CHAPTER 1. GENERAL PROVISIONS

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BUSINESS AND COMMERCE CODE

TITLE 1. UNIFORM COMMERCIAL CODE

CHAPTER 1. GENERAL PROVISIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1.101. SHORT TITLES. (a) This title may be cited as the

Uniform Commercial Code.

(b) This chapter may be cited as Uniform Commercial

Code--General Provisions.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.102. SCOPE OF CHAPTER. This chapter applies to a

transaction to the extent that it is governed by another chapter

of this title.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.103. CONSTRUCTION OF TITLE TO PROMOTE ITS PURPOSES AND

POLICIES; APPLICABILITY OF SUPPLEMENTAL PRINCIPLES OF LAW. (a)

This title must be liberally construed and applied to promote its

underlying purposes and policies, which are:

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

commercial transactions;

(2) to permit the continued expansion of commercial practices

through custom, usage and agreement of the parties; and

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

(b) Unless displaced by the particular provisions of this title,

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.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.104. CONSTRUCTION AGAINST IMPLIED REPEAL. This title

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matter, no part of it shall be deemed to be impliedly repealed by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.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.105. SEVERABILITY. If any provision or clause of this

title or its application to any person or circumstance is held

invalid, the invalidity does not affect other provisions or

applications of this title which can be given effect without the

invalid provision or application, and to this end the provisions

of this title are severable.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.106. USE OF SINGULAR AND PLURAL; GENDER. In this title,

unless the statutory context otherwise requires:

(1) words in the singular number include the plural, and those

in the plural include the singular; and

(2) words of any gender also refer to any other gender.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.107. SECTION CAPTIONS. Section captions are parts of

this title.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.108. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND

NATIONAL COMMERCE ACT. This title modifies, limits, and

supersedes the federal Electronic Signatures in Global and

National Commerce Act (15 U.S.C. Section 7001 et seq.) but does

not modify, limit, or supersede Section 101(c) of that Act (15

U.S.C. Section 7001(c)) or authorize electronic delivery of any

of the notices described in Section 103(b) of that Act (15 U.S.C.

Section 7003(b)).

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

SUBCHAPTER B. GENERAL DEFINITIONS AND PRINCIPLES OF

INTERPRETATION

Sec. 1.201. GENERAL DEFINITIONS. (a) Unless the context

otherwise requires, words or phrases defined in this section, or

in the additional definitions contained in other chapters of this

title that apply to particular chapters or parts thereof, have

the meanings stated.

(b) Subject to definitions contained in other chapters of this

title that apply to particular chapters or parts thereof:

(1) "Action," in the sense of a judicial proceeding, includes

recoupment, counterclaim, set-off, suit in equity, and any other

proceeding in which rights are determined.

(2) "Aggrieved party" means a party entitled to pursue a remedy.

(3) "Agreement," as distinguished from "contract," means the

bargain of the parties in fact, as found in their language or

inferred from other circumstances, including course of

performance, course of dealing, or usage of trade as provided in

Section 1.303.

(4) "Bank" means a person engaged in the business of banking and

includes a savings bank, savings and loan association, credit

union, and trust company.

(5) "Bearer" means a person in control of a negotiable

electronic document of title or a person in possession of a

negotiable instrument, a negotiable tangible document of title,

or a certificated security that is payable to bearer or indorsed

in blank.

(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.

(7) "Branch" includes a separately incorporated foreign branch

of a bank.

(8) "Burden of establishing" a fact means the burden of

persuading the trier of fact that the existence of the fact is

more probable than its nonexistence.

(9) "Buyer in ordinary course of business" means a person that

buys goods in good faith, without knowledge that the sale

violates the rights of another person in the goods, and in the

ordinary course from a person, other than a pawnbroker, in the

business of selling goods of that kind. A person buys goods in

the ordinary course if the sale to the person comports with the

usual or customary practices in the kind of business in which the

seller is engaged or with the seller's own usual or customary

practices. A person that sells oil, gas, or other minerals at the

wellhead or minehead is a person in the business of selling goods

of that kind. A buyer in ordinary course of business may buy for

cash, by exchange of other property, or on secured or unsecured

credit, and may acquire goods or documents of title under a

preexisting contract for sale. Only a buyer that takes possession

of the goods or has a right to recover the goods from the seller

under Chapter 2 may be a buyer in ordinary course of business.

"Buyer in ordinary course of business" does not include a person

that acquires goods in a transfer in bulk or as security for or

in total or partial satisfaction of a money debt.

(10) "Conspicuous," with reference to a term, means so written,

displayed, or presented that a reasonable person against which it

is to operate ought to have noticed it. Whether a term is

"conspicuous" or not is a decision for the court. Conspicuous

terms include the following:

(A) a heading in capitals equal to or greater in size than the

surrounding text, or in contrasting type, font, or color to the

surrounding text of the same or lesser size; and

(B) language in the body of a record or display in larger type

than the surrounding text, or in contrasting type, font, or color

to the surrounding text of the same size, or set off from

surrounding text of the same size by symbols or other marks that

call attention to the language.

(11) "Consumer" means an individual who enters into a

transaction primarily for personal, family, or household

purposes.

(12) "Contract," as distinguished from "agreement," means the

total legal obligation that results from the parties' agreement

as determined by this title as supplemented by any other

applicable laws.

(13) "Creditor" includes a general creditor, a secured creditor,

a lien creditor and any representative of creditors, including an

assignee for the benefit of creditors, a trustee in bankruptcy, a

receiver in equity and an executor or administrator of an

insolvent debtor's or assignor's estate.

(14) "Defendant" includes a person in the position of defendant

in a counterclaim, cross-claim, or third-party claim.

(15) "Delivery," with respect to an 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.

(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 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 is evidenced by a record consisting of information

stored in an electronic medium. A tangible document of title is

evidenced by a record consisting of information that is inscribed

on a tangible medium.

(17) "Fault" means a default, breach, or wrongful act or

omission.

(18) "Fungible goods" means:

(A) goods of which any unit, by nature or usage of trade, is the

equivalent of any other like unit; or

(B) goods that by agreement are treated as equivalent.

(19) "Genuine" means free of forgery or counterfeiting.

(20) "Good faith," except as otherwise provided in Chapter 5,

means honesty in fact and the observance of reasonable commercial

standards of fair dealing.

(21) "Holder" means:

(A) the person in possession of a negotiable instrument that is

payable either to bearer or to an identified person that is the

person in possession;

(B) the person in possession of a negotiable tangible document

of title if the goods are deliverable either to bearer or to the

order of the person in possession; or

title.

(22) "Insolvency proceeding " includes an assignment for the

benefit of creditors or other proceeding intended to liquidate or

rehabilitate the estate of the person involved.

(23) "Insolvent" means:

(A) having generally ceased to pay debts in the ordinary course

of business other than as a result of a bona fide dispute;

(B) being unable to pay debts as they become due; or

law.

(24) "Money" means a medium of exchange currently authorized or

adopted by a domestic or foreign government. The term includes a

monetary unit of account established by an intergovernmental

organization or by agreement between two or more countries.

(25) "Organization" means a person other than an individual.

(26) "Party," as distinguished from "third party," means a

person that has engaged in a transaction or made an agreement

subject to this title.

(27) "Person" means an individual, corporation, business trust,

estate, trust, partnership, limited liability company,

association, joint venture, government, governmental subdivision,

agency, or instrumentality, public corporation, or any other

legal or commercial entity.

(28) "Present value" means the amount as of a date certain of

one or more sums payable in the future, discounted to the date

certain by use of either an interest rate specified by the

parties if that rate is not manifestly unreasonable at the time

the transaction is entered into or, if an interest rate is not so

specified, a commercially reasonable rate that takes into account

the facts and circumstances at the time the transaction is

entered into.

(29) "Purchase" means taking by sale, lease, discount,

negotiation, mortgage, pledge, lien, security interest, issue or

reissue, gift, or any other voluntary transaction creating an

interest in property.

(30) "Purchaser" means a person that takes by purchase.

(31) "Record" means information that is inscribed on a tangible

medium or that is stored in an electronic or other medium and is

retrievable in perceivable form.

(32) "Remedy" means any remedial right to which an aggrieved

party is entitled with or without resort to a tribunal.

(33) "Representative" means a person empowered to act for

another, including an agent, an officer of a corporation or

association, and a trustee, executor, or administrator of an

estate.

(34) "Right" includes remedy.

(35) "Security interest" means an interest in personal property

or fixtures which secures payment or performance of an

obligation. "Security interest" includes any interest of a

consignor and a buyer of accounts, chattel paper, a payment

intangible, or a promissory note in a transaction that is subject

to Chapter 9. "Security interest" does not include the special

property interest of a buyer of goods on identification of those

goods to a contract for sale under Section 2.401, but a buyer may

also acquire a "security interest" by complying with Chapter 9.

Except as otherwise provided in Section 2.505, the right of a

seller or lessor of goods under Chapter 2 or 2A to retain or

acquire possession of the goods is not a "security interest," but

a seller or lessor may also acquire a "security interest" by

complying with Chapter 9. The retention or reservation of title

by a seller of goods notwithstanding shipment or delivery to the

buyer under Section 2.401 is limited in effect to a reservation

of a "security interest." Whether a transaction in the form of a

lease creates a security interest is determined pursuant to

Section 1.203.

(36) "Send" in connection with a writing, record, or notice

means:

(A) to deposit in the mail or deliver for transmission by any

other usual means of communication with postage or cost of

transmission provided for and properly addressed and, in the case

of an instrument, to an address specified thereon or otherwise

agreed, or if there be none to any address reasonable under the

circumstances; or

(B) in any other way cause to be received any record or notice

within the time at which it would have arrived if properly sent.

(37) "Signed" includes using any symbol executed or adopted with

present intention to adopt or accept a writing.

(38) "State" means a State of the United States, the District of

Columbia, Puerto Rico, the United States Virgin Islands, or any

territory or insular possession subject to the jurisdiction of

the United States.

(39) "Surety" includes a guarantor or other secondary obligor.

(40) "Term" means a portion of an agreement that relates to a

particular matter.

(41) "Unauthorized signature" means a signature made without

actual, implied, or apparent authority. The term includes a

forgery.

(42) "Warehouse receipt" means a document of title issued by a

person engaged in the business of storing goods for hire.

(43) "Writing" includes printing, typewriting, or any other

intentional reduction to tangible form. "Written" has a

corresponding meaning.

Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1, eff. Sept. 1,

1967. Amended by Acts 1973, 63rd Leg., p. 997, ch. 400, Sec. 2,

Jan. 1, 1974; Acts 1983, 68th Leg., p. 1535, ch. 290, Sec. 12,

eff. Aug. 29, 1983; Acts 1983, 68th Leg., p. 2575, ch. 442, Sec.

12, eff. Sept. 1, 1983; Acts 1989, 71st Leg., ch. 846, Sec. 1,

eff. Sept. 1, 1989; Acts 1995, 74th Leg., ch. 921, Sec. 2, eff.

Jan. 1, 1996; Acts 1999, 76th Leg., ch. 414, Sec. 2.12, 2.13,

eff. July 1, 2001; Acts 2003, 78th Leg., ch. 542, Sec. 1, eff.

Sept. 1, 2003.

Amended by:

Acts 2005, 79th Leg., Ch.

122, Sec. 2, eff. September 1, 2005.

Sec. 1.202. NOTICE; KNOWLEDGE. (a) Subject to Subsection (f),

a person has "notice" of a fact if the person:

(1) has actual knowledge of it;

(2) has received a notice or notification of it; or

(3) from all the facts and circumstances known to the person at

the time in question, has reason to know that it exists.

(b) "Knowledge" means actual knowledge. "Knows" has a

corresponding meaning.

knowledge rather than to reason to know.

(d) A person "notifies" or "gives" a notice or notification to

another person by taking such steps as may be reasonably required

to inform the other person in ordinary course, whether or not the

other person actually comes to know of it.

(e) Subject to Subsection (f), a person "receives" a notice or

notification when:

(1) it comes to that person's attention; or

(2) it is duly delivered in a form reasonable under the

circumstances at the place of business through which the contract

was made or at another location held out by that person as the

place for receipt of such communications.

(f) Notice, knowledge, or a notice or notification received by

an organization is effective for a particular transaction from

the time it is brought to the attention of the individual

conducting that transaction and, in any event, from the time it

would have been brought to the individual's attention if the

organization had exercised due diligence. An organization

exercises due diligence if it maintains reasonable routines for

communicating significant information to the person conducting

the transaction and there is reasonable compliance with the

routines. Due diligence does not require an individual acting for

the organization to communicate information unless the

communication is part of the individual's regular duties or the

individual has reason to know of the transaction and that the

transaction would be materially affected by the information.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.203. LEASE DISTINGUISHED FROM SECURITY INTEREST. (a)

Whether a transaction in the form of a lease creates a lease or

security interest is determined by the facts of each case.

(b) A transaction in the form of a lease creates a security

interest if the consideration that the lessee is to pay the

lessor for the right to possession and use of the goods is an

obligation for the term of the lease and is not subject to

termination by the lessee, and:

(1) the original term of the lease is equal to or greater than

the remaining economic life of the goods;

(2) the lessee is bound to renew the lease for the remaining

economic life of the goods or is bound to become the owner of the

goods;

(3) the lessee has an option to renew the lease for the

remaining economic life of the goods for no additional

consideration or for nominal additional consideration upon

compliance with the lease agreement; or

(4) the lessee has an option to become the owner of the goods

for no additional consideration or for nominal additional

consideration upon compliance with the lease agreement.

security interest merely because:

(1) the present value of the consideration the lessee is

obligated to pay the lessor for the right to possession and use

of the goods is substantially equal to or is greater than the

fair market value of the goods at the time the lease is entered

into;

(2) the lessee assumes risk of loss of the goods;

(3) the lessee agrees to pay, with respect to the goods, taxes,

insurance, filing, recording, or registration fees, or service or

maintenance costs;

(4) the lessee has an option to renew the lease or to become the

owner of the goods;

(5) the lessee has an option to renew the lease for a fixed rent

that is equal to or greater than the reasonably predictable fair

market rent for the use of the goods for the term of the renewal

at the time the option is to be performed; or

(6) the lessee has an option to become the owner of the goods

for a fixed price that is equal to or greater than the reasonably

predictable fair market value of the goods at the time the option

is to be performed.

(d) Additional consideration is nominal if it is less than the

lessee's reasonably predictable cost of performing under the

lease agreement if the option is not exercised. Additional

consideration is not nominal if:

(1) when the option to renew the lease is granted to the lessee,

the rent is stated to be the fair market rent for the use of the

goods for the term of the renewal determined at the time the

option is to be performed; or

(2) when the option to become the owner of the goods is granted

to the lessee, the price is stated to be the fair market value of

the goods determined at the time the option is to be performed.

(e) The "remaining economic life of the goods" and "reasonably

predictable" fair market rent, fair market value, or cost of

performing under the lease agreement must be determined with

reference to the facts and circumstances at the time the

transaction is entered into.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.204. VALUE. Except as otherwise provided in Chapters 3,

4, and 5, a person gives value for rights if the person acquires

them:

(1) in return for a binding commitment to extend credit or for

the extension of immediately available credit, whether or not

drawn upon and whether or not a charge-back is provided for in

the event of difficulties in collection;

(2) as security for, or in total or partial satisfaction of, a

preexisting claim;

(3) by accepting delivery under a preexisting contract for

purchase; or

(4) in return for any consideration sufficient to support a

simple contract.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.205. REASONABLE TIME; SEASONABLENESS. (a) Whether a

time for taking an action required by this title is reasonable

depends on the nature, purpose, and circumstances of the action.

(b) An action is taken seasonably if it is taken at or within

the time agreed or, if no time is agreed, at or within a

reasonable time.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.206. PRESUMPTIONS. Whenever this title creates a

"presumption" with respect to a fact, or provides that a fact is

"presumed," the trier of fact must find the existence of the fact

unless and until evidence is introduced that supports a finding

of its nonexistence.

Amended by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

SUBCHAPTER C. TERRITORIAL APPLICABILITY AND GENERAL RULES

Sec. 1.301. TERRITORIAL APPLICATION OF THE TITLE; PARTIES' POWER

TO CHOOSE APPLICABLE LAW. (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.

(b) Where one of the following provisions of this title

specifies the applicable law, that provision governs and a

contrary agreement is effective only to the extent permitted by

the law (including the conflict of laws rules) so specified:

Rights of creditors against sold goods. Section 2.402.

Applicability of the chapter on Leases. Sections 2A.105 and

2A.106.

Applicability of the chapter on Bank Deposits and Collections.

Section 4.102.

Governing law in the chapter on Funds Transfers. Section 4A.507.

Letters of Credit. Section 5.116.

Applicability of the chapter on Investment Securities. Section

8.110.

Law governing perfection, the effect of perfection or

nonperfection, and the priority of security interests and

agricultural liens. Sections 9.301-9.307.

"qualified transaction," as defined in Section 271.001, then

except as provided in Subsection (b) of this section, Chapter 271

governs the effect of an agreement by the parties that the law of

a particular jurisdiction governs an issue relating to the

transaction or that the law of a particular jurisdiction governs

the interpretation or construction of an agreement relating to

the transaction or a provision of the agreement.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

885, Sec. 2.02, eff. April 1, 2009.

Sec. 1.302. VARIATION BY AGREEMENT. (a) Except as otherwise

provided in Subsection (b) or elsewhere in this title, the effect

of provisions of this title may be varied by agreement.

(b) The obligations of good faith, diligence, reasonableness,

and care prescribed by this title 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 this

title requires an action to be taken within a reasonable time, a

time that is not manifestly unreasonable may be fixed by

agreement.

phrase "unless otherwise agreed," or words of similar import,

does not imply that the effect of other provisions may not be

varied by agreement under this section.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.303. COURSE OF PERFORMANCE, COURSE OF DEALING, AND USAGE

OF TRADE. (a) A "course of performance" is a sequence of

conduct between the parties to a particular transaction that

exists if:

(1) the agreement of the parties with respect to the transaction

involves repeated occasions for performance by a party; and

(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.

(b) A course of dealing 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.

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.

(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 parties' agreement, 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.

(e) Except as otherwise provided in Subsection (f), 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:

(1) express terms prevail over course of performance, course of

dealing, and usage of trade;

(2) course of performance prevails over course of dealing and

usage of trade; and

(3) course of dealing prevails over usage of trade.

(f) Subject to Section 2.209, a course of performance is

relevant to show a waiver or modification of any term

inconsistent with the course of performance.

(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.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.304. OBLIGATION OF GOOD FAITH. Every contract or duty

within this title imposes an obligation of good faith in its

performance and enforcement.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.305. REMEDIES TO BE LIBERALLY ADMINISTERED. (a) The

remedies provided by this title 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 damages nor penal damages may be had

except as specifically provided in this title or by other rule of

law.

(b) Any right or obligation declared by this title is

enforceable by action unless the provision declaring it specifies

a different and limited effect.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.306. WAIVER OF RENUNCIATION OF CLAIM OR RIGHT AFTER

BREACH. 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.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.307. PRIMA FACIE EVIDENCE BY THIRD-PARTY DOCUMENTS. 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.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.308. PERFORMANCE OR ACCEPTANCE UNDER RESERVATION OF

RIGHTS. (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.

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

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.309. OPTION TO ACCELERATE AT WILL. A term providing that

one party or that party's successor in interest may accelerate

payment or performance or require collateral or additional

collateral "at will" or when the party "deems itself insecure,"

or words of similar import, means that the party has 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 which the power has

been exercised.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

Sec. 1.310. SUBORDINATED OBLIGATIONS. 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.

Subordination does not create a security interest as against

either the common debtor or a subordinated creditor.

Added by Acts 2003, 78th Leg., ch. 542, Sec. 1, eff. Sept. 1,

2003.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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