff. Sept. 1, 1994.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3416. Transfer Warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">TRANSFER WARRANTIES&nbsp;</span></p> <p><span class="cls0">(a) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by indorsement, to any subsequent transferee that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The warrantor is a person entitled to enforce the instrument;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;All signatures on the instrument are authentic and authorized;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;The instrument has not been altered;&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(5)&nbsp;&nbsp;The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.&nbsp;</span></p> <p><span class="cls0">(b) A person to whom the warranties under subsection (a) of this section are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.&nbsp;</span></p> <p><span class="cls0">(c) The warranties stated in subsection (a) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (b) of this section is discharged to the extent of any loss caused by the delay in giving notice of the claim.&nbsp;</span></p> <p><span class="cls0">(d) A claim for relief for breach of warranty under this section accrues when the claimant has reason to know of the breach.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 112, &sect; 3416; Laws 1991, c. 117, &sect; 79, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3417. Presentment Warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRESENTMENT WARRANTIES&nbsp;</span></p> <p><span class="cls0">(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The draft has not been altered; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;The warrantor has no knowledge that the signature of the drawer of the draft is unauthorized.&nbsp;</span></p> <p><span class="cls0">(b) A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.&nbsp;</span></p> <p><span class="cls0">(c) If a drawee asserts a claim for breach of warranty under subsection (a) of this section based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under Section 3-404 or 3-405 of this title or the drawer is precluded under Section 3-406 or 4-406 of this title from asserting against the drawee the unauthorized indorsement or alteration.&nbsp;</span></p> <p><span class="cls0">(d) If (i) a dishonored draft is presented for payment to the drawer or an indorser or (ii) any other instrument is presented for payment to a party obliged to pay the instrument, and (iii) payment is received, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.&nbsp;</span></p> <p><span class="cls0">(e) The warranties stated in subsections (a) and (d) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (b) or (d) of this section is discharged to the extent of any loss caused by the delay in giving notice of the claim.&nbsp;</span></p> <p><span class="cls0">(f) A claim for relief for breach of warranty under this section accrues when the claimant has reason to know of the breach.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 113, &sect; 3417; Laws 1991, c. 117, &sect; 80, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3418. Payment or Acceptance by Mistake.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYMENT OR ACCEPTANCE BY MISTAKE&nbsp;</span></p> <p><span class="cls0">(a) Except as provided in subsection (c) of this section, if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that (i) payment of the draft had not been stopped pursuant to Section 4-403 of this title or (ii) the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.&nbsp;</span></p> <p><span class="cls0">(b) Except as provided in subsection (c) of this section, if an instrument has been paid or accepted by mistake and the case is not covered by subsection (a) of this section, the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (i) recover the payment from the person to whom or for whose benefit payment was made or (ii) in the case of acceptance, may revoke the acceptance.&nbsp;</span></p> <p><span class="cls0">(c) The remedies provided by subsection (a) or (b) of this section may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by Section 3-417 or 4-407 of this title.&nbsp;</span></p> <p><span class="cls0">(d) Notwithstanding Section 4-215 of this title, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection (a) or (b) of this section, the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 114, &sect; 3418; Laws 1991, c. 117, &sect; 81, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-419. Instruments Signed for Accommodation.&nbsp;</span></p> <p class="cls1"><span class="cls0">INSTRUMENTS SIGNED FOR ACCOMMODATION&nbsp;</span></p> <p><span class="cls0">(a) If an instrument is issued for value given for the benefit of a party to the instrument ("accommodated party") and another party to the instrument ("accommodation party") signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party "for accommodation".&nbsp;</span></p> <p><span class="cls0">(b) An accommodation party may sign the instrument as maker, drawer, acceptor, or indorser and, subject to subsection (d) of this section, is obliged to pay the instrument in the capacity in which the accommodation party signs. The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives consideration for the accommodation.&nbsp;</span></p> <p><span class="cls0">(c) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous indorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. Except as provided in Section 3-605 of this title, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.&nbsp;</span></p> <p><span class="cls0">(d) If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if (i) execution of judgment against the other party has been returned unsatisfied, (ii) the other party is insolvent or in an insolvency proceeding, (iii) the other party cannot be served with process, or (iv) it is otherwise apparent that payment cannot be obtained from the other party.&nbsp;</span></p> <p><span class="cls0">(e) If the signature of a party to an instrument is accompanied by words indicating that the party guarantees payment or the signer signs the instrument as an accommodation party in some other manner that does not unambiguously indicate an intention to guarantee collection rather than payment, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument in the same circumstances as the accommodated party would be obliged, without prior resort to the accommodated party by the person entitled to enforce the instrument.&nbsp;</span></p> <p><span class="cls0">(f) An accommodation party that pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. In proper circumstances, an accommodation party may obtain relief that requires the accommodated party to perform its obligations on the instrument. An accommodated party that pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 114, &sect; 3-419. Amended by Laws 1991, c. 117, &sect; 82, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 9, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 9 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-3-420. Conversion of Instrument.&nbsp;</span></p> <p class="cls1"><span class="cls0">CONVERSION OF INSTRUMENT&nbsp;</span></p> <p><span class="cls0">(a) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.&nbsp;</span></p> <p><span class="cls0">(b) In an action under subsection (a) of this section, the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff's interest in the instrument.&nbsp;</span></p> <p><span class="cls0">(c) A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 83, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3501. Presentment.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRESENTMENT&nbsp;</span></p> <p><span class="cls0">(a) "Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.&nbsp;</span></p> <p><span class="cls0">(b) The following rules are subject to Article 4 of this title, agreement of the parties, and clearing-house rules and the like:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written, or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one of two or more makers, acceptors, drawees, or other payors;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument, (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;Without dishonoring the instrument, the party to whom presentment is made may (i) return the instrument for lack of a necessary indorsement, or (ii) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cutoff hour not earlier than 2 o'clock p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cutoff hour.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 114, &sect; 3501; Laws 1970, c. 246, &sect; 2; Laws 1991, c. 117, &sect; 84, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3502. Dishonor.&nbsp;</span></p> <p class="cls9"><span class="cls0">DISHONOR&nbsp;</span></p> <p><span class="cls0">(a) Dishonor of a note is governed by the following rules:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;If the note is not payable on demand and paragraph (2) of this subsection does not apply, the note is dishonored if it is not paid on the day it becomes payable.&nbsp;</span></p> <p><span class="cls0">(b) Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under Section 4-301 or 4-302 of this title, or becomes accountable for the amount of the check under Section 4-302 of this title;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;If a draft is payable on demand and paragraph (1) of this subsection does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;If a draft is payable on a date stated in the draft, the draft is dishonored if (i) presentment for payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later, or (ii) presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.&nbsp;</span></p> <p><span class="cls0">(c) Dishonor of an unaccepted documentary draft occurs according to the rules stated in paragraphs (2), (3) and (4) of subsection (b) of this section, except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by those paragraphs.&nbsp;</span></p> <p><span class="cls0">(d) Dishonor of an accepted draft is governed by the following rules:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.&nbsp;</span></p> <p><span class="cls0">(e) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under Section 3-504 of this title, dishonor occurs without presentment if the instrument is not duly accepted or paid.&nbsp;</span></p> <p><span class="cls0">(f) If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 115, &sect; 3502; Laws 1991, c. 117, &sect; 85, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3503. Notice of Dishonor.&nbsp;</span></p> <p class="cls10"><span class="cls0">NOTICE OF DISHONOR&nbsp;</span></p> <p><span class="cls0">(a) The obligation of an indorser stated in subsection (a) of Section 3-415 of this title and the obligation of a drawer stated in subsection (d) of Section 3-414 of this title may not be enforced unless (i) the indorsers or drawer is given notice of dishonor of the instrument complying with this section or (ii) notice of dishonor is excused under subsection (b) of Section 3-504 of this title.&nbsp;</span></p> <p><span class="cls0">(b) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written, or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.&nbsp;</span></p> <p><span class="cls0">(c) Subject to subsection (c) of Section 3-504 of this title, with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (i) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or (ii) by any other person within thirty (30) days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within thirty (30) days following the day on which dishonor occurs.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 115, &sect; 3503; Laws 1991, c. 117, &sect; 86, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3504. Excused Presentment and Notice of Dishonor.&nbsp;</span></p> <p class="cls1"><span class="cls0">EXCUSED PRESENTMENT AND NOTICE OF DISHONOR&nbsp;</span></p> <p><span class="cls0">(a) Presentment for payment or acceptance of an instrument is excused if (i) the person entitled to present the instrument cannot with reasonable diligence make presentment, (ii) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings, (iii) by the terms of the instrument presentment is not necessary to enforce the obligation of indorsers or the drawer, (iv) the drawer or indorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted, or (v) the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.&nbsp;</span></p> <p><span class="cls0">(b) Notice of dishonor is excused if (i) by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or (ii) the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.&nbsp;</span></p> <p><span class="cls0">(c) Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 115, &sect; 3504; Laws 1991, c. 117, &sect; 87, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A3505. Evidence of Dishonor.&nbsp;</span></p> <p class="cls1"><span class="cls0">EVIDENCE OF DISHONOR&nbsp;</span></p> <p><span class="cls0">(a) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;A document regular in form as provided in subsection (b) of this section which purports to be a protest;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;A purported stamp or writing of the drawee, payor bank, or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;A book or record of the drawee, payor bank, or collecting bank, kept in the usual course of business which shows dishonor, even if there is no evidence of who made the entry.&nbsp;</span></p> <p><span class="cls0">(b) A protest is a certificate of dishonor made by a United States consul or vice consul, or a notary public or other person authorized to administer oaths by the law of the place where dishonor occurs. It may be made upon information satisfactory to that person. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 116, &sect; 3505; Laws 1991, c. 117, &sect; 88, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-506. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-507. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-508. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-509. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-510. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-511. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A3601. Discharge and Effect of Discharge.&nbsp;</span></p> <p class="cls1"><span class="cls0">DISCHARGE AND EFFECT OF DISCHARGE&nbsp;</span></p> <p><span class="cls0">(a) The obligation of a party to pay the instrument is discharged as stated in this article or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.&nbsp;</span></p> <p><span class="cls0">(b) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 118, &sect; 3601; Laws 1991, c. 117, &sect; 89, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-602. Payment.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYMENT&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (e) of this section, an instrument is paid to the extent payment is made by or on behalf of a party obliged to pay the instrument, and to a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under Section 3-306 of this title by another person.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (e) of this section, a note is paid to the extent payment is made by or on behalf of a party obliged to pay the note to a person that formerly was entitled to enforce the note only if at the time of the payment the party obliged to pay has not received adequate notification that the note has been transferred and that payment is to be made to the transferee. A notification is adequate only if it is signed by the transferor or the transferee, reasonably identifies the transferred note, and provides an address at which payments subsequently are to be made. Upon request, a transferee shall seasonably furnish reasonable proof that the note has been transferred. Unless the transferee complies with the request, a payment to the person that formerly was entitled to enforce the note is effective for purposes of subsection (c) of this section even if the party obliged to pay the note has received a notification under this subsection.&nbsp;</span></p> <p><span class="cls0">(c) Subject to subsection (e) of this section, to the extent of a payment under subsections (a) and (b) of this section, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under Section 3-306 of this title by another person.&nbsp;</span></p> <p><span class="cls0">(d) Subject to subsection (e) of this section, a transferee, or any party that has acquired rights in the instrument directly or indirectly from a transferee, including any such party that has rights as a holder in due course, is deemed to have notice of any payment that is made under subsection (b) of this section after the date that the note is transferred to the transferee but before the party obliged to pay the note receives adequate notification of the transfer.&nbsp;</span></p> <p><span class="cls0">(e) The obligation of a party to pay the instrument is not discharged under subsections (a) through (d) of this section if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;A claim to the instrument under Section 3-306 of this title is enforceable against the party receiving payment and (i) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or (ii) in the case of an instrument other than a cashier's check, teller's check, or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The person making payment knows that the instrument is a stolen instrument and pays a person it knows is in wrongful possession of the instrument.&nbsp;</span></p> <p><span class="cls0">(f) As used in this section, &ldquo;signed&rdquo;, with respect to a record that is not a writing, includes the attachment to or logical association with the record of an electronic symbol, sound, or process with the present intent to adopt or accept the record.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 118, &sect; 3-602. Amended by Laws 1991, c. 117, &sect; 90, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 10, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 10 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A3603. Tender of Payment.&nbsp;</span></p> <p class="cls1"><span class="cls0">TENDER OF PAYMENT&nbsp;</span></p> <p><span class="cls0">(a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.&nbsp;</span></p> <p><span class="cls0">(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.&nbsp;</span></p> <p><span class="cls0">(c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 118, &sect; 3603; Laws 1991, c. 117, &sect; 91, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-3-604. Discharge by Cancellation or Renunciation.&nbsp;</span></p> <p class="cls1"><span class="cls0">DISCHARGE BY CANCELLATION OR RENUNCIATION&nbsp;</span></p> <p><span class="cls0">(a) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (i) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation, or cancellation of the instrument, cancellation or striking out of the party's signature, or the addition of words to the instrument indicating discharge, or (ii) by agreeing not to sue or otherwise renouncing rights against the party by a signed record.&nbsp;</span></p> <p><span class="cls0">(b) Cancellation or striking out of an indorsement pursuant to subsection (a) of this section does not affect the status and rights of a party derived from the indorsement.&nbsp;</span></p> <p><span class="cls0">(c) As used in this section, &ldquo;signed&rdquo;, with respect to a record that is not a writing, includes the attachment to or logical association with the record of an electronic symbol, sound, or process with the present intent to adopt or accept the record.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 119, &sect; 3-604. Amended by Laws 1991, c. 117, &sect; 92, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 11, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 11 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-3-605. Discharge of Secondary Obligors.&nbsp;</span></p> <p class="cls1"><span class="cls0">DISCHARGE OF SECONDARY OBLIGORS&nbsp;</span></p> <p><span class="cls0">(a) If a person entitled to enforce an instrument releases the obligation of a principal obligor in whole or in part, and another party to the instrument is a secondary obligor with respect to the obligation of that principal obligor, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Any obligations of the principal obligor to the secondary obligor with respect to any previous payment by the secondary obligor are not affected. Unless the terms of the release preserve the secondary obligor&rsquo;s recourse, the principal obligor is discharged, to the extent of the release, from any other duties to the secondary obligor under this article.&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Unless the terms of the release provide that the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor, the secondary obligor is discharged to the same extent as the principal obligor from any unperformed portion of its obligation on the instrument. If the instrument is a check and the obligation of the secondary obligor is based on an indorsement of the check, the secondary obligor is discharged without regard to the language or circumstances of the discharge or other release.&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;If the secondary obligor is not discharged under paragraph (2) of this subsection, the secondary obligor is discharged to the extent of the value of the consideration for the release, and to the extent that the release would otherwise cause the secondary obligor a loss.&nbsp;</span></p> <p><span class="cls0">(b) If a person entitled to enforce an instrument grants a principal obligor an extension of the time at which one or more payments are due on the instrument and another party to the instrument is a secondary obligor with respect to the obligation of that principal obligor, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Any obligations of the principal obligor to the secondary obligor with respect to any previous payment by the secondary obligor are not affected. Unless the terms of the extension preserve the secondary obligor&rsquo;s recourse, the extension correspondingly extends the time for performance of any other duties owed to the secondary obligor by the principal obligor under this article.&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The secondary obligor is discharged to the extent that the extension would otherwise cause the secondary obligor a loss.&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;To the extent that the secondary obligor is not discharged under paragraph (2) of this subsection, the secondary obligor may perform its obligations to a person entitled to enforce the instrument as if the time for payment had not been extended or, unless the terms of the extension provide that the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor as if the time for payment had not been extended, treat the time for performance of its obligations as having been extended correspondingly.&nbsp;</span></p> <p><span class="cls0">(c) If a person entitled to enforce an instrument agrees, with or without consideration, to a modification of the obligation of a principal obligor other than a complete or a partial release or an extension of the due date and another party to the instrument is a secondary obligor with respect to the obligation of that principal obligor, the following rules apply:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Any obligations of the principal obligor to the secondary obligor with respect to any previous payment by the secondary obligor are not affected. The modification correspondingly modifies any other duties owed to the secondary obligor by the principal obligor under this article.&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The secondary obligor is discharged from any unperformed portion of its obligation to the extent that the modification would otherwise cause the secondary obligor a loss.&nbsp;</span></p> <p><span class="cls0">(3)&nbsp;&nbsp;To the extent that the secondary obligor is not discharged under paragraph (2) of this subsection, the secondary obligor may satisfy its obligation on the instrument as if the modification had not occurred, or treat its obligation on the instrument as having been modified correspondingly. &nbsp;</span></p> <p><span class="cls0">(d) If the obligation of a principal obligor is secured by an interest in collateral, another party to the instrument is a secondary obligor with respect to that obligation, and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of the secondary obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent the value of the interest is reduced to an amount less than the amount of the recourse of the secondary obligor, or the reduction in value of the interest causes an increase in the amount by which the amount of the recourse exceeds the value of the interest. For purposes of this subsection, impairing the value of an interest in collateral includes failure to obtain or maintain perfection or recordation of the interest in collateral, release of collateral without substitution of collateral of equal value or equivalent reduction of the underlying obligation, failure to perform a duty to preserve the value of collateral owed, under Article 9 of the Uniform Commercial Code or other law, to a debtor or other person secondarily liable, and failure to comply with applicable law in disposing of or otherwise enforcing the interest in collateral.&nbsp;</span></p> <p><span class="cls0">(e) A secondary obligor is not discharged under paragraph (3) of subsection (a) of this section or subsections (b), (c), or (d) of this section unless the person entitled to enforce the instrument knows that the person is a secondary obligor or has notice under subsection (c) of Section 3-419 of this title that the instrument was signed for accommodation.&nbsp;</span></p> <p><span class="cls0">(f) A secondary obligor is not discharged under this section if the secondary obligor consents to the event or conduct that is the basis of the discharge, or the instrument or a separate agreement of the party provides for waiver of discharge under this section specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral. Unless the circumstances indicate otherwise, consent by the principal obligor to an act that would lead to a discharge under this section constitutes consent to that act by the secondary obligor if the secondary obligor controls the principal obligor or deals with the person entitled to enforce the instrument on behalf of the principal obligor.&nbsp;</span></p> <p><span class="cls0">(g) A release or extension preserves a secondary obligor&rsquo;s recourse if the terms of the release or extension provide that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;the recourse of the secondary obligor continues as if the release or extension had not been granted.&nbsp;</span></p> <p><span class="cls0">(h) Except as otherwise provided in subsection (i) of this section, a secondary obligor asserting discharge under this section has the burden of persuasion both with respect to the occurrence of the acts alleged to harm the secondary obligor and loss or prejudice caused by those acts.&nbsp;</span></p> <p><span class="cls0">(i) If the secondary obligor demonstrates prejudice caused by an impairment of its recourse, and the circumstances of the case indicate that the amount of loss is not reasonably susceptible of calculation or requires proof of facts that are not ascertainable, it is presumed that the act impairing recourse caused a loss or impairment equal to the liability of the secondary obligor on the instrument. In that event, the burden of persuasion as to any lesser amount of the loss is on the person entitled to enforce the instrument.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 119, &sect; 3-605. Amended by Laws 1991, c. 117, &sect; 93, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 12, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 12 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-3-606. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-701. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-801. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-802. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-803. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-804. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A-3-805. Repealed by Laws 1991, c. 117, &sect; 137, eff. Jan. 1, 1992.&nbsp;</span></p> <p><span class="cls0">&sect;12A4101. Short Title.&nbsp;</span></p> <p class="cls1"><span class="cls0">SHORT TITLE&nbsp;</span></p> <p><span class="cls0">This article may be cited as Uniform Commercial Code Bank Deposits and Collections.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 121, &sect; 4101; Laws 1991, c. 117, &sect; 94, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-102. Applicability.&nbsp;</span></p> <p class="cls1"><span class="cls0">APPLICABILITY&nbsp;</span></p> <p><span class="cls0">(a) To the extent that items within this article are also within Articles 3 and 8 of this title, they are subject to those articles. If there is conflict, this article governs Article 3, but Article 8 governs this article.&nbsp;</span></p> <p><span class="cls0">(b) The liability of a bank for action or nonaction with respect to any item handled by it for purposes of presentment, payment or collection is governed by the law of the place where the bank is located. In the case of action or nonaction by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 121, &sect; 4-102. Amended by Laws 1991, c. 117, &sect; 95, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 13, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 13 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A4103. Variation by Agreement; Measure of Damages; Certain Action Constituting Ordinary Care.&nbsp;</span></p> <p class="cls1"><span class="cls0">VARIATION BY AGREEMENT; MEASURE OF&nbsp;</span></p> <p class="cls1"><span class="cls0">DAMAGES; CERTAIN ACTION CONSTITUTING ORDINARY CARE&nbsp;</span></p> <p><span class="cls0">(a) The effect of the provisions of this article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure; however, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.&nbsp;</span></p> <p><span class="cls0">(b) Federal Reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection (a) of this section, whether or not specifically assented to by all parties interested in items handled.&nbsp;</span></p> <p><span class="cls0">(c) Action or non-action approved by this article or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or non-action consistent with clearing-house rules and the like or with a general banking usage not disapproved by this article, is prima facie the exercise of ordinary care.&nbsp;</span></p> <p><span class="cls0">(d) The specification or approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.&nbsp;</span></p> <p><span class="cls0">(e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 121, &sect; 4103; Laws 1991, c. 117, &sect; 96, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-104. Definitions and Index of Definitions.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFINITIONS AND INDEX OF DEFINITIONS&nbsp;</span></p> <p><span class="cls0">(a) In this article unless the context otherwise requires:&nbsp;</span></p> <p><span class="cls0">(1) "Account" means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;&nbsp;</span></p> <p><span class="cls0">(2) "Afternoon" means the period of a day between noon and midnight;&nbsp;</span></p> <p><span class="cls0">(3) "Banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;&nbsp;</span></p> <p><span class="cls0">(4) "Clearing house" means an association of banks or other payors regularly clearing items;&nbsp;</span></p> <p><span class="cls0">(5) "Customer" means a person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;&nbsp;</span></p> <p><span class="cls0">(6) "Documentary draft" means a draft to be presented for acceptance or payment if specified documents, certified securities (Section 8-102 of this title) or instructions for uncertificated securities (Section 8-102 of this title) or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;&nbsp;</span></p> <p><span class="cls0">(7) "Draft" means a draft as defined in Section 3-104 of this title or an item, other than an instrument, that is an order;&nbsp;</span></p> <p><span class="cls0">(8) "Drawee" means a person ordered in a draft to make payment;&nbsp;</span></p> <p><span class="cls0">(9) "Item" means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by Article 4A of this title or a credit or debit card slip;&nbsp;</span></p> <p><span class="cls0">(10) "Midnight deadline" with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;&nbsp;</span></p> <p><span class="cls0">(11) "Settle" means to pay in cash, by clearing-house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final; and&nbsp;</span></p> <p><span class="cls0">(12) "Suspends payments" with respect to a bank means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary course of business.&nbsp;</span></p> <p><span class="cls0">(b) Other definitions applying to this article and the sections of this title in which they appear are:&nbsp;</span></p> <p><span class="cls0">"Agreement for electronic presentment" Section 4-110.&nbsp;</span></p> <p><span class="cls0">"Collecting bank" Section 4-105.&nbsp;</span></p> <p><span class="cls0">"Depositary bank" Section 4-105.&nbsp;</span></p> <p><span class="cls0">"Intermediary bank" Section 4-105.&nbsp;</span></p> <p><span class="cls0">"Payor bank" Section 4-105.&nbsp;</span></p> <p><span class="cls0">"Presenting bank" Section 4-105.&nbsp;</span></p> <p><span class="cls0">"Presentment Notice" Section 4-110.&nbsp;</span></p> <p><span class="cls0">(c) &ldquo;Control&rdquo; as provided in Section 7-106 of this title and the following definitions in other articles of this title apply to this article:&nbsp;</span></p> <p><span class="cls0">"Acceptance" Section 3-409.&nbsp;</span></p> <p><span class="cls0">"Alteration" Section 3-407.&nbsp;</span></p> <p><span class="cls0">"Cashier's check" Section 3-104.&nbsp;</span></p> <p><span class="cls0">"Certificate of deposit" Section 3-104.&nbsp;</span></p> <p><span class="cls0">"Certified check" Section 3-409.&nbsp;</span></p> <p><span class="cls0">"Check" Section 3-104.&nbsp;</span></p> <p><span class="cls0">"Draft" Section 3-104.&nbsp;</span></p> <p><span class="cls0">"Good faith" Section 3-103.&nbsp;</span></p> <p><span class="cls0">"Holder in due course" Section 3-302.&nbsp;</span></p> <p><span class="cls0">"Instrument" Section 3-104.&nbsp;</span></p> <p><span class="cls0">"Notice of dishonor" Section 3-503.&nbsp;</span></p> <p><span class="cls0">"Order" Section 3-103.&nbsp;</span></p> <p><span class="cls0">"Ordinary care" Section 3-103.&nbsp;</span></p> <p><span class="cls0">"Person entitled to enforce" Section 3-301.&nbsp;</span></p> <p><span class="cls0">"Presentment" Section 3-501.&nbsp;</span></p> <p><span class="cls0">"Promise" Section 3-103.&nbsp;</span></p> <p><span class="cls0">"Prove" Section 3-103.&nbsp;</span></p> <p><span class="cls0">&ldquo;Record&rdquo; Section 3-103&nbsp;</span></p> <p><span class="cls0">"Teller's check" Section 3-104.&nbsp;</span></p> <p><span class="cls0">"Unauthorized signature" Section 3-403.&nbsp;</span></p> <p><span class="cls0">(d) In addition, Article 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 121, &sect; 4-104. Amended by Laws 1988, c. 39, &sect; 2, emerg. eff. March 21, 1988; Laws 1991, c. 117, &sect; 97, eff. Jan. 1, 1992; Laws 1995, c. 242, &sect; 54, eff. Feb. 1, 1996; Laws 2005, c. 140, &sect; 56, eff. Jan. 1, 2006; Laws 2009, c. 208, &sect; 14, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 14 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A-4-105. Definitions of types of banks.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFINITIONS OF TYPES OF BANKS&nbsp;</span></p> <p><span class="cls0">In this article:&nbsp;</span></p> <p><span class="cls0">(1) Reserved;&nbsp;</span></p> <p><span class="cls0">(2) "Depositary bank" means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;&nbsp;</span></p> <p><span class="cls0">(3) "Payor bank" means a bank that is the drawee of a draft;&nbsp;</span></p> <p><span class="cls0">(4) "Intermediary bank" means a bank to which an item is transferred in course of collection except the depositary or payor bank;&nbsp;</span></p> <p><span class="cls0">(5) "Collecting bank" means a bank handling an item for collection except the payor bank; and&nbsp;</span></p> <p><span class="cls0">(6) "Presenting bank" means a bank presenting an item except a payor bank.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 122, &sect; 4-105. Amended by Laws 1991, c. 117, &sect; 98, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 15, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 15 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-106. Payable through or Payable at Bank; Collecting Bank.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYABLE THROUGH OR PAYABLE AT BANK; COLLECTING BANK&nbsp;</span></p> <p><span class="cls0">(a) If an item states that it is "payable through" a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.&nbsp;</span></p> <p><span class="cls0">(b) If an item states that it is "payable at" a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.&nbsp;</span></p> <p><span class="cls0">(c) If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co-drawee or a collecting bank, the bank is a collecting bank.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 99, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4107. Separate Office of Bank.&nbsp;</span></p> <p class="cls1"><span class="cls0">SEPARATE OFFICE OF BANK&nbsp;</span></p> <p><span class="cls0">A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notice or orders must be given under this article and under Article 3 of this title.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 122, &sect; 4107; Laws 1991, c. 117, &sect; 100, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4108. Time of Receipt of Items.&nbsp;</span></p> <p class="cls1"><span class="cls0">TIME OF RECEIPT OF ITEMS&nbsp;</span></p> <p><span class="cls0">(a) For the purpose of allowing time to process items, prove balances, and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of 2:00 p.m. or later as a cut-off hour for the handling of money and items and the making of entries on its books.&nbsp;</span></p> <p><span class="cls0">(b) An item or deposit of money received on any day after a cut-off so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 123, &sect; 4108; Laws 1991, c. 117, &sect; 101, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-109. Delays.&nbsp;</span></p> <p class="cls1"><span class="cls0">DELAYS&nbsp;</span></p> <p><span class="cls0">(a) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify, or extend time limits imposed or permitted by this article for a period not exceeding two (2) additional banking days without discharge of drawers or indorsers or liability to its transferor or a prior party.&nbsp;</span></p> <p><span class="cls0">(b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this article or by instructions is excused if (i) the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of the bank, and (ii) the bank exercises such diligence as the circumstances require.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 102, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-110. Electronic Presentment.&nbsp;</span></p> <p class="cls1"><span class="cls0">ELECTRONIC PRESENTMENT&nbsp;</span></p> <p><span class="cls0">(a) "Agreement for electronic presentment" means an agreement, clearing-house rule, or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item ("presentment notice") rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor, and other matters concerning items subject to the agreement.&nbsp;</span></p> <p><span class="cls0">(b) Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.&nbsp;</span></p> <p><span class="cls0">(c) If presentment is made by presentment notice, a reference to "item" or "check" in this article means the presentment notice unless the context otherwise indicates.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 103, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-111. Statute of Limitations.&nbsp;</span></p> <p class="cls1"><span class="cls0">STATUTE OF LIMITATIONS&nbsp;</span></p> <p><span class="cls0">An action to enforce an obligation, duty, or right arising under this article must be commenced within three (3) years after the claim for relief accrues.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 104, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4201. Status of Collecting Bank as Agent and Provisional Status of Credits; Applicability of Article; Item Endorsed "Pay Any Bank".&nbsp;</span></p> <p class="cls1"><span class="cls0">STATUS OF COLLECTING&nbsp;</span></p> <p class="cls1"><span class="cls0"> BANK AS AGENT AND PROVISIONAL STATUS OF CREDITS;&nbsp;</span></p> <p class="cls1"><span class="cls0">APPLICABILITY OF ARTICLE; ITEM ENDORSED "PAY ANY BANK"&nbsp;</span></p> <p><span class="cls0">(a) Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or subagent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of indorsement or lack of indorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank, such as those resulting from outstanding advances on the item and rights of recoupment or setoff. If an item is handled by banks for purposes of presentment, payment, collection, or return, the relevant provisions of this article apply even though action of parties clearly establishes that a particular bank has purchased the item and is the owner of it.&nbsp;</span></p> <p><span class="cls0">(b) After an item has been indorsed with the words "pay any bank" or the like, only a bank may acquire the rights of a holder until the item has been:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;returned to the customer initiating collection; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;specially indorsed by bank to a person who is not a bank.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 123, &sect; 4201; Laws 1991, c. 117, &sect; 105, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4202. Responsibility for Collection or Return; When Action Timely.&nbsp;</span></p> <p class="cls1"><span class="cls0">RESPONSIBILITY FOR COLLECTION&nbsp;</span></p> <p class="cls1"><span class="cls0">OR RETURN; WHEN ACTION TIMELY&nbsp;</span></p> <p><span class="cls0">(a) A collecting bank must exercise ordinary care in:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Presenting an item or sending it for presentment;&nbsp;</span></p> <p class="cls3"><span class="cls0">&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;Sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank's transferor after learning that the item has not been paid or accepted, as the case may be;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;Settling for an item when the bank receives final settlement; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;Notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof.&nbsp;</span></p> <p><span class="cls0">(b) A collecting bank exercises ordinary care under subsection (a) of this section by taking proper action before its midnight deadline following receipt of an item, notice, or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.&nbsp;</span></p> <p><span class="cls0">(c) Subject to paragraph (1) of subsection (a) of this section, a bank is not liable for the insolvency, neglect, misconduct, mistake or default of another bank or person or for loss or destruction of an item in the possession of others or in transit.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 123, &sect; 4202; Laws 1991, c. 117, &sect; 106, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4203. Effect of Instructions.&nbsp;</span></p> <p class="cls1"><span class="cls0">EFFECT OF INSTRUCTIONS&nbsp;</span></p> <p><span class="cls0">Subject to Article 3 of this title concerning conversion of instruments (Section 3-420 of this title) and restrictive indorsements (Section 3-206 of this title), only a collecting bank's transferor can give instructions that affect the bank or constitute notice to it, and a collecting bank is not liable to prior parties for any action taken pursuant to the instructions or in accordance with any agreement with its transferor.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 124, &sect; 4203; Laws 1991, c. 117, &sect; 107, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4204. Methods of Sending and Presenting; Sending Directly to Payor Bank.&nbsp;</span></p> <p class="cls1"><span class="cls0">METHODS OF SENDING AND PRESENTING;&nbsp;</span></p> <p class="cls1"><span class="cls0">SENDING DIRECTLY TO PAYOR BANK&nbsp;</span></p> <p><span class="cls0">(a) A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of those items on hand, the cost of collection involved, and the method generally used by it or others to present those items.&nbsp;</span></p> <p><span class="cls0">(b) A collecting bank may send:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;An item directly to the payor bank;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;An item to a nonbank payor if authorized by its transferor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;An item other than documentary drafts to a nonbank payor, if authorized by Federal Reserve regulation or operating circular, clearing-house rule, or the like.&nbsp;</span></p> <p><span class="cls0">(c) Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 124, &sect; 4204; Laws 1991, c. 117, &sect; 108, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4205. Depositary Bank Holder of Unindorsed Item.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEPOSITARY BANK HOLDER OF UNINDORSED ITEM&nbsp;</span></p> <p><span class="cls0">If a customer delivers an item to a depositary bank for collection:&nbsp;</span></p> <p><span class="cls0">(1) The depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer indorses the item, and, if the bank satisfies the other requirements of Section 3-302 of this title, it is a holder in due course; and&nbsp;</span></p> <p><span class="cls0">(2) The depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer's account.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 124, &sect; 4205; Laws 1991, c. 117, &sect; 109, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4206. Transfer Between Banks.&nbsp;</span></p> <p class="cls1"><span class="cls0">TRANSFER BETWEEN BANKS&nbsp;</span></p> <p><span class="cls0">Any agreed method that identifies the transferor bank is sufficient for the item's further transfer to another bank.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 124, &sect; 4206; Laws 1991, c. 117, &sect; 110, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4207. Transfer Warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">TRANSFER WARRANTIES&nbsp;</span></p> <p><span class="cls0">(a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The warrantor is a person entitled to enforce the item;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;All signatures on the item are authentic and authorized;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;The item has not been altered;&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;The item is not subject to a defense or claim in recoupment (subsection (a) of Section 3-305 of this title) of any party that can be asserted against the warrantor; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(5)&nbsp;&nbsp;The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.&nbsp;</span></p> <p><span class="cls0">(b) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item (i) according to the terms of the item at the time it was transferred, or (ii) if the transfer was of an incomplete item, according to its terms when completed as stated in Sections 3-115 and 3-407 of this title. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an indorsement stating that it is made "without recourse" or otherwise disclaiming liability.&nbsp;</span></p> <p><span class="cls0">(c) A person to whom the warranties under subsection (a) of this section are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.&nbsp;</span></p> <p><span class="cls0">(d) The warranties stated in subsection (a) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.&nbsp;</span></p> <p><span class="cls0">(e) A claim for relief for breach of warranty under this section accrues when the claimant has reason to know of the breach.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 124, &sect; 4207; Laws 1991, c. 117, &sect; 111, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4208. Presentment Warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRESENTMENT WARRANTIES&nbsp;</span></p> <p><span class="cls0">(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The draft has not been altered; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;The warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized.&nbsp;</span></p> <p><span class="cls0">(b) A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft (i) breach of warranty is a defense to the obligation of the acceptor, and (ii) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.&nbsp;</span></p> <p><span class="cls0">(c) If a drawee asserts a claim for breach of warranty under subsection (a) of this section based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under Section 3-404 or 3-405 of this title or the drawer is precluded under Section 3-406 or 4-406 of this title from asserting against the drawee the unauthorized indorsement or alteration.&nbsp;</span></p> <p><span class="cls0">(d) If (i) a dishonored draft is presented for payment to the drawer or an indorser or (ii) any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.&nbsp;</span></p> <p><span class="cls0">(e) The warranties stated in subsections (a) and (d) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.&nbsp;</span></p> <p><span class="cls0">(f) A claim for relief for breach of warranty under this section accrues when the claimant has reason to know of the breach.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 125, &sect; 4208; Laws 1991, c. 117, &sect; 112, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4209. Encoding and Retention Warranties.&nbsp;</span></p> <p class="cls1"><span class="cls0">ENCODING AND RETENTION WARRANTIES&nbsp;</span></p> <p><span class="cls0">(a) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.&nbsp;</span></p> <p><span class="cls0">(b) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payor bank or other payor that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.&nbsp;</span></p> <p><span class="cls0">(c) A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 126, &sect; 4209; Laws 1991, c. 117, &sect; 113, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-210. Security interest of collecting bank in items, accompanying documents and proceeds.&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTEREST OF COLLECTING BANK IN ITEMS,&nbsp;</span></p> <p class="cls1"><span class="cls0">ACCOMPANYING DOCUMENTS AND PROCEEDS&nbsp;</span></p> <p><span class="cls0">(a) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:&nbsp;</span></p> <p><span class="cls0">(1) In case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;&nbsp;</span></p> <p><span class="cls0">(2) In case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or&nbsp;</span></p> <p><span class="cls0">(3) If it makes an advance on or against the item.&nbsp;</span></p> <p><span class="cls0">(b) If credit given for several items received at one time or pursuant to a single agreement is withdrawn or applied in part, the security interest remains upon all the items, any accompanying documents or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.&nbsp;</span></p> <p><span class="cls0">(c) Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents, and proceeds. So long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to Article 9 of this title, but:&nbsp;</span></p> <p><span class="cls0">(1) No security agreement is necessary to make the security interest enforceable (subparagraph (A) of paragraph (3) of subsection (b) of Section 19203 of this title);&nbsp;</span></p> <p><span class="cls0">(2) No filing is required to perfect the security interest; and&nbsp;</span></p> <p><span class="cls0">(3) The security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 126, &sect; 4-210. Amended by Laws 1991, c. 117, &sect; 114, eff. Jan. 1, 1992; Laws 2000, c. 371, &sect; 157, eff. July 1, 2001; Laws 2005, c. 140, &sect; 57, eff. Jan. 1, 2006.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A4211. When Bank Gives Value for Purposes of Holder In Due Course.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN BANK GIVES VALUE FOR PURPOSES OF HOLDER IN DUE COURSE&nbsp;</span></p> <p><span class="cls0">For purposes of determining its status as a holder in due course, a bank has given value to the extent it has a security interest in an item, if the bank otherwise complies with the requirements of Section 3-302 of this title on what constitutes a holder in due course.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 126, &sect; 4211; Laws 1991, c. 117, &sect; 115, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-212. Presentment by Notice of Item Not Payable By, Through, or At Bank; Liability of Drawer or Indorser.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRESENTMENT BY NOTICE OF ITEM NOT PAYABLE BY, THROUGH, OR AT BANK;&nbsp;</span></p> <p class="cls1"><span class="cls0">LIABILITY OF DRAWER OR INDORSER&nbsp;</span></p> <p><span class="cls0">(a) Unless otherwise instructed, a collecting bank may present an item not payable by, through, or at a bank by sending to the party to accept or pay a record providing notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before the day when presentment is due and the bank must meet any requirement of the party to accept or pay under Section 3-501 of this title by the close of the bank's next banking day after it knows of the requirement.&nbsp;</span></p> <p><span class="cls0">(b) If presentment is made by notice and payment, acceptance, or request for compliance with a requirement under Section 3-501 of this title is not received by the close of business on the day after maturity or, in the case of demand items, by the close of business on the third banking day after notice was sent, the presenting bank may treat the item as dishonored and charge any drawer or indorser by sending it notice of the facts.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 127, &sect; 4-212. Amended by Laws 1991, c. 117, &sect; 116, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 16, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 16 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A4213. Medium and Time of Settlement by Bank.&nbsp;</span></p> <p class="cls1"><span class="cls0">MEDIUM AND TIME OF SETTLEMENT BY BANK&nbsp;</span></p> <p><span class="cls0">(a) With respect to settlement by a bank, the medium and time of settlement may be prescribed by Federal Reserve regulations or circulars, clearing-house rules, and the like, or agreement. In the absence of such prescription:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The medium of settlement is cash or credit to an account in a Federal Reserve bank of or specified by the person to receive settlement; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The time of settlement, is:&nbsp;</span></p> <p class="cls4"><span class="cls0">(i)&nbsp;&nbsp;with respect to tender of settlement by cash, a cashier's check, or teller's check, when the cash or check is sent or delivered;&nbsp;</span></p> <p class="cls4"><span class="cls0">&nbsp;&nbsp; (ii)&nbsp;&nbsp;with respect to tender of settlement by credit in an account in a Federal Reserve bank, when the credit is made;&nbsp;</span></p> <p class="cls4"><span class="cls0">&nbsp;&nbsp; (iii)&nbsp;&nbsp;with respect to tender of settlement by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or&nbsp;</span></p> <p class="cls4"><span class="cls0"> &nbsp;&nbsp; (iv)&nbsp;&nbsp;with respect to tender of settlement by a funds transfer, when payment is made pursuant to subsection (a) of Section 4A-406 of this title to the person receiving settlement.&nbsp;</span></p> <p><span class="cls0">(b) If the tender of settlement is not by a medium authorized by subsection (a) of this section or the time of settlement is not fixed by subsection (a) of this section, no settlement occurs until the tender or settlement is accepted by the person receiving settlement.&nbsp;</span></p> <p><span class="cls0">(c) If settlement for an item is made by cashier's check or teller's check and the person receiving settlement, before its midnight deadline:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Presents or forwards the check for collection, settlement is final when the check is finally paid; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.&nbsp;</span></p> <p><span class="cls0">(d) If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is make by the bank receiving settlement if there are funds available in the account for the amount of the item.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 127, &sect; 4213; Laws 1991, c. 117, &sect; 117, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4214. Right of Charge-Back or Refund; Liability of Collecting Bank; Return of Item.&nbsp;</span></p> <p class="cls1"><span class="cls0">RIGHT OF CHARGE-BACK OR REFUND;&nbsp;</span></p> <p class="cls1"><span class="cls0">LIABILITY OF COLLECTING BANK; RETURN OF ITEM&nbsp;</span></p> <p><span class="cls0">(a) If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer's account, or obtain refund from its customer, whether or not it is able to return the item, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. If the return or notice is delayed beyond the bank's midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. These rights to revoke, charge back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final.&nbsp;</span></p> <p><span class="cls0">(b) A collecting bank returns an item when it is sent or delivered to the bank's customer or transferor or pursuant to its instructions.&nbsp;</span></p> <p><span class="cls0">&nbsp;&nbsp;(c) A depositary bank that is also the payor may charge back the amount of an item to its customer's account or obtain refund in accordance with the section governing return of an item received by a payor bank for credit on its books (Section 4-301 of this title).&nbsp;</span></p> <p><span class="cls0">(d) The right to charge back is not affected by:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Previous use of a credit given for the item; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Failure by any bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.&nbsp;</span></p> <p><span class="cls0">(e) A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.&nbsp;</span></p> <p><span class="cls0">(f) If credit is given in dollars as the equivalent of the value of an item payable in foreign money, the dollar amount of any charge-back or refund must be calculated on the basis of the bank-offered spot rate for the foreign money prevailing on the day when the person entitled to the charge-back or refund learns that it will not receive payment in ordinary course.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 128, &sect; 4214; Laws 1991, c. 117, &sect; 118, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-215. Final Payment of Item by Payor Bank; When Provisional Debits and Credits Become Final; When Certain Credits Become Available for Withdrawal.&nbsp;</span></p> <p class="cls1"><span class="cls0">FINAL PAYMENT OF ITEM BY PAYOR BANK; WHEN&nbsp;</span></p> <p class="cls1"><span class="cls0">PROVISIONAL DEBITS AND CREDITS BECOME FINAL;&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN CERTAIN CREDITS BECOME AVAILABLE FOR WITHDRAWAL&nbsp;</span></p> <p><span class="cls0">(a) An item is finally paid by a payor bank when the bank has first done any of the following:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Paid the item in cash;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;Made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.&nbsp;</span></p> <p><span class="cls0">(b) If provisional settlement for an item does not become final, the item is not finally paid.&nbsp;</span></p> <p><span class="cls0">(c) If provisional settlement for an item between the presenting and payor banks is made through a clearing-house or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the items by the payor bank.&nbsp;</span></p> <p><span class="cls0">(d) If a collecting bank receives a settlement for an item which is or becomes final, the bank is accountable to its customer for the amount of the item and any provisional credit given for the item in an account with its customer becomes final.&nbsp;</span></p> <p><span class="cls0">(e) Subject to (i) applicable law stating a time for availability of funds and (ii) any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in a customer's account becomes available for withdrawal as of right:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;If the bank has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;If the bank is both the depositary bank and the payor bank, and the item is finally paid, at the opening of the bank's second banking day following receipt of the item.&nbsp;</span></p> <p><span class="cls0">(f) Subject to applicable law stating a time for availability of funds and any right of a bank to apply a deposit to an obligation of the depositor, a deposit of money becomes available for withdrawal as of right at the opening of the bank's next banking day after receipt of the deposit.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 119, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-216. Insolvency and Preference.&nbsp;</span></p> <p class="cls1"><span class="cls0">INSOLVENCY AND PREFERENCE&nbsp;</span></p> <p><span class="cls0">(a) If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item must be returned by the receiver, trustee, or agent in charge of the closed bank to the presenting bank or the closed bank's customer.&nbsp;</span></p> <p><span class="cls0">(b) If a payor bank finally pays an item and suspends payments without making a settlement for the item with its customer or the presenting bank which settlement is or becomes final, the owner of the item has a preferred claim against the payor bank.&nbsp;</span></p> <p><span class="cls0">(c) If a payor bank gives or a collecting bank gives or receives a provisional settlement for an item and thereafter suspends payments, the suspension does not prevent or interfere with the settlement's becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.&nbsp;</span></p> <p><span class="cls0">(d) If a collecting bank receives from subsequent parties settlement for an item, which settlement is or becomes final and the bank suspends payments without making a settlement for the item with its customer which settlement is or becomes final, the owner of the item has a preferred claim against the collecting bank.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1991, c. 117, &sect; 120, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-301. Deferred Posting; Recovery of Payment by Return of Items; Time of Dishonor; Return of Items by Payor Bank.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEFERRED POSTING; RECOVERY OF PAYMENT BY RETURN OF ITEMS;&nbsp;</span></p> <p class="cls1"><span class="cls0">TIME OF DISHONOR; RETURN OF ITEMS BY PAYOR BANK&nbsp;</span></p> <p><span class="cls0">(a) If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Returns the item; &nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Returns an image of the item, if the party to which the return is made has entered into an agreement to accept an image as a return of the item and the image is returned in accordance with that agreement; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;Sends a record providing notice of dishonor or nonpayment if the item is unavailable for return.&nbsp;</span></p> <p><span class="cls0">(b) If a demand item is received by a payor bank for credit on its books, it may return the item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in subsection (a) of this section.&nbsp;</span></p> <p><span class="cls0">(c) Unless previous notice of dishonor has been sent an item is dishonored at the time when for purposes of dishonor it is returned or notice sent in accordance with this section.&nbsp;</span></p> <p><span class="cls0">(d) An item is returned:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;As to an item presented through a clearing-house, when it is delivered to the presenting or last collecting bank or to the clearing-house or is sent or delivered in accordance with clearing-house rules; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;In all other cases, when it is sent or delivered to the bank's customer or transferor or pursuant to instructions.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 128, &sect; 4-301. Amended by Laws 1991, c. 117, &sect; 121, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 17, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 17 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A4302. Payor Bank's Responsibility for Late Return of Item.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYOR BANK'S RESPONSIBILITY FOR LATE RETURN OF ITEM&nbsp;</span></p> <p><span class="cls0">(a) If an item is presented to and received by a payor bank, the bank is accountable for the amount of:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;a demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;any other properly payable item unless, within the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.&nbsp;</span></p> <p><span class="cls0">(b) The liability of a payor bank to pay an item pursuant to subsection (a) of this section is subject to defenses based on breach of presentment warranty (Section 4-208 of this title) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 129, &sect; 4302; Laws 1991, c. 117, &sect; 122, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4303. When Items Subject to Notice, StopPayment Order, Legal Process, or Setoff; Order in Which Items May be Charged or Certified.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN ITEMS SUBJECT TO NOTICE, STOP-PAYMENT ORDER,&nbsp;</span></p> <p class="cls1"><span class="cls0">LEGAL PROCESS, OR SETOFF; ORDER IN WHICH ITEMS&nbsp;</span></p> <p class="cls1"><span class="cls0">MAY BE CHARGED OR CERTIFIED&nbsp;</span></p> <p><span class="cls0">(a) Any knowledge, notice, or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank comes too late to terminate, suspend, or modify the bank's right or duty to pay an item or to charge its customer's account for the item if the knowledge, notice, stop-payment order, or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the earliest of the following:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The bank accepts or certifies the item;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The bank pays the item in cash;&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;The bank settles for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement;&nbsp;</span></p> <p class="cls3"><span class="cls0">(4)&nbsp;&nbsp;The bank becomes accountable for the amount of the item under Section 4302 of this title dealing with the payor bank's responsibility for late return of items; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(5)&nbsp;&nbsp;With respect to checks, a cutoff hour no earlier than one (1) hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if no cutoff hour is fixed, the close of the next banking day after the banking day on which the bank received the check.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (a) of this section, items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 129, &sect; 4303; Laws 1991, c. 117, &sect; 123, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-401. When Bank May Charge Customer's Account - Statute of limitations.&nbsp;</span></p> <p class="cls1"><span class="cls0">WHEN BANK MAY CHARGE CUSTOMER'S ACCOUNT&nbsp;</span></p> <p><span class="cls0">(a) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.&nbsp;</span></p> <p><span class="cls0">(b) A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.&nbsp;</span></p> <p><span class="cls0">(c) A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in subsection (b) of Section 4-403 of this title for stop-payment orders, and must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to the check described in Section 4-303 of this title. If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act. The loss may include damages for dishonor or subsequent items under Section 4-402 of this title.&nbsp;</span></p> <p><span class="cls0">(d) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The original terms of the altered item; or&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The terms of the completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.&nbsp;</span></p> <p><span class="cls0">(e) The statute of limitations on a customer&rsquo;s claim that an item charged against an account is not properly payable due to a forged or unauthorized endorsement begins on the date the item is finally paid by the bank, without regard to care or lack of care of either the customer or the bank.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 129, &sect; 4-401. Amended by Laws 1991, c. 117, &sect; 124, eff. Jan. 1, 1992; Laws 2011, c. 28, &sect; 1, eff. Nov. 1, 2011.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A4402. Bank's Liability to Customer for Wrongful Dishonor; Time for Determining Insufficiency of Account.&nbsp;</span></p> <p class="cls1"><span class="cls0">BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL DISHONOR;&nbsp;</span></p> <p class="cls1"><span class="cls0">TIME FOR DETERMINING INSUFFICIENCY OF ACCOUNT&nbsp;</span></p> <p><span class="cls0">(a) Except as otherwise provided in this article, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.&nbsp;</span></p> <p><span class="cls0">(b) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and may include damages for an arrest or prosecution of the customer or other consequential damages. Whether any consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case.&nbsp;</span></p> <p><span class="cls0">(c) A payor bank's determination of the customer's account balance on which a decision to dishonor for insufficiency of available funds is based and may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one (1) determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank's decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 129, &sect; 4402; Laws 1991, c. 117, &sect; 125, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4-403. Customer's Right to Stop Payment; Burden of Proof of Loss.&nbsp;</span></p> <p class="cls1"><span class="cls0">CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF PROOF OF LOSS&nbsp;</span></p> <p><span class="cls0">(a) A customer or any person authorized to draw on the account if there is more than one person may stop payment of any item drawn on the customer's account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in Section 4303 of this title. If the signature of more than one person is required to draw on an account, any of these persons may stop payment or close the account.&nbsp;</span></p> <p><span class="cls0">(b) A stop-payment order is effective for six (6) months, but it lapses after fourteen (14) calendar days if the original order was oral and was not confirmed in a record within that period. A stop-payment order may be renewed for additional six-month periods by a record given to the bank within a period during which the stop-payment order is effective.&nbsp;</span></p> <p><span class="cls0">(c) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a stop-payment order or order to close an account is on the customer. The loss from payment of an item contrary to a stop-payment order may include damages for dishonor of subsequent items under Section 4-402 of this title.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1961, p. 130, &sect; 4-403. Amended by Laws 1991, c. 117, &sect; 126, eff. Jan. 1, 1992; Laws 2009, c. 208, &sect; 18, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">NOTE: Laws 2008, c. 382, &sect; 18 was held unconstitutional by the Oklahoma Supreme Court in the case of Weddington v. Henry, 202 P.3d 143, 2008 OK 102 (2009) and repealed by Laws 2009, c. 208, &sect; 22, eff. Nov. 1, 2009.&nbsp;</span></p> <p>&nbsp;</p> <p><span class="cls0">&sect;12A4404. Bank Not Obligated to Pay Check More Than Six Months Old.&nbsp;</span></p> <p><span class="cls0">A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six (6) months after its date, but it may charge its customer's account for a payment made thereafter in good faith.&nbsp;</span></p> <p class="cls2"><span class="cls0">Laws 1961, p. 130, &sect; 4404. &nbsp;</span></p> <p><span class="cls0">&sect;12A4405. Death or Incompetence of Customer.&nbsp;</span></p> <p class="cls1"><span class="cls0">DEATH OR INCOMPETENCE OF CUSTOMER&nbsp;</span></p> <p><span class="cls0">(a) A payor or collecting bank's authority to accept, pay, or collect an item or to account for proceeds of its collection, if otherwise effective, is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is undertaken if the bank does not know of an adjudication of incompetence. Neither death nor incompetence of a customer revokes the authority to accept, pay, collect, or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.&nbsp;</span></p> <p><span class="cls0">(b) Even with knowledge, a bank may for ten (10) days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 130, &sect; 4405; Laws 1991, c. 117, &sect; 127, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4406. Customer's Duty to Discover and Report Unauthorized Signature or Alteration.&nbsp;</span></p> <p class="cls1"><span class="cls0">CUSTOMER'S DUTY TO DISCOVER AND REPORT&nbsp;</span></p> <p class="cls1"><span class="cls0">UNAUTHORIZED SIGNATURE OR ALTERATION&nbsp;</span></p> <p><span class="cls0">(a) A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid. The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.&nbsp;</span></p> <p><span class="cls0">(b) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven (7) years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.&nbsp;</span></p> <p><span class="cls0">(c) If a bank sends or makes available a statement of account or items pursuant to subsection (a) of this section, the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.&nbsp;</span></p> <p><span class="cls0">(d) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (c) of this section, the customer is precluded from asserting against the bank:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;The customer's unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;The customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding thirty (30) days, in which to examine the item or statement of account and notify the bank.&nbsp;</span></p> <p><span class="cls0">(e) If subsection (d) of this section applies and the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure substantially contributed to loss, the loss is allocated between the customer precluded and the bank asserting the preclusion according to the extent to which the failure of the customer to comply with subsection (c) of this section and the failure of the bank to exercise ordinary care contributed to the loss. If the customer proves that the bank did not pay the item in good faith, the preclusion under subsection (d) of this section does not apply.&nbsp;</span></p> <p><span class="cls0">(f) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one (1) year after the statement or items are made available to the customer (subsection (a) of this section) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration. If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under Section 4-208 of this title with respect to the unauthorized signature or alteration to which the preclusion applies.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 130, &sect; 4406; Laws 1991, c. 117, &sect; 128, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4407. Payor Bank's Right to Subrogation on Improper Payment.&nbsp;</span></p> <p class="cls1"><span class="cls0">PAYOR BANK'S RIGHT TO SUBROGATION ON IMPROPER PAYMENT&nbsp;</span></p> <p><span class="cls0">If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, or otherwise under circumstances giving a basis for objection by the drawer or maker, to prevent unjust enrichment and only to the extent necessary to prevent loss to the bank by reason of its payment of the item, the payor bank is subrogated to the rights:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Of any holder in due course on the item against the drawer or maker;&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Of the payee or any other holder of the item against the drawer or maker either on the item or under transaction out of which the item arose; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(3)&nbsp;&nbsp;Of the drawer or maker against the payee or any other holder of the item with respect to the transaction of which the item arose.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 131, &sect; 4407; Laws 1991, c. 117, &sect; 129, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4501. Handling of Documentary Drafts; Duty to Send for Presentment and to Notify Customer of Dishonor.&nbsp;</span></p> <p class="cls1"><span class="cls0">HANDLING OF DOCUMENTARY DRAFTS; DUTY TO SEND FOR PRESENTMENT&nbsp;</span></p> <p class="cls1"><span class="cls0">AND TO NOTIFY CUSTOMER OF DISHONOR&nbsp;</span></p> <p><span class="cls0">A bank that takes a documentary draft for collection shall present or send the draft and accompanying documents for presentment and, upon learning that the draft has not been paid or accepted in due course, shall seasonably notify its customer of the fact even though it may have discounted or bought the draft or extended credit available for withdrawal as of right.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 131, &sect; 4501; Laws 1991, c. 117, &sect; 130, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4502. Presentment of "On Arrival" Drafts.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRESENTMENT OF "ON ARRIVAL" DRAFTS&nbsp;</span></p> <p><span class="cls0">If a draft or the relevant instructions require presentment "on arrival", "when goods arrive" or the like, the collecting bank need not present until in its judgment a reasonable time for arrival of the goods has expired. Refusal to pay or accept because the goods have not arrived is not dishonor; the bank must notify its transferor of the refusal but need not present the draft again until it is instructed to do so or learns of the arrival of the goods.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 131, &sect; 4502; Laws 1991, c. 117, &sect; 131, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4503. Responsibility of Presenting Bank for Documents and Goods; Report of Reasons for Dishonor; Referee in Case of Need.&nbsp;</span></p> <p class="cls1"><span class="cls0">RESPONSIBILITY OF PRESENTING BANK FOR DOCUMENTS AND GOODS;&nbsp;</span></p> <p class="cls1"><span class="cls0">REPORT OF REASONS FOR DISHONOR; REFEREE IN CASE OF NEED&nbsp;</span></p> <p><span class="cls0">Unless otherwise instructed and except as provided in Article 5 of this title, a bank presenting a documentary draft:&nbsp;</span></p> <p class="cls3"><span class="cls0">(1)&nbsp;&nbsp;Must deliver the documents to the drawee on acceptance of the draft if it is payable more than three (3) days after presentment; otherwise, only on payment; and&nbsp;</span></p> <p class="cls3"><span class="cls0">(2)&nbsp;&nbsp;Upon dishonor, either in the case of presentment for acceptance or presentment for payment, may seek and follow instructions from any referee in case of need designated in the draft or, if the presenting bank does not choose to utilize the referee's services, it must use diligence and good faith to ascertain the reason for dishonor, must notify its transferor of the dishonor and of the results of its effort to ascertain the reasons therefor, and must request instructions.&nbsp;</span></p> <p><span class="cls0">However, the presenting bank is under no obligation with respect to goods represented by the documents except to follow any reasonable instructions seasonably received; it has a right to reimbursement for any expense incurred in following instructions and to prepayment of or indemnity for those expenses.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 131, &sect; 4503; Laws 1991, c. 117, &sect; 132, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A4504. Privilege of Presenting Bank to Deal With Goods; Security Interest for Expenses.&nbsp;</span></p> <p class="cls1"><span class="cls0">PRIVILEGE OF PRESENTING BANK TO DEAL WITH GOODS;&nbsp;</span></p> <p class="cls1"><span class="cls0">SECURITY INTEREST FOR EXPENSES&nbsp;</span></p> <p><span class="cls0">(a) A presenting bank that, following the dishonor of a documentary draft, has seasonably requested instructions but does not receive them within a reasonable time may store, sell, or otherwise deal with the goods in any reasonable manner.&nbsp;</span></p> <p><span class="cls0">(b) For its reasonable expenses incurred by action under subsection (a) of this section, the presenting bank has a lien upon the goods or their proceeds, which may be foreclosed in the same manner as an unpaid seller's lien.&nbsp;</span></p> <p><span class="cls0">Laws 1961, p. 131, &sect; 4504; Laws 1991, c. 117, &sect; 133, eff. Jan. 1, 1992.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-101. Short title.&nbsp;</span></p> <p><span class="cls0">SHORT TITLE&nbsp;</span></p> <p><span class="cls0">This Article, Sections 1 through 38 of this act, shall be known and may be cited as the Uniform Commercial Code - Funds Transfers.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 1, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-102. Subject matter.&nbsp;</span></p> <p><span class="cls0">SUBJECT MATTER&nbsp;</span></p> <p><span class="cls0">Except as otherwise provided in Section 8 of this act, this Article applies to funds transfers defined in Section 4 of this act.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 2, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-103. Payment order - Definitions.&nbsp;</span></p> <p><span class="cls0">PAYMENT ORDER - DEFINITIONS&nbsp;</span></p> <p><span class="cls0">(a) In this Article:&nbsp;</span></p> <p><span class="cls0">(1) "Payment order" means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:&nbsp;</span></p> <p class="cls3"><span class="cls0">(i)&nbsp;&nbsp;the instruction does not state a condition to payment to the beneficiary other than time of payment,&nbsp;</span></p> <p class="cls3"><span class="cls0"> (ii)&nbsp;&nbsp;the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender, and&nbsp;</span></p> <p class="cls3"><span class="cls0"> (iii)&nbsp;&nbsp;the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank.&nbsp;</span></p> <p><span class="cls0">(2) "Beneficiary" means the person to be paid by the beneficiary's bank.&nbsp;</span></p> <p><span class="cls0">(3) "Beneficiary's bank" means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.&nbsp;</span></p> <p><span class="cls0">(4) "Receiving bank" means the bank to which the sender's instruction is addressed.&nbsp;</span></p> <p><span class="cls0">(5) "Sender" means the person giving the instruction to the receiving bank.&nbsp;</span></p> <p><span class="cls0">(b) If an instruction complying with paragraph (1) of subsection (a) is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment.&nbsp;</span></p> <p><span class="cls0">(c) A payment order is issued when it is sent to the receiving bank.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 3, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-104. Funds transfer - Definitions.&nbsp;</span></p> <p><span class="cls0">FUNDS TRANSFER - DEFINITIONS&nbsp;</span></p> <p><span class="cls0">In this Article:&nbsp;</span></p> <p><span class="cls0">(a) "Funds transfer" means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A fund transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order.&nbsp;</span></p> <p><span class="cls0">(b) "Intermediary bank" means a receiving bank other than the originator's bank or the beneficiary's bank.&nbsp;</span></p> <p><span class="cls0">(c) "Originator" means the sender of the first payment order in a funds transfer.&nbsp;</span></p> <p><span class="cls0">(d) "Originator's bank" means (i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 4, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-105. Other definitions.&nbsp;</span></p> <p><span class="cls0">OTHER DEFINITIONS&nbsp;</span></p> <p><span class="cls0">(a) In this Article:&nbsp;</span></p> <p><span class="cls0">(1) "Authorized account" means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account.&nbsp;</span></p> <p><span class="cls0">(2) "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company. A branch or separate office of a bank is a separate bank for purposes of this Article.&nbsp;</span></p> <p><span class="cls0">(3) "Customer" means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders.&nbsp;</span></p> <p><span class="cls0">(4) "Funds-transfer business day" of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders.&nbsp;</span></p> <p><span class="cls0">(5) "Funds-transfer system" means a wire transfer network, automated clearing house, or other communication system of a clearing house or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed.&nbsp;</span></p> <p><span class="cls0">(6) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.&nbsp;</span></p> <p><span class="cls0">(7) "Prove" with respect to a fact means to meet the burden of establishing the fact as provided in paragraph 8 of Section 1-201 of Title 12A of the Oklahoma Statutes.&nbsp;</span></p> <p><span class="cls0">(b) Other definitions applying to this Article and the sections in which they appear are:&nbsp;</span></p> <p class="cls11"><span class="cls0">"Acceptance"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-209&nbsp;</span></p> <p class="cls11"><span class="cls0">"Beneficiary"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-103&nbsp;</span></p> <p class="cls11"><span class="cls0">"Beneficiary's bank"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-103&nbsp;</span></p> <p class="cls11"><span class="cls0">"Executed"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-301&nbsp;</span></p> <p class="cls11"><span class="cls0">"Execution date"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-301&nbsp;</span></p> <p class="cls11"><span class="cls0">"Funds transfer"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-104&nbsp;</span></p> <p><span class="cls0">"Funds-transfer system rule"&nbsp;&nbsp;Section 4A-501&nbsp;</span></p> <p class="cls11"><span class="cls0">"Intermediary bank"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-104&nbsp;</span></p> <p class="cls11"><span class="cls0">"Originator"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-104&nbsp;</span></p> <p class="cls11"><span class="cls0">"Originator's bank"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-104&nbsp;</span></p> <p><span class="cls0">"Payment by beneficiary's bank&nbsp;</span></p> <p class="cls3"><span class="cls0">to beneficiary"&nbsp;&nbsp;Section 4A-405&nbsp;</span></p> <p><span class="cls0">"Payment by originator to&nbsp;</span></p> <p class="cls11"><span class="cls0">beneficiary"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-406&nbsp;</span></p> <p><span class="cls0">"Payment by sender&nbsp;</span></p> <p class="cls3"><span class="cls0">to receiving bank"&nbsp;&nbsp;Section 4A-403&nbsp;</span></p> <p class="cls11"><span class="cls0">"Payment date"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-401&nbsp;</span></p> <p class="cls11"><span class="cls0">"Payment order"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-103&nbsp;</span></p> <p class="cls11"><span class="cls0">"Receiving bank"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-103&nbsp;</span></p> <p class="cls11"><span class="cls0">"Security procedure"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-201&nbsp;</span></p> <p class="cls11"><span class="cls0">"Sender"&nbsp;&nbsp;&nbsp;&nbsp;Section 4A-103&nbsp;</span></p> <p><span class="cls0">(c) The following definitions in Article 4 of Title 12A of the Oklahoma Statutes apply to this Article:&nbsp;</span></p> <p class="cls11"><span class="cls0">"Clearing house"&nbsp;&nbsp;&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p class="cls11"><span class="cls0">"Item"&nbsp;&nbsp;&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p class="cls11"><span class="cls0">"Suspends payments"&nbsp;&nbsp;&nbsp;&nbsp;Section 4-104&nbsp;</span></p> <p><span class="cls0">(d) In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 5, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-106. Time payment order is received.&nbsp;</span></p> <p class="cls1"><span class="cls0">TIME PAYMENT ORDER IS RECEIVED&nbsp;</span></p> <p><span class="cls0">(a) The time of receipt of a payment order or communication canceling or amending a payment order is determined by the rules applicable to receipt of a notice stated in Section 1-202 of this title. A receiving bank may fix a cut-off time or times on a funds-transfer business day for the receipt and processing of payment orders and communications canceling or amending payment orders. Different cut-off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cut-off time may apply to senders generally or different cut-off times may apply to different senders or categories of payment orders. If a payment order or communication canceling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.&nbsp;</span></p> <p><span class="cls0">(b) If this Article refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this Article.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 6, eff. July 1, 1991. Amended by Laws 2005, c. 139, &sect; 34, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-107. Federal reserve regulations and operating circulars.&nbsp;</span></p> <p><span class="cls0">FEDERAL RESERVE REGULATIONS AND OPERATING CIRCULARS&nbsp;</span></p> <p><span class="cls0">Regulations of the board of governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Article to the extent of the inconsistency.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 7, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-108. Exclusion of consumer transactions governed by federal law.&nbsp;</span></p> <p><span class="cls0">EXCLUSION OF CONSUMER TRANSACTIONS GOVERNED BY FEDERAL LAW&nbsp;</span></p> <p><span class="cls0">This Article does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. Section 1693 et seq.) as amended from time to time.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 8, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-201. Security procedure.&nbsp;</span></p> <p><span class="cls0">SECURITY PROCEDURE&nbsp;</span></p> <p><span class="cls0">"Security procedure" means a procedure established by agreement of a customer and a receiving bank for the purpose of (i) verifying that a payment order or communication amending or canceling a payment order is that of the customer, or (ii) detecting error in the transmission or the content of the payment order or communication. A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar security devices. Comparisons of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 9, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-202. Authorized and verified payment orders.&nbsp;</span></p> <p><span class="cls0">AUTHORIZED AND VERIFIED PAYMENT ORDERS&nbsp;</span></p> <p><span class="cls0">(a) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.&nbsp;</span></p> <p><span class="cls0">(b) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if (i) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and (ii) the bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer. The bank is not required to follow an instruction that violates a written agreement with the customer or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.&nbsp;</span></p> <p><span class="cls0">(c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving banks similarly situated. A security procedure is deemed to be commercially reasonable if (i) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer, and (ii) the customer expressly agreed in writing to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.&nbsp;</span></p> <p><span class="cls0">(d) The term "sender" in this Article includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subsection (a), or it is effective as the order of the customer under subsection (b).&nbsp;</span></p> <p><span class="cls0">(e) This section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.&nbsp;</span></p> <p><span class="cls0">(f) Except as provided in this section and in paragraph (1) of subsection (a) of Section 11 of this act rights and obligations arising under this section or Section 11 of this act may not be varied by agreement.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 10, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-203. Unenforceability of certain verified payment orders.&nbsp;</span></p> <p><span class="cls0">UNENFORCEABILITY OF CERTAIN VERIFIED PAYMENT ORDERS&nbsp;</span></p> <p><span class="cls0">(a) If an accepted payment order is not, under subsection (a) of Section 10 of this act, an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to subsection (b) of Section 10 of this act, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) By express written agreement, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order.&nbsp;</span></p> <p><span class="cls0">(2) The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by a person (i) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure, or (ii) who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault. Information includes any access device, computer software, or the like.&nbsp;</span></p> <p><span class="cls0">(b) This section applies to amendments of payment orders to the same extent it applies to payment orders.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 11, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-204. Refund of payment and duty of customer to report with respect to unauthorized payment order.&nbsp;</span></p> <p class="cls1"><span class="cls0">REFUND OF PAYMENT AND DUTY OF CUSTOMER TO REPORT WITH RESPECT TO UNAUTHORIZED PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) If a receiving bank accepts a payment order issued in the name of its customer as sender which is (i) not authorized and not effective as the order of the customer under Section 4A-202 of this title, or (ii) not enforceable, in whole or in part, against the customer under Section 4A-203 of this title, the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund. However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the date the customer received notification from the bank that the order was accepted or that the customer's account was debited with respect to the order. The bank is not entitled to any recovery from the customer on account of a failure by the customer to give notification as stated in this section.&nbsp;</span></p> <p><span class="cls0">(b) Reasonable time under subsection (a) of this section may be fixed by agreement as stated in subsection (b) of Section 15 of this act, but the obligation of a receiving bank to refund payment as stated in subsection (a) of this section may not otherwise be varied by agreement.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 12, eff. July 1, 1991. Amended by Laws 2005, c. 139, &sect; 35, eff. Jan. 1, 2006.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-205. Erroneous payment orders.&nbsp;</span></p> <p><span class="cls0">ERRONEOUS PAYMENT ORDERS&nbsp;</span></p> <p><span class="cls0">(a) If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order (i) erroneously instructed payment to a beneficiary not intended by the sender, (ii) erroneously instructed payment in an amount greater than the amount intended by the sender, or (iii) was an erroneously transmitted duplicate of a payment order previously sent by the sender, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) If the sender proves that the sender or a person acting on behalf of the sender pursuant to Section 14 of this act complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in paragraphs (2) and (3) of this subsection.&nbsp;</span></p> <p><span class="cls0">(2) If the funds transfer is completed on the basis of an erroneous payment order described in clause (i) or (iii) of subsection (a) of this section, the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.&nbsp;</span></p> <p><span class="cls0">(3) If the funds transfer is completed on the basis of a payment order described in clause (ii) of subsection (a) of this section, the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender. In that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution.&nbsp;</span></p> <p><span class="cls0">(b) If (i) the sender of an erroneous payment order described in subsection (a) of this section is not obliged to pay all or part of the order, and (ii) the sender receives notification from the receiving bank that the order was accepted by the bank or that the sender's account was debited with respect to the order, the sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding ninety (90) days, after the bank's notification was received by the sender. If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender's order.&nbsp;</span></p> <p><span class="cls0">(c) This section applies to amendments to payment orders to the same extent it applies to payment orders.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 13, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-206. Transmission of payment order through funds-transfer or other communication system.&nbsp;</span></p> <p><span class="cls0">TRANSMISSION OF PAYMENT ORDER THROUGH FUNDS-TRANSFER OR OTHER COMMUNICATION SYSTEM&nbsp;</span></p> <p><span class="cls0">(a) If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other third-party communication system for transmittal to the bank, the system is deemed to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system. This section does not apply to a funds-transfer system of the Federal Reserve Banks.&nbsp;</span></p> <p><span class="cls0">(b) This section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 14, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-207. Misdescription of beneficiary.&nbsp;</span></p> <p><span class="cls0">MISDESCRIPTION OF BENEFICIARY&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (b) of this section, if, in a payment order received by the beneficiary's bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.&nbsp;</span></p> <p><span class="cls0">(b) If a payment order received by the beneficiary's bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) Except as otherwise provided in subsection (c) of this section, if the beneficiary's bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary's bank need not determine whether the name and number refer to the same person.&nbsp;</span></p> <p><span class="cls0">(2) If the beneficiary's bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary's bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.&nbsp;</span></p> <p><span class="cls0">(c) If (i) a payment order described in subsection (b) of this section is accepted, (ii) the originator's payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary's bank pays the person identified by number as permitted by paragraph (1) of subsection (b) of this section, the following rules apply:&nbsp;</span></p> <p><span class="cls0">(1) If the originator is a bank, the originator is obliged to pay its order.&nbsp;</span></p> <p><span class="cls0">(2) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator's bank proves that the originator, before acceptance of the originator's order, had notice that payment of a payment order issued by the originator might be made by the beneficiary's bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator's bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a writing stating the information to which the notice relates.&nbsp;</span></p> <p><span class="cls0">(d) In a case governed by paragraph (1) of subsection (b) of this section, if the beneficiary's bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:&nbsp;</span></p> <p><span class="cls0">(1) If the originator is obliged to pay its payment order as stated in subsection (c) of this section, the originator has the right to recover.&nbsp;</span></p> <p><span class="cls0">(2) If the originator is not a bank and is not obliged to pay its payment order, the originator's bank has the right to recover.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 15, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-208. Misdescription of intermediary bank or beneficiary's bank.&nbsp;</span></p> <p><span class="cls0">MISDESCRIPTION OF INTERMEDIARY BANK OR BENEFICIARY'S BANK&nbsp;</span></p> <p><span class="cls0">(a) This subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank only by an identifying number.&nbsp;</span></p> <p><span class="cls0">(1) The receiving bank may rely on the number as the proper identification of the intermediary or beneficiary's bank and need not determine whether the number identifies a bank.&nbsp;</span></p> <p><span class="cls0">(2) The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.&nbsp;</span></p> <p><span class="cls0">(b) This subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank both by name and an identifying number if the name and number identify different persons.&nbsp;</span></p> <p><span class="cls0">(1) If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary's bank if the receiving bank, when it executes the sender's order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.&nbsp;</span></p> <p><span class="cls0">(2) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary's bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by paragraph (1) of subsection (b) of this section, as though the sender were a bank. Proof of notice may be made by any admissible evidence. The receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a writing stating the information to which the notice relates.&nbsp;</span></p> <p><span class="cls0">(3) Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary's bank if the receiving bank, at the time it executes the sender's order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person.&nbsp;</span></p> <p><span class="cls0">(4) If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender's payment order is a breach of the obligation stated in paragraph (1) of subsection (a) of Section 22 of this act.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 16, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-209. Acceptance of payment order.&nbsp;</span></p> <p><span class="cls0">ACCEPTANCE OF PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) Subject to subsection (d) of this section, a receiving bank other than the beneficiary's bank accepts a payment order when it executes the order.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsections (c) and (d) of this section, a beneficiary's bank accepts a payment order at the earliest of the following times:&nbsp;</span></p> <p><span class="cls0">(1) When the bank (i) pays the beneficiary as stated in subsection (a) or (b) of Section 30 of this act, or (ii) notifies the beneficiary of receipt of the order or that the account of the beneficiary has been credited with respect to the order unless the notice indicates that the bank is rejecting the order or that funds with respect to the order may not be withdrawn or used until receipt of payment from the sender of the order;&nbsp;</span></p> <p><span class="cls0">(2) When the bank receives payment of the entire amount of the sender's order pursuant to paragraph (1) or (2) of subsection (a) of Section 28 of this act; or&nbsp;</span></p> <p><span class="cls0">(3) The opening of the next funds-transfer business day of the bank following the payment date of the order if, at that time, the amount of the sender's order is fully covered by a withdrawable credit balance in an authorized account of the sender or the bank has otherwise received full payment from the sender, unless the order was rejected before that time or is rejected within (i) one hour after that time, or (ii) one hour after the opening of the next business day of the sender following the payment date if that time is later. If notice of rejection is received by the sender after the payment date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the payment date to the day the sender receives notice or learns that the order was not accepted, counting that day as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest payable is reduced accordingly.&nbsp;</span></p> <p><span class="cls0">(c) Acceptance of a payment order cannot occur before the order is received by the receiving bank. Acceptance does not occur under paragraph (2) or (3) of subsection (b) of this section if the beneficiary of the payment order does not have an account with the receiving bank, the account has been closed, or the receiving bank is not permitted by law to receive credits for the beneficiary's account.&nbsp;</span></p> <p><span class="cls0">(d) A payment order issued to the originator's bank cannot be accepted until the payment date if the bank is the beneficiary's bank, or the execution date if the bank is not the beneficiary's bank. If the originator's bank executes the originator's payment order before the execution date or pays the beneficiary of the originator's payment order before the payment date and the payment order is subsequently canceled pursuant to subsection (b) of Section 19 of this act, the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 17, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-210. Rejection of payment order.&nbsp;</span></p> <p><span class="cls0">REJECTION OF PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally, electronically, or in writing. A notice of rejection need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order. Rejection is effective when the notice is given if transmission is by a means that is reasonable in the circumstances. If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received. If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order, (i) any means complying with the agreement is reasonable and (ii) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.&nbsp;</span></p> <p><span class="cls0">(b) This subsection applies if a receiving bank other than the beneficiary's bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order. If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is canceled pursuant to subsection (d) of Section 19 of this act or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly.&nbsp;</span></p> <p><span class="cls0">(c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.&nbsp;</span></p> <p><span class="cls0">(d) Acceptance of a payment order precludes a later rejection of the order. Rejection of a payment order precludes a later acceptance of the order.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 18, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-211. Cancellation and amendment of payment order.&nbsp;</span></p> <p><span class="cls0">CANCELLATION AND AMENDMENT OF PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) A communication of the sender of a payment order canceling or amending the order may be transmitted to the receiving bank orally, electronically, or in writing. If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified pursuant to the security procedure or the bank agrees to the cancellation or amendment.&nbsp;</span></p> <p><span class="cls0">(b) Subject to subsection (a) of this section, a communication by the sender canceling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order.&nbsp;</span></p> <p><span class="cls0">(c) After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank.&nbsp;</span></p> <p><span class="cls0">(1) With respect to a payment order accepted by a receiving bank other than the beneficiary's bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made.&nbsp;</span></p> <p><span class="cls0">(2) With respect to a payment order accepted by the beneficiary's bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a payment order (i) that is a duplicate of a payment order previously issued by the sender, (ii) that orders payment to a beneficiary not entitled to receive payment from the originator, or (iii) that orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator. If the payment order is canceled or amended, the beneficiary's bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.&nbsp;</span></p> <p><span class="cls0">(d) An unaccepted payment order is canceled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date or payment date of the order.&nbsp;</span></p> <p><span class="cls0">(e) A canceled payment order cannot be accepted. If an accepted payment order is canceled, the acceptance is nullified and no person has any right or obligation based on the acceptance. Amendment of a payment order is deemed to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time.&nbsp;</span></p> <p><span class="cls0">(f) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank's agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney's fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.&nbsp;</span></p> <p><span class="cls0">(g) A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order.&nbsp;</span></p> <p><span class="cls0">(h) A funds-transfer system rule is not effective to the extent it conflicts with paragraph (2) of subsection (c) of this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 19, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-212. Liability and duty of receiving bank regarding unaccepted payment.&nbsp;</span></p> <p><span class="cls0">LIABILITY AND DUTY OF RECEIVING BANK REGARDING UNACCEPTED PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this Article, but does not otherwise have any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this Article or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in Section 17 of this act, and liability is limited to that provided in this Article. A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this Article or by express agreement.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 20, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-301. Execution and execution date.&nbsp;</span></p> <p><span class="cls0">EXECUTION AND EXECUTION DATE&nbsp;</span></p> <p><span class="cls0">(a) A payment order is "executed" by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank. A payment order received by the beneficiary's bank can be accepted but cannot be executed.&nbsp;</span></p> <p><span class="cls0">(b) "Execution date" of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender's order. The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received. If the sender's instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 21, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-302. Obligations of receiving bank in execution of payment order.&nbsp;</span></p> <p><span class="cls0">OBLIGATIONS OF RECEIVING BANK IN EXECUTION OF PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) Except as provided in subsections (b) through (d) of this section, if the receiving bank accepts a payment order pursuant to subsection (a) of Section 17 of this act, the bank has the following obligations in executing the order:&nbsp;</span></p> <p><span class="cls0">(1) The receiving bank is obliged to issue, on the execution date, a payment order complying with the sender's order and to follow the sender's instructions concerning (i) any intermediary bank or funds-transfer system to be used in carrying out the funds transfer, or (ii) the means by which payment orders are to be transmitted in the funds transfer. If the originator's bank issues a payment order to an intermediary bank, the originator's bank is obliged to instruct the intermediary bank according to the instruction of the originator. An intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts.&nbsp;</span></p> <p><span class="cls0">(2) If the sender's instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct any intermediary bank accordingly. If a sender's instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment date or as soon thereafter as is feasible.&nbsp;</span></p> <p><span class="cls0">(b) Unless otherwise instructed, a receiving bank executing a payment order may (i) use any funds-transfer system if use of that system is reasonable in the circumstances, and (ii) issue a payment order to the beneficiary's bank or to an intermediary bank through which a payment order conforming to the sender's order can expeditiously be issued to the beneficiary's bank if the receiving bank exercises ordinary care in the selection of the intermediary bank. A receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer.&nbsp;</span></p> <p><span class="cls0">(c) Unless paragraph (2) of subsection (a) of this section applies or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first class mail or by any means reasonable in the circumstances. If the receiving bank is instructed to execute the sender's order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by the means stated or by any means as expeditious as the means stated.&nbsp;</span></p> <p><span class="cls0">(d) Unless instructed by the sender, (i) the receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender's order by issuing a payment order in an amount equal to the amount of the sender's order less the amount of the charges, and (ii) may not instruct a subsequent receiving bank to obtain payment of its charges in the same manner.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 22, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-303. Erroneous execution of payment order.&nbsp;</span></p> <p><span class="cls0">ERRONEOUS EXECUTION OF PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) A receiving bank that (i) executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender's order, or (ii) issues a payment order in execution of the sender's order and then issues a duplicate order, is entitled to payment of the amount of the sender's order under subsection (e) of Section 27 of this act if that subsection is otherwise satisfied. The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution.&nbsp;</span></p> <p><span class="cls0">(b) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender's order is entitled to payment of the amount of the sender's order under subsection (c) of Section 27 of this act if (i) that subsection is otherwise satisfied and (ii) the bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the sender's order. If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. This subsection does not apply if the receiving bank executes the sender's payment order by issuing a payment order in an amount less than the amount of the sender's order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender.&nbsp;</span></p> <p><span class="cls0">(c) If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender's order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued. The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 23, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-304. Duty of sender to report erroneously executed payment order.&nbsp;</span></p> <p><span class="cls0">DUTY OF SENDER TO REPORT ERRONEOUSLY EXECUTED PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">If the sender of a payment order that is erroneously executed as stated in Section 23 of this act receives notification from the receiving bank that the order was executed or that the sender's account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the notification from the bank was received by the sender. If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under subsection (d) of Section 27 of this act for the period before the bank learns of the execution error. The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this section.&nbsp;</span></p> <p><span class="cls0">Added by Laws 1990, c. 110, &sect; 24, eff. July 1, 1991.&nbsp;</span></p> <p class="cls2">&nbsp;</p> <p><span class="cls0">&sect;12A-4A-305. Liability for late or improper execution or failure to execute payment order.&nbsp;</span></p> <p><span class="cls0">LIABILITY FOR LATE OR IMPROPER EXECUTION OR FAILURE TO&nbsp;</span></p> <p><span class="cls0">EXECUTE PAYMENT ORDER&nbsp;</span></p> <p><span class="cls0">(a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of Section 22 of this act results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the