400.1-201. Subject to additional definitions contained in the subsequentarticles of this chapter which are applicable to specific articles or partsthereof, and unless the context otherwise requires, in this chapter:
(1) "Action" in the sense of a judicial proceeding includes recoupment,counterclaim, set-off, suit in equity and any other proceedings in whichrights are determined.
(2) "Aggrieved party" means a party entitled to resort to a remedy.
(3) "Agreement" means the bargain of the parties in fact as found intheir language or by implication from other circumstances including course ofdealing or usage of trade or course of performance as provided in this chapter(sections 400.1-205 and 400.2-208). Whether an agreement has legalconsequences is determined by the provisions of this chapter, if applicable;otherwise by the law of contracts (section 400.1-103). (Compare "Contract".)
(4) "Bank" means any person engaged in the business of banking.
(5) "Bearer" means the person in possession of an instrument, documentof title, or certificated security payable to bearer or endorsed in blank.
(6) "Bill of lading" means a document evidencing the receipt of goodsfor shipment issued by a person engaged in the business of transporting orforwarding goods, and includes an airbill. "Airbill" means a document servingfor air transportation as a bill of lading does for marine or railtransportation, and includes an air consignment note or air waybill.
(7) "Branch" includes a separately incorporated foreign branch of abank.
(8) "Burden of establishing" a fact means the burden of persuading thetriers of fact that the existence of the fact is more probable than itsnonexistence.
(9) "Buyer in ordinary course of business" means a person that buysgoods in good faith and without knowledge that the sale violates the rights ofanother person in the goods, and in the ordinary course from a person, otherthan a pawnbroker, in the business of selling goods of that kind. A personbuys goods in the ordinary course if the sale to the person comports with theusual or customary practices in the kind of business in which the seller isengaged or with the seller's own usual or customary practices. A person thatsells oil, gas or other minerals at the wellhead or minehead is a person inthe business of selling goods of that kind. A buyer in ordinary course ofbusiness may buy for cash, by exchange of other property or on secured orunsecured credit and may acquire goods or documents of title under apreexisting contract for sale. Only a buyer that takes possession of thegoods or has a right to recover the goods from the seller under article 2 maybe a buyer in ordinary course of business. A person that acquires goods in atransfer in bulk or as security for, or in total or partial satisfaction of, amoney debt is not a buyer in ordinary course of business.
(10) "Conspicuous": A term or clause is conspicuous when it is sowritten that a reasonable person against whom it is to operate ought to havenoticed it. A printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING)is conspicuous. Language in the body of a form is "conspicuous" if it is inlarger or other contrasting type or color. But in a telegram any stated termis "conspicuous". Whether a term or clause is "conspicuous" or not is fordecision by the court.
(11) "Contract" means the total legal obligation which results from theparties' agreement as affected by this chapter and any other applicable rulesof law. (Compare "Agreement".)
(12) "Creditor" includes a general creditor, a secured creditor, a liencreditor and any representative of creditors, including an assignee for thebenefit of creditors, a trustee in bankruptcy, a receiver in equity and anexecutor or administrator of an insolvent debtor's or assignor's estate.
(13) "Defendant" includes a person in the position of defendant in across-action or counterclaim.
(14) "Delivery" with respect to instruments, documents of title, chattelpaper or certificated securities means voluntary transfer of possession.
(15) "Document of title" includes bill of lading, dock warrant, dockreceipt, warehouse receipt or order for the delivery of goods, and also anyother document which in the regular course of business or financing is treatedas adequately evidencing that the person in possession of it is entitled toreceive, hold and dispose of the document and the goods it covers. To be adocument of title a document must purport to be issued by or addressed to abailee and purport to cover goods in the bailee's possession which are eitheridentified or are fungible portions of an identified mass.
(16) "Fault" means wrongful act, omission or breach.
(17) "Fungible" with respect to goods or securities means goods orsecurities of which any unit is, by nature or usage of trade, the equivalentof any other like unit. Goods which are not fungible shall be deemed fungiblefor the purposes of this chapter to the extent that under a particularagreement or document unlike units are treated as equivalents.
(18) "Genuine" means free of forgery or counterfeiting.
(19) "Good faith" means honesty in fact in the conduct or transactionconcerned.
(20) "Holder" with respect to a negotiable instrument, means the personin possession if the instrument is payable to bearer or, in the case of aninstrument payable to an identified person, if the identified person is inpossession. "Holder" with respect to a document of title means the person inpossession if the goods are deliverable to bearer or to the order of theperson in possession.
(21) To "honor" is to pay or to accept and pay, or where a credit soengages to purchase or discount a draft complying with the terms of thecredit.
(22) "Insolvency proceedings" includes any assignment for the benefit ofcreditors or other proceedings intended to liquidate or rehabilitate theestate of the person involved.
(23) A person is "insolvent" who either has ceased to pay his or herdebts in the ordinary course of business or cannot pay his or her debts asthey become due or is insolvent within the meaning of the federal bankruptcylaw.
(24) "Money" means a medium of exchange authorized or adopted by adomestic or foreign government and includes a monetary unit of accountestablished by an intergovernmental organization or by agreement between twoor more nations.
(25) A person has "notice" of a fact when
(a) a person has actual knowledge of it; or
(b) a person has received a notice or notification of it; or
(c) from all the facts and circumstances known to him or her at the timein question he or she has reason to know that it exists. A person "knows" orhas "knowledge" of a fact when a person has actual knowledge of it."Discover" or "learn" or a word or phrase of similar import refers toknowledge rather than to reason to know. The time and circumstances underwhich a notice or notification may cease to be effective are not determined bythis chapter.
(26) A person "notifies" or "gives" a notice or notification to anotherby taking such steps as may be reasonably required to inform the other inordinary course whether or not such other actually comes to know of it. Aperson "receives" a notice or notification when
(a) it comes to a person's attention, or
(b) it is duly delivered at the place of business through which thecontract was made or at any other place held out by a person as the place forreceipt of such communications.
(27) Notice, knowledge or a notice or notification received by anorganization is effective for a particular transaction from the time when itis brought to the attention of the individual conducting that transaction, andin any event from the time when it would have been brought to an individual'sattention if the organization had exercised due diligence. An organizationexercises due diligence if it maintains reasonable routines for communicatingsignificant information to the person conducting the transaction and there isreasonable compliance with the routines. Due diligence does not require anindividual acting for the organization to communicate information unless suchcommunication is part of an individual's regular duties or unless he or shehas reason to know of the transaction and that the transaction would bematerially affected by the information.
(28) "Organization" includes a corporation, government or governmentalsubdivision or agency, business trust, estate, trust, partnership orassociation, two or more persons having a joint or common interest, or anyother legal or commercial entity.
(29) "Party", as distinct from "third party", means a person who hasengaged in a transaction or made an agreement within this chapter.
(30) "Person" includes an individual or an organization (see section400.1-102).
(31) "Presumption" or "presumed" means that the trier of fact must findthe existence of the fact presumed unless and until evidence is introducedwhich would support a finding of its nonexistence.
(32) "Purchase" includes taking by sale, discount, negotiation,mortgage, pledge, lien, security interest, issue or reissue, gift or any othervoluntary transaction creating an interest in property.
(33) "Purchaser" means a person who takes by purchase.
(34) "Remedy" means any remedial right to which an aggrieved party isentitled with or without resort to a tribunal.
(35) "Representative" includes an agent, an officer of a corporation orassociation, and a trustee, executor or administrator of an estate, or anyother person empowered to act for another.
(36) "Rights" includes remedies.
(37) "Security interest" means an interest in personal property orfixtures which secures payment or performance of an obligation. The term alsoincludes any interest of a consignor and a buyer of accounts, chattel paper, apayment intangible, or a promissory note in a transaction that is subject toarticle 9. The special property interest of a buyer of goods onidentification of those goods to a contract for sale under section 400.2-401is not a "security interest", but a buyer may also acquire a "securityinterest" by complying with article 9. Except as otherwise provided insection 400.2-505, the right of a seller or lessor of goods under article 2 or2A to retain or acquire possession of the goods is not a "security interest",but a seller or lessor may also acquire a "security interest" by complyingwith article 9. The retention or reservation of title by a seller of goodsnotwithstanding shipment or delivery to the buyer (section 400.2-401) islimited in effect to a reservation of a "security interest".
Whether a transaction creates a lease or security interest is determinedby the facts of each case; however, a transaction creates a security interestif the consideration the lessee is to pay the lessor for the right topossession and use of the goods is an obligation for the term of the lease notsubject to termination by the lessee, and
(a) the original term of the lease is equal to or greater than theremaining economic life of the goods,
(b) the lessee is bound to renew the lease for the remaining economiclife of the goods or is bound to become the owner of the goods,
(c) the lessee has an option to renew the lease for the remainingeconomic life of the goods for no additional consideration or nominaladditional consideration upon compliance with the lease agreement, or
(d) the lessee has an option to become the owner of the goods for noadditional consideration or nominal additional consideration upon compliancewith the lease agreement.
A transaction does not create a security interest merely because itprovides that
(a) the present value of the consideration the lessee is obligated topay the lessor for the right to possession and use of the goods issubstantially equal to or is greater than the fair market value of the goodsat the time the lease is entered into,
(b) the lessee assumes risk of loss of the goods, or agrees to paytaxes, insurance, filing, recording, or registration fees, or service ormaintenance costs with respect to the goods,
(c) the lessee has an option to renew the lease or to become the ownerof the goods,
(d) the lessee has an option to renew the lease for a fixed rent that isequal to or greater than the reasonably predictable fair market rent for theuse of the goods for the term of the renewal at the time the option is to beperformed, or
(e) the lessee has an option to become the owner of the goods for afixed price that is equal to or greater than the reasonably predictable fairmarket value of the goods at the time the option is to be performed.
For purposes of subsection (37):
(a) Additional consideration is not nominal if (i) when the option torenew the lease is granted to the lessee the rent is stated to be the fairmarket rent for the use of the goods for the term of the renewal determined atthe time the option is to be performed, or (ii) when the option to become theowner of the goods is granted to the lessee the price is stated to be the fairmarket value of the goods determined at the time the option is to beperformed. Additional consideration is nominal if it is less than thelessee's reasonably predictable cost of performing under the lease agreementif the option is not exercised;
(b) "Reasonably predictable" and "remaining economic life of the goods"are to be determined with reference to the facts and circumstances at the timethe transaction is entered into; and
(c) "Present value" means the amount as of a date certain of one or moresums payable in the future, discounted to the date certain. The discount isdetermined by the interest rate specified by the parties if the rate is notmanifestly unreasonable at the time the transaction is entered into;otherwise, the discount is determined by a commercially reasonable rate thattakes into account the facts and circumstances of each case at the time thetransaction was entered into.
(38) "Send" in connection with any writing or notice means to deposit inthe mail or deliver for transmission by any other usual means of communicationwith postage or cost of transmission provided for and properly addressed andin the case of an instrument to an address specified thereon or otherwiseagreed, or if there be none to any address reasonable under the circumstances. The receipt of any writing or notice within the time at which it would havearrived if properly sent has the effect of a proper sending.
(39) "Signed" includes any symbol executed or adopted by a party withpresent intention to authenticate a writing.
(40) "Special property" means identifiable property in which the holderhas only a qualified, temporary, or limited interest.
(41) "Surety" includes guarantor.
(42) "Telegram" includes a message transmitted by radio, teletype,cable, any mechanical method of transmission, or the like.
(43) "Term" means that portion of an agreement which relates to aparticular matter.
(44) "Unauthorized" signature means one made without actual, implied, orapparent authority and includes a forgery.
(45) "Value". Except as otherwise provided with respect to negotiableinstruments and bank collections (sections 400.3-303, 400.4-208 and 400.4-209)a person gives "value" for rights if he or she acquires them
(a) in return for a binding commitment to extend credit or for theextension of immediately available credit whether or not drawn upon andwhether or not a charge-back is provided for in the event of difficulties incollection; or
(b) as security for or in total or partial satisfaction of a preexistingclaim; or
(c) by accepting delivery pursuant to a preexisting contract forpurchase; or
(d) generally, in return for any consideration sufficient to support asimple contract.
(46) "Warehouse receipt" means a receipt issued by a person engaged inthe business of storing goods for hire.
(47) "Written" or "writing" includes printing, typewriting or any otherintentional reduction to tangible form.
(1974) Held that an option to purchase does not as a matter of law cause a lease agreement to become a "security" agreement. RCA Corporation v. State Tax Commission of Missouri (Mo.), 513 S.W.2d 313.
(1974) Held that proof of licensing of dealer is not required under this section in order to obtain its protection. Kaw Valley State Bank v. Stanley (A.), 514 S.W.2d 42.
400.1-201. Subject to additional definitions contained in the subsequentarticles of this chapter which are applicable to specific articles or partsthereof, and unless the context otherwise requires, in this chapter:
(1) "Action" in the sense of a judicial proceeding includes recoupment,counterclaim, set-off, suit in equity and any other proceedings in whichrights are determined.
(2) "Aggrieved party" means a party entitled to resort to a remedy.
(3) "Agreement" means the bargain of the parties in fact as found intheir language or by implication from other circumstances including course ofdealing or usage of trade or course of performance as provided in this chapter(sections 400.1-205 and 400.2-208). Whether an agreement has legalconsequences is determined by the provisions of this chapter, if applicable;otherwise by the law of contracts (section 400.1-103). (Compare "Contract".)
(4) "Bank" means any person engaged in the business of banking.
(5) "Bearer" means the person in possession of an instrument, documentof title, or certificated security payable to bearer or endorsed in blank.
(6) "Bill of lading" means a document evidencing the receipt of goodsfor shipment issued by a person engaged in the business of transporting orforwarding goods, and includes an airbill. "Airbill" means a document servingfor air transportation as a bill of lading does for marine or railtransportation, and includes an air consignment note or air waybill.
(7) "Branch" includes a separately incorporated foreign branch of abank.
(8) "Burden of establishing" a fact means the burden of persuading thetriers of fact that the existence of the fact is more probable than itsnonexistence.
(9) "Buyer in ordinary course of business" means a person that buysgoods in good faith and without knowledge that the sale violates the rights ofanother person in the goods, and in the ordinary course from a person, otherthan a pawnbroker, in the business of selling goods of that kind. A personbuys goods in the ordinary course if the sale to the person comports with theusual or customary practices in the kind of business in which the seller isengaged or with the seller's own usual or customary practices. A person thatsells oil, gas or other minerals at the wellhead or minehead is a person inthe business of selling goods of that kind. A buyer in ordinary course ofbusiness may buy for cash, by exchange of other property or on secured orunsecured credit and may acquire goods or documents of title under apreexisting contract for sale. Only a buyer that takes possession of thegoods or has a right to recover the goods from the seller under article 2 maybe a buyer in ordinary course of business. A person that acquires goods in atransfer in bulk or as security for, or in total or partial satisfaction of, amoney debt is not a buyer in ordinary course of business.
(10) "Conspicuous": A term or clause is conspicuous when it is sowritten that a reasonable person against whom it is to operate ought to havenoticed it. A printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING)is conspicuous. Language in the body of a form is "conspicuous" if it is inlarger or other contrasting type or color. But in a telegram any stated termis "conspicuous". Whether a term or clause is "conspicuous" or not is fordecision by the court.
(11) "Contract" means the total legal obligation which results from theparties' agreement as affected by this chapter and any other applicable rulesof law. (Compare "Agreement".)
(12) "Creditor" includes a general creditor, a secured creditor, a liencreditor and any representative of creditors, including an assignee for thebenefit of creditors, a trustee in bankruptcy, a receiver in equity and anexecutor or administrator of an insolvent debtor's or assignor's estate.
(13) "Defendant" includes a person in the position of defendant in across-action or counterclaim.
(14) "Delivery" with respect to instruments, documents of title, chattelpaper or certificated securities means voluntary transfer of possession.
(15) "Document of title" includes bill of lading, dock warrant, dockreceipt, warehouse receipt or order for the delivery of goods, and also anyother document which in the regular course of business or financing is treatedas adequately evidencing that the person in possession of it is entitled toreceive, hold and dispose of the document and the goods it covers. To be adocument of title a document must purport to be issued by or addressed to abailee and purport to cover goods in the bailee's possession which are eitheridentified or are fungible portions of an identified mass.
(16) "Fault" means wrongful act, omission or breach.
(17) "Fungible" with respect to goods or securities means goods orsecurities of which any unit is, by nature or usage of trade, the equivalentof any other like unit. Goods which are not fungible shall be deemed fungiblefor the purposes of this chapter to the extent that under a particularagreement or document unlike units are treated as equivalents.
(18) "Genuine" means free of forgery or counterfeiting.
(19) "Good faith" means honesty in fact in the conduct or transactionconcerned.
(20) "Holder" with respect to a negotiable instrument, means the personin possession if the instrument is payable to bearer or, in the case of aninstrument payable to an identified person, if the identified person is inpossession. "Holder" with respect to a document of title means the person inpossession if the goods are deliverable to bearer or to the order of theperson in possession.
(21) To "honor" is to pay or to accept and pay, or where a credit soengages to purchase or discount a draft complying with the terms of thecredit.
(22) "Insolvency proceedings" includes any assignment for the benefit ofcreditors or other proceedings intended to liquidate or rehabilitate theestate of the person involved.
(23) A person is "insolvent" who either has ceased to pay his or herdebts in the ordinary course of business or cannot pay his or her debts asthey become due or is insolvent within the meaning of the federal bankruptcylaw.
(24) "Money" means a medium of exchange authorized or adopted by adomestic or foreign government and includes a monetary unit of accountestablished by an intergovernmental organization or by agreement between twoor more nations.
(25) A person has "notice" of a fact when
(a) a person has actual knowledge of it; or
(b) a person has received a notice or notification of it; or
(c) from all the facts and circumstances known to him or her at the timein question he or she has reason to know that it exists. A person "knows" orhas "knowledge" of a fact when a person has actual knowledge of it."Discover" or "learn" or a word or phrase of similar import refers toknowledge rather than to reason to know. The time and circumstances underwhich a notice or notification may cease to be effective are not determined bythis chapter.
(26) A person "notifies" or "gives" a notice or notification to anotherby taking such steps as may be reasonably required to inform the other inordinary course whether or not such other actually comes to know of it. Aperson "receives" a notice or notification when
(a) it comes to a person's attention, or
(b) it is duly delivered at the place of business through which thecontract was made or at any other place held out by a person as the place forreceipt of such communications.
(27) Notice, knowledge or a notice or notification received by anorganization is effective for a particular transaction from the time when itis brought to the attention of the individual conducting that transaction, andin any event from the time when it would have been brought to an individual'sattention if the organization had exercised due diligence. An organizationexercises due diligence if it maintains reasonable routines for communicatingsignificant information to the person conducting the transaction and there isreasonable compliance with the routines. Due diligence does not require anindividual acting for the organization to communicate information unless suchcommunication is part of an individual's regular duties or unless he or shehas reason to know of the transaction and that the transaction would bematerially affected by the information.
(28) "Organization" includes a corporation, government or governmentalsubdivision or agency, business trust, estate, trust, partnership orassociation, two or more persons having a joint or common interest, or anyother legal or commercial entity.
(29) "Party", as distinct from "third party", means a person who hasengaged in a transaction or made an agreement within this chapter.
(30) "Person" includes an individual or an organization (see section400.1-102).
(31) "Presumption" or "presumed" means that the trier of fact must findthe existence of the fact presumed unless and until evidence is introducedwhich would support a finding of its nonexistence.
(32) "Purchase" includes taking by sale, discount, negotiation,mortgage, pledge, lien, security interest, issue or reissue, gift or any othervoluntary transaction creating an interest in property.
(33) "Purchaser" means a person who takes by purchase.
(34) "Remedy" means any remedial right to which an aggrieved party isentitled with or without resort to a tribunal.
(35) "Representative" includes an agent, an officer of a corporation orassociation, and a trustee, executor or administrator of an estate, or anyother person empowered to act for another.
(36) "Rights" includes remedies.
(37) "Security interest" means an interest in personal property orfixtures which secures payment or performance of an obligation. The term alsoincludes any interest of a consignor and a buyer of accounts, chattel paper, apayment intangible, or a promissory note in a transaction that is subject toarticle 9. The special property interest of a buyer of goods onidentification of those goods to a contract for sale under section 400.2-401is not a "security interest", but a buyer may also acquire a "securityinterest" by complying with article 9. Except as otherwise provided insection 400.2-505, the right of a seller or lessor of goods under article 2 or2A to retain or acquire possession of the goods is not a "security interest",but a seller or lessor may also acquire a "security interest" by complyingwith article 9. The retention or reservation of title by a seller of goodsnotwithstanding shipment or delivery to the buyer (section 400.2-401) islimited in effect to a reservation of a "security interest".
Whether a transaction creates a lease or security interest is determinedby the facts of each case; however, a transaction creates a security interestif the consideration the lessee is to pay the lessor for the right topossession and use of the goods is an obligation for the term of the lease notsubject to termination by the lessee, and
(a) the original term of the lease is equal to or greater than theremaining economic life of the goods,
(b) the lessee is bound to renew the lease for the remaining economiclife of the goods or is bound to become the owner of the goods,
(c) the lessee has an option to renew the lease for the remainingeconomic life of the goods for no additional consideration or nominaladditional consideration upon compliance with the lease agreement, or
(d) the lessee has an option to become the owner of the goods for noadditional consideration or nominal additional consideration upon compliancewith the lease agreement.
A transaction does not create a security interest merely because itprovides that
(a) the present value of the consideration the lessee is obligated topay the lessor for the right to possession and use of the goods issubstantially equal to or is greater than the fair market value of the goodsat the time the lease is entered into,
(b) the lessee assumes risk of loss of the goods, or agrees to paytaxes, insurance, filing, recording, or registration fees, or service ormaintenance costs with respect to the goods,
(c) the lessee has an option to renew the lease or to become the ownerof the goods,
(d) the lessee has an option to renew the lease for a fixed rent that isequal to or greater than the reasonably predictable fair market rent for theuse of the goods for the term of the renewal at the time the option is to beperformed, or
(e) the lessee has an option to become the owner of the goods for afixed price that is equal to or greater than the reasonably predictable fairmarket value of the goods at the time the option is to be performed.
For purposes of subsection (37):
(a) Additional consideration is not nominal if (i) when the option torenew the lease is granted to the lessee the rent is stated to be the fairmarket rent for the use of the goods for the term of the renewal determined atthe time the option is to be performed, or (ii) when the option to become theowner of the goods is granted to the lessee the price is stated to be the fairmarket value of the goods determined at the time the option is to beperformed. Additional consideration is nominal if it is less than thelessee's reasonably predictable cost of performing under the lease agreementif the option is not exercised;
(b) "Reasonably predictable" and "remaining economic life of the goods"are to be determined with reference to the facts and circumstances at the timethe transaction is entered into; and
(c) "Present value" means the amount as of a date certain of one or moresums payable in the future, discounted to the date certain. The discount isdetermined by the interest rate specified by the parties if the rate is notmanifestly unreasonable at the time the transaction is entered into;otherwise, the discount is determined by a commercially reasonable rate thattakes into account the facts and circumstances of each case at the time thetransaction was entered into.
(38) "Send" in connection with any writing or notice means to deposit inthe mail or deliver for transmission by any other usual means of communicationwith postage or cost of transmission provided for and properly addressed andin the case of an instrument to an address specified thereon or otherwiseagreed, or if there be none to any address reasonable under the circumstances. The receipt of any writing or notice within the time at which it would havearrived if properly sent has the effect of a proper sending.
(39) "Signed" includes any symbol executed or adopted by a party withpresent intention to authenticate a writing.
(40) "Special property" means identifiable property in which the holderhas only a qualified, temporary, or limited interest.
(41) "Surety" includes guarantor.
(42) "Telegram" includes a message transmitted by radio, teletype,cable, any mechanical method of transmission, or the like.
(43) "Term" means that portion of an agreement which relates to aparticular matter.
(44) "Unauthorized" signature means one made without actual, implied, orapparent authority and includes a forgery.
(45) "Value". Except as otherwise provided with respect to negotiableinstruments and bank collections (sections 400.3-303, 400.4-208 and 400.4-209)a person gives "value" for rights if he or she acquires them
(a) in return for a binding commitment to extend credit or for theextension of immediately available credit whether or not drawn upon andwhether or not a charge-back is provided for in the event of difficulties incollection; or
(b) as security for or in total or partial satisfaction of a preexistingclaim; or
(c) by accepting delivery pursuant to a preexisting contract forpurchase; or
(d) generally, in return for any consideration sufficient to support asimple contract.
(46) "Warehouse receipt" means a receipt issued by a person engaged inthe business of storing goods for hire.
(47) "Written" or "writing" includes printing, typewriting or any otherintentional reduction to tangible form.
(1974) Held that an option to purchase does not as a matter of law cause a lease agreement to become a "security" agreement. RCA Corporation v. State Tax Commission of Missouri (Mo.), 513 S.W.2d 313.
(1974) Held that proof of licensing of dealer is not required under this section in order to obtain its protection. Kaw Valley State Bank v. Stanley (A.), 514 S.W.2d 42.
400.1-201. Subject to additional definitions contained in the subsequentarticles of this chapter which are applicable to specific articles or partsthereof, and unless the context otherwise requires, in this chapter:
(1) "Action" in the sense of a judicial proceeding includes recoupment,counterclaim, set-off, suit in equity and any other proceedings in whichrights are determined.
(2) "Aggrieved party" means a party entitled to resort to a remedy.
(3) "Agreement" means the bargain of the parties in fact as found intheir language or by implication from other circumstances including course ofdealing or usage of trade or course of performance as provided in this chapter(sections 400.1-205 and 400.2-208). Whether an agreement has legalconsequences is determined by the provisions of this chapter, if applicable;otherwise by the law of contracts (section 400.1-103). (Compare "Contract".)
(4) "Bank" means any person engaged in the business of banking.
(5) "Bearer" means the person in possession of an instrument, documentof title, or certificated security payable to bearer or endorsed in blank.
(6) "Bill of lading" means a document evidencing the receipt of goodsfor shipment issued by a person engaged in the business of transporting orforwarding goods, and includes an airbill. "Airbill" means a document servingfor air transportation as a bill of lading does for marine or railtransportation, and includes an air consignment note or air waybill.
(7) "Branch" includes a separately incorporated foreign branch of abank.
(8) "Burden of establishing" a fact means the burden of persuading thetriers of fact that the existence of the fact is more probable than itsnonexistence.
(9) "Buyer in ordinary course of business" means a person that buysgoods in good faith and without knowledge that the sale violates the rights ofanother person in the goods, and in the ordinary course from a person, otherthan a pawnbroker, in the business of selling goods of that kind. A personbuys goods in the ordinary course if the sale to the person comports with theusual or customary practices in the kind of business in which the seller isengaged or with the seller's own usual or customary practices. A person thatsells oil, gas or other minerals at the wellhead or minehead is a person inthe business of selling goods of that kind. A buyer in ordinary course ofbusiness may buy for cash, by exchange of other property or on secured orunsecured credit and may acquire goods or documents of title under apreexisting contract for sale. Only a buyer that takes possession of thegoods or has a right to recover the goods from the seller under article 2 maybe a buyer in ordinary course of business. A person that acquires goods in atransfer in bulk or as security for, or in total or partial satisfaction of, amoney debt is not a buyer in ordinary course of business.
(10) "Conspicuous": A term or clause is conspicuous when it is sowritten that a reasonable person against whom it is to operate ought to havenoticed it. A printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING)is conspicuous. Language in the body of a form is "conspicuous" if it is inlarger or other contrasting type or color. But in a telegram any stated termis "conspicuous". Whether a term or clause is "conspicuous" or not is fordecision by the court.
(11) "Contract" means the total legal obligation which results from theparties' agreement as affected by this chapter and any other applicable rulesof law. (Compare "Agreement".)
(12) "Creditor" includes a general creditor, a secured creditor, a liencreditor and any representative of creditors, including an assignee for thebenefit of creditors, a trustee in bankruptcy, a receiver in equity and anexecutor or administrator of an insolvent debtor's or assignor's estate.
(13) "Defendant" includes a person in the position of defendant in across-action or counterclaim.
(14) "Delivery" with respect to instruments, documents of title, chattelpaper or certificated securities means voluntary transfer of possession.
(15) "Document of title" includes bill of lading, dock warrant, dockreceipt, warehouse receipt or order for the delivery of goods, and also anyother document which in the regular course of business or financing is treatedas adequately evidencing that the person in possession of it is entitled toreceive, hold and dispose of the document and the goods it covers. To be adocument of title a document must purport to be issued by or addressed to abailee and purport to cover goods in the bailee's possession which are eitheridentified or are fungible portions of an identified mass.
(16) "Fault" means wrongful act, omission or breach.
(17) "Fungible" with respect to goods or securities means goods orsecurities of which any unit is, by nature or usage of trade, the equivalentof any other like unit. Goods which are not fungible shall be deemed fungiblefor the purposes of this chapter to the extent that under a particularagreement or document unlike units are treated as equivalents.
(18) "Genuine" means free of forgery or counterfeiting.
(19) "Good faith" means honesty in fact in the conduct or transactionconcerned.
(20) "Holder" with respect to a negotiable instrument, means the personin possession if the instrument is payable to bearer or, in the case of aninstrument payable to an identified person, if the identified person is inpossession. "Holder" with respect to a document of title means the person inpossession if the goods are deliverable to bearer or to the order of theperson in possession.
(21) To "honor" is to pay or to accept and pay, or where a credit soengages to purchase or discount a draft complying with the terms of thecredit.
(22) "Insolvency proceedings" includes any assignment for the benefit ofcreditors or other proceedings intended to liquidate or rehabilitate theestate of the person involved.
(23) A person is "insolvent" who either has ceased to pay his or herdebts in the ordinary course of business or cannot pay his or her debts asthey become due or is insolvent within the meaning of the federal bankruptcylaw.
(24) "Money" means a medium of exchange authorized or adopted by adomestic or foreign government and includes a monetary unit of accountestablished by an intergovernmental organization or by agreement between twoor more nations.
(25) A person has "notice" of a fact when
(a) a person has actual knowledge of it; or
(b) a person has received a notice or notification of it; or
(c) from all the facts and circumstances known to him or her at the timein question he or she has reason to know that it exists. A person "knows" orhas "knowledge" of a fact when a person has actual knowledge of it."Discover" or "learn" or a word or phrase of similar import refers toknowledge rather than to reason to know. The time and circumstances underwhich a notice or notification may cease to be effective are not determined bythis chapter.
(26) A person "notifies" or "gives" a notice or notification to anotherby taking such steps as may be reasonably required to inform the other inordinary course whether or not such other actually comes to know of it. Aperson "receives" a notice or notification when
(a) it comes to a person's attention, or
(b) it is duly delivered at the place of business through which thecontract was made or at any other place held out by a person as the place forreceipt of such communications.
(27) Notice, knowledge or a notice or notification received by anorganization is effective for a particular transaction from the time when itis brought to the attention of the individual conducting that transaction, andin any event from the time when it would have been brought to an individual'sattention if the organization had exercised due diligence. An organizationexercises due diligence if it maintains reasonable routines for communicatingsignificant information to the person conducting the transaction and there isreasonable compliance with the routines. Due diligence does not require anindividual acting for the organization to communicate information unless suchcommunication is part of an individual's regular duties or unless he or shehas reason to know of the transaction and that the transaction would bematerially affected by the information.
(28) "Organization" includes a corporation, government or governmentalsubdivision or agency, business trust, estate, trust, partnership orassociation, two or more persons having a joint or common interest, or anyother legal or commercial entity.
(29) "Party", as distinct from "third party", means a person who hasengaged in a transaction or made an agreement within this chapter.
(30) "Person" includes an individual or an organization (see section400.1-102).
(31) "Presumption" or "presumed" means that the trier of fact must findthe existence of the fact presumed unless and until evidence is introducedwhich would support a finding of its nonexistence.
(32) "Purchase" includes taking by sale, discount, negotiation,mortgage, pledge, lien, security interest, issue or reissue, gift or any othervoluntary transaction creating an interest in property.
(33) "Purchaser" means a person who takes by purchase.
(34) "Remedy" means any remedial right to which an aggrieved party isentitled with or without resort to a tribunal.
(35) "Representative" includes an agent, an officer of a corporation orassociation, and a trustee, executor or administrator of an estate, or anyother person empowered to act for another.
(36) "Rights" includes remedies.
(37) "Security interest" means an interest in personal property orfixtures which secures payment or performance of an obligation. The term alsoincludes any interest of a consignor and a buyer of accounts, chattel paper, apayment intangible, or a promissory note in a transaction that is subject toarticle 9. The special property interest of a buyer of goods onidentification of those goods to a contract for sale under section 400.2-401is not a "security interest", but a buyer may also acquire a "securityinterest" by complying with article 9. Except as otherwise provided insection 400.2-505, the right of a seller or lessor of goods under article 2 or2A to retain or acquire possession of the goods is not a "security interest",but a seller or lessor may also acquire a "security interest" by complyingwith article 9. The retention or reservation of title by a seller of goodsnotwithstanding shipment or delivery to the buyer (section 400.2-401) islimited in effect to a reservation of a "security interest".
Whether a transaction creates a lease or security interest is determinedby the facts of each case; however, a transaction creates a security interestif the consideration the lessee is to pay the lessor for the right topossession and use of the goods is an obligation for the term of the lease notsubject to termination by the lessee, and
(a) the original term of the lease is equal to or greater than theremaining economic life of the goods,
(b) the lessee is bound to renew the lease for the remaining economiclife of the goods or is bound to become the owner of the goods,
(c) the lessee has an option to renew the lease for the remainingeconomic life of the goods for no additional consideration or nominaladditional consideration upon compliance with the lease agreement, or
(d) the lessee has an option to become the owner of the goods for noadditional consideration or nominal additional consideration upon compliancewith the lease agreement.
A transaction does not create a security interest merely because itprovides that
(a) the present value of the consideration the lessee is obligated topay the lessor for the right to possession and use of the goods issubstantially equal to or is greater than the fair market value of the goodsat the time the lease is entered into,
(b) the lessee assumes risk of loss of the goods, or agrees to paytaxes, insurance, filing, recording, or registration fees, or service ormaintenance costs with respect to the goods,
(c) the lessee has an option to renew the lease or to become the ownerof the goods,
(d) the lessee has an option to renew the lease for a fixed rent that isequal to or greater than the reasonably predictable fair market rent for theuse of the goods for the term of the renewal at the time the option is to beperformed, or
(e) the lessee has an option to become the owner of the goods for afixed price that is equal to or greater than the reasonably predictable fairmarket value of the goods at the time the option is to be performed.
For purposes of subsection (37):
(a) Additional consideration is not nominal if (i) when the option torenew the lease is granted to the lessee the rent is stated to be the fairmarket rent for the use of the goods for the term of the renewal determined atthe time the option is to be performed, or (ii) when the option to become theowner of the goods is granted to the lessee the price is stated to be the fairmarket value of the goods determined at the time the option is to beperformed. Additional consideration is nominal if it is less than thelessee's reasonably predictable cost of performing under the lease agreementif the option is not exercised;
(b) "Reasonably predictable" and "remaining economic life of the goods"are to be determined with reference to the facts and circumstances at the timethe transaction is entered into; and
(c) "Present value" means the amount as of a date certain of one or moresums payable in the future, discounted to the date certain. The discount isdetermined by the interest rate specified by the parties if the rate is notmanifestly unreasonable at the time the transaction is entered into;otherwise, the discount is determined by a commercially reasonable rate thattakes into account the facts and circumstances of each case at the time thetransaction was entered into.
(38) "Send" in connection with any writing or notice means to deposit inthe mail or deliver for transmission by any other usual means of communicationwith postage or cost of transmission provided for and properly addressed andin the case of an instrument to an address specified thereon or otherwiseagreed, or if there be none to any address reasonable under the circumstances. The receipt of any writing or notice within the time at which it would havearrived if properly sent has the effect of a proper sending.
(39) "Signed" includes any symbol executed or adopted by a party withpresent intention to authenticate a writing.
(40) "Special property" means identifiable property in which the holderhas only a qualified, temporary, or limited interest.
(41) "Surety" includes guarantor.
(42) "Telegram" includes a message transmitted by radio, teletype,cable, any mechanical method of transmission, or the like.
(43) "Term" means that portion of an agreement which relates to aparticular matter.
(44) "Unauthorized" signature means one made without actual, implied, orapparent authority and includes a forgery.
(45) "Value". Except as otherwise provided with respect to negotiableinstruments and bank collections (sections 400.3-303, 400.4-208 and 400.4-209)a person gives "value" for rights if he or she acquires them
(a) in return for a binding commitment to extend credit or for theextension of immediately available credit whether or not drawn upon andwhether or not a charge-back is provided for in the event of difficulties incollection; or
(b) as security for or in total or partial satisfaction of a preexistingclaim; or
(c) by accepting delivery pursuant to a preexisting contract forpurchase; or
(d) generally, in return for any consideration sufficient to support asimple contract.
(46) "Warehouse receipt" means a receipt issued by a person engaged inthe business of storing goods for hire.
(47) "Written" or "writing" includes printing, typewriting or any otherintentional reduction to tangible form.
(1974) Held that an option to purchase does not as a matter of law cause a lease agreement to become a "security" agreement. RCA Corporation v. State Tax Commission of Missouri (Mo.), 513 S.W.2d 313.
(1974) Held that proof of licensing of dealer is not required under this section in order to obtain its protection. Kaw Valley State Bank v. Stanley (A.), 514 S.W.2d 42.
