Title 24 Commercial Code

Chapter 24.01 General Provisions

24.01.010 Short Title; Construction, Application and Subject Matter or the Act

This title shall be known and may be cited as the Turtle Mountain Band of Chippewa Indians Commercial Code.

24.01.020 Purposes; Rules of Construction; Variation by Agreement

(a) This Code shall 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;

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

(b) The effect of provisions of this Code may be varied by agreement, except as otherwise provided in this Code and except that the obligations of good faith, diligence, reasonableness and care prescribed by this Code may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

(c) The presence in certain provisions of this Code of the words "unless otherwise agreed" or words of similar import does not imply that the effect of other provisions may not be varied by agreement under Subsection (b).

(d) In this Code unless the context otherwise requires, words in the singular number include the plural, and words in the plural include the singular, and words of the masculine gender include the feminine and the neuter.

24.01.030 Supplementary General Principles of Law Applicable

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.

24.01.040 Construction Against Implicit Repeal

This Code being a general code intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.

24.01.050 Territorial Application of the Code; Parties' Power to Choose Applicable Law

(a) Except as provided hereafter in this section, when a transaction bears a reasonable relation to the territorial jurisdiction of the Tribe and also to another jurisdiction, state or nation the parties may agree that the law either of the Tribe or of such other jurisdiction, state or nation shall govern their rights and duties. Failing such agreement this Code applies to transactions bearing an appropriate relation to the territorial jurisdiction of the Tribe.

(b) Where one of the following provisions of this Code 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 24.02.020

Applicability of the article on leases, Section 24.09.040 and Section 24.08.060.

Applicability of the articles on bank deposits and collections, Chapter 24.20.

Governing law in the Chapter on funds transfers, Section 24.09.070.

Applicability of the Chapters on investment securities, Chapter 24.38.

Perfection provisions of the chapter on secured transactions, Chapter 24.24.

24.01.060 Remedies to Be Liberally Administered

(a) The remedies provided by this Code shall 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 this Code or by other rule of law.

(b) Any right or obligation declared by this Code is enforceable by action unless the provision declaring it specifies a different and limited effect.

24.01.070 Waiver or Renunciation of Claim or Right After Breach

Any claim or right arising out of an alleged breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.

24.01.080 Severability

If any provision or clause of this Code or application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the Code which can be given effect without the invalid provision or application, and to this end the provisions of this Code are declared to be severable.

24.01.090 Section Captions

Section captions are parts of this Code.

24.01.100 General Definitions and Principles of Interpretation

Subject to additional definitions contained in the subsequent articles of this Code which are applicable to specific articles or parts thereof, and unless the context otherwise requires, in this Code:

(a) "ACTION" in the sense of a judicial proceeding includes recoup, counterclaim, setoff, suit in equity and any other proceedings in which rights are determined.

(b) "AGGRIEVED PARTY" means a party entitled to resort to a remedy.

(c) "AGREEMENT" means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this Code (Section 24.01.140). Whether an agreement has legal consequences is determined by the provisions of this Code, if applicable; otherwise by the law of contracts (Section 24.01.130). (Compare "Contract")

(d) "BANK" means any person engaged in the business of banking.

(e) "BEARER" means the person in possession of an instrument, document of title, or certificated security payable to bearer or endorsed in blank.

(f) "BILL OF LADING" means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods, and includes an air bill. "Air bill" means a document serving for air transportation as a bill of lading does for marine or rail transportation, and includes an air consignment note or air waybill.

(g) "BRANCH" includes a separately incorporated foreign branch of a bank.

(h) "BURDEN OF ESTABLISHING" a fact means the burden of persuading the triers of fact that the existence of the fact is more probable than its nonexistence.

(i) "BUYER IN ORDINARY COURSE OF BUSINESS" means a person who in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. All persons who sell minerals or the like (including oil and gas) at wellhead or mine-head shall be deemed to be persons in the business of selling goods of that kind. "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving 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.

(j) "CONSPICUOUS": A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is "conspicuous" if it is in larger or other contrasting type or color. But in a telegram any stated term is "conspicuous." Whether a term or clause is "conspicuous" or not is for decision by the court.

(k) "CONTRACT" means the total legal obligation which results from the parties' agreement as affected by this Code and any other applicable rules of law. (Compare "Agreement.")

(l) "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.

(m) "DEFENDANT" includes a person in the position of defendant in a cross-action or counterclaim.

(n) "DELIVERY" with respect to instruments, documents of title, chattel paper or certificated securities means voluntary transfer of possession.

(o) "DOCUMENT OF TITLE" includes bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers. To be a document of title a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.

(p) "FAULT" means wrongful act, omission or breach.

(q) "FUNGIBLE" with respect to goods or securities means goods or securities of which any unit is, by nature or usage of trade, the equivalent of any other like unit. Goods which are not fungible shall be deemed fungible for the purposes of this title to the extent that under a particular agreement or document unlike units are treated as equivalents.

(r) "GENUINE" means free of forgery or counterfeiting.

(s) "GOOD FAITH" means honesty in fact in the conduct or transaction concerned.

(t) "HOLDER," with respect to a negotiable instrument, means the person who is in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession. "Holder," with respect to a document of title, means the person in possession if the goods are deliverable to bearer or to the order of the person in possession.

(u) To "HONOR" is to payor to accept and pay, or where a credit so engages to purchase or discount a draft complying with the terms of the credit.

(v) "INSOLVENCY PROCEEDINGS" includes any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate the estate of the person involved.

(w) A person is "INSOLVENT" who either has ceased to pay his or her debts in the ordinary course of business or cannot pay his or her debts as they become due or is insolvent within the meaning of the federal bankruptcy law.

(x) "MONEY" means a medium of exchange authorized or adopted by a domestic or foreign government as part of its currency.

(y) A person has "NOTICE" of a fact when:

(1) He or she has actual knowledge of it; or

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

(3) from all the facts and circumstances known to him or her at the time in question he or she has reason to know that it exists.

(z) A person "KNOWS" or has "KNOWLEDGE" of a fact when he or she has actual knowledge of it. "DISCOVER" or "LEARN" or a word or phrase of similar import refers to knowledge rather than to reason to know. The time and circumstances under which a notice or notification may cease to be effective are not determined by this Code.

(aa) A person "NOTIFIES" or "gives" a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it. A person "receives" a notice or notification when it comes to his or her attention; or it is duly delivered at the place of business through which the contract was made or at any other place held out by him or her as the place for receipt of such communications. 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 when it would have been brought to his or her attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless such communication is part of his or her regular duties or unless he or she has reason to know of the transaction and that the transaction would be materially affected by the information.

(bb) "ORGANIZATION" includes a corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(cc) "PARTY," as distinct from "third party," means a person who has engaged in a transaction or made an agreement within this Code.

(dd) "PERSON" includes an individual or an organization.

(ee) "PRESUMPTION" or "PRESUMED" means that the trier of fact must find the existence of the fact presumed unless and until evidence is introduced which would support a finding of its nonexistence.

(ff) "PURCHASE" includes taking by sale, discount, negotiation, mortgage, pledge, lien, issue or reissue, gift or any other voluntary transaction creating an interest in property.

(gg) "PURCHASER" means a person who takes by purchase.

(hh) "REMEDY" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

(ii) "REPRESENTATIVE" includes an agent, an officer of a corporation or association, and a trustee, executor or administrator of an estate, or any other person empowered to act for another.

(jj) "RIGHTS" includes remedies.

(kk) "SECURITY INTEREST" means an interest in personal property or fixtures which secures payment or performance of an obligation. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (Section 24.06.030) is limited in effect to a reservation of a "security interest." The term also includes any interest of a buyer of accounts or chattel paper which is subject to Chapters 24.42 through 24.48. The special circumstances of a secured transaction must be treated in accordance with Chapters 24.42 through 24.48 of this title. Whether a transaction creates a lease or security interest is determined by the facts of each case; however, a transaction creates a security interest if the consideration the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee, and:

(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 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 nominal additional consideration upon compliance with the lease agreement.

A transaction does not create a security interest merely because it provides that:

(5) 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,

(6) the lessee assumes risk of loss of the goods, or agrees to pay taxes, insurance, filing, recording, or registration fees, or service or maintenance costs with respect to the goods,

(7) the lessee has an option to renew the lease or to become the owner of the goods,

(8) 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

(9) 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.

For purposes of this Subsection (kk):

(10) Additional consideration is not nominal if (i) 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 (ii) when the option to become the owner of the goods is granted to the lessee the price is stated to be the fair market value of the goods determined at the time the option is to be performed. Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised;

(11) "Reasonably predictable" and "remaining economic life of the goods" are to be determined with reference to the facts and circumstances at the time the transaction is entered into; and

(12) "Present value" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate is not manifestly unreasonable at the time the transaction is entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.

(13) "Send" in connection with any writing or notice means to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and in the case of an instrument to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances. The receipt of any writing or notice within the time at which it would have arrived if properly sent has the effect of a proper sending.

(ll) "SIGNED" includes any symbol executed or adopted by a party with present intention to authenticate a writing.

(mm) "SURETY" includes guarantor.

(nn) "TELEGRAM" includes a message transmitted by radio, teletype, cable, any mechanical method of transmission, or the like.

(oo) "TERM" means that portion of an agreement which relates to a particular matter.

(pp) "UNAUTHORIZED" signature means one made without actual, implied or apparent authority and includes a forgery.

(qq) "VALUE" Except as otherwise provided with respect to negotiable instruments and bank collections (Section 24.0333, Section 24.04.280 and Section 24.04.290) a person gives "value" for rights if he or she 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; or

(2) as security for or in total or partial satisfaction of a preexisting claim; or

(3) by accepting delivery pursuant to a preexisting contract for purchase; or

(4) generally, in return for any consideration sufficient to support a simple contract.

(rr) "WAREHOUSE RECEIPT" means a receipt issued by a person engaged in the business of storing goods for hire.

(ss) "WRITTEN" or "WRITING" includes printing, typewriting or any other intentional reduction to tangible form.

24.01.110 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 shall be prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.

24.01.120 Obligation of Good Faith

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

24.01.130 Time; Reasonable Time; "Seasonably."

(a) Whenever this Code requires any action to be taken within a reasonable time, any time which is not manifestly unreasonable may be fixed by agreement.

(b) What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action.

(c) An action is taken "seasonably" when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time.

24.01.140 Course of Dealing and Usage of Trade

(a) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(b) A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing is for the court.

(c) A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.

(d) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.

(e) An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting the agreement as to that part of the performance.

(f) Evidence of a relevant usage of trade offered by one arty is not admissible unless and until he or she has given the other party such notice as the court finds sufficient to prevent unfair surprise to the latter.

24.01.150 Statute of Frauds for Kinds of Personal Property Not Otherwise Covered

(a) Except in the cases described in Subsection (b) of this section a contract for the sale of personal property is not enforceable by way of action or defense beyond five thousand dollars in amount or value of remedy unless there is some writing which indicates that a contract for sale has been made between the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the party against whom enforcement is sought, or by his or her authorized agent.

(b) Subsection (a) of this section does not apply to contracts for the sale of goods (Section 24.0301) nor of securities (Section 24.0839) nor to security agreements (Section 24.03.030).

24.01.160 Performance or Acceptance Under Reservation of Rights

(a) A party who, with explicit reservation of rights, performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest" or the like are sufficient.

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

24.01.170 Option to Accelerate at Will

A term providing that one party, or his or her successor in interest may accelerate payment or performance, or require collateral or additional collateral "at will" or "when he or she deems himself insecure" or in words of similar import shall be construed to mean that he or she shall have power to do so only if he or she 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.

24.01.180 Subordinated Obligation

An obligation may be issued as subordinated to payment of another obligation of the person obligated, or a creditor may subordinate his right to payment of an obligation by agreement with either person obligated or another creditor of the person obligated. Such subordination does not create a security interest as against either the common debtor or a subordinated creditor.

Chapter 24.02 Sales

24.02.010 Short Title; General Construct and Subject Matter

This article shall be known and may be cited as Turtle Mountain Band of Chippewa Indians Commercial Code - Sales.

24.02.020 Scope; Certain Security and Other Transactions Excluded from This Article

Unless the context otherwise requires, this article applies to transactions in goods; they do 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, fanners or other specified classes of buyers.

24.02.030 Definitions and Index of Definitions

(a) In this article unless the context otherwise requires

(1) "Buyer" means a person who buys or contracts to buy goods.

(2) "Good faith" in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.

(3) "Receipt" of goods means taking physical possession of them.

(4) "Seller" means a person who sells or contracts to sell goods.

(b) Other definitions applying to this article or to specified parts thereof, and the sections in which they appear are:

"ACCEPTANCE." Section 24.07.060.

"BANKER'S CREDIT" Section 24.04.270.

"BETWEEN MERCHANTS." Section 24.02.040.

"CANCELLATION." Section 24.03.060

"COMMERCIAL UNIT" Section 24.02.050.

"CONFIRMED CREDIT" Section 24.04.270.

"CONFORMING TO CONTRACT" Section 24.02.060.

"CONTRACT FOR SALE." Section 24.02.060.

"COVER." Section 24.08.120.

"ENTRUSTING." Section 24.05.030.

"FINANCING AGENCY." Section 24.02.040.

"FUTURE GOODS." Section 24.02.050.

"GOODS." Section 24.02.050.

"IDENTIFICATION." Section 24.06.010.

"INSTALLMENT CONTRACT." Section 24.07.120(a).

"LETTER OF CREDIT." Section 24.04.270.

"LOT." Section 24.02.050.

"MERCHANT." Section 24.02.040.

"OVERSEAS." Section 24.04.250.

"PERSON IN POSITION OF SELLER." Section 24.08.070.

"PRESENT SALE." Section 24.02.060.

"SALE." Section 24.02.060.

"SALE ON APPROVAL." Section 24.04.280.

"SALE ON RETURN." Section 24.04.280.

"TERMINATION." Section 24.02.060.

"CHECK." Section 24.14.040(h).

"CONSIGNEE." Section 24.32.020(a)(2).

"CONSIGNOR." Section 24.32.020(a)(3).

"CONSUMER GOODS." Section 24.42.020

"DISHONOR." Chapter 24.18.

"DRAFT." Section 24.14.040(g).

(d) In addition, Chapter 24.01 contains general definitions and principles of construction and interpretation applicable throughout this article.

24.02.040 Definitions; "Merchant"; "Between Merchants"; "Financing Agency."

(a) "Merchant" means a person who deals in goods of the kind, or otherwise by his or her occupation holds himself out as having knowledge or skill particular to the practices or goods involved in the transaction, or to whom such knowledge or skill may be attributed by his or her employment of an agent or broker or other intermediary who by his or her occupation holds himself out as having such knowledge or skill.

(b) "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 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 24.06.060).

(c) "Between merchants" means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.

24.02.050 Definitions; Transferability, Goods, Future Goods, Lot, Commercial Unit

(a) "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 (Chapter 24.38) 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 sections on goods to be severed from realty (Section 24.02.070).

(b) 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.

(d) 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.

(e) "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.

(f) "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.

24.02.060 Definitions; Contract, Agreement, Contract for Sale, Sale, Present Sale, Conforming to Contract, Termination, Cancellation."

(a) 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. A "sale" consists in the passing of title from the seller to the buyer for a price (Section 24.04.040. A "PRESENT SALE" means a sale which is accomplished by the making of the contract.

(b) 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.

(c) "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.

(d) "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.

24.02.070 Goods to Be Severed from Realty; Recording

(a) 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.

(b) 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 (a), 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.

(c) 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.

Chapter 24.03 Form, Formation and Readjustment of Contract

24.03.010 Formal Requirements; Statute of Frauds

(a) Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars ($500) 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 or her 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.

(b) 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 (a) against such party unless written notice of objection to its contents is given within ten (10) days after it is received.

(c) A contract which does not satisfy the requirements of subsection (a) but which is valid in other respects is enforceable

(1) 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

(2) If the party against whom enforcement is sought admits in his or her 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

(3) With respect to goods for which payment has been made and accepted, or which have been received and accepted (Section 24.07.070).

24.03.020 Final Written Expression; Parole or Extrinsic Evidence

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

(a) By course of dealing or usage of trade (Section 24.01.140) or by course of performance (Section 24.03.080); and

(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.

24.03.030 Seals Inoperative

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.

24.03.040 Formation in General

(a) 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.

(b) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(c) 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.

24.03.050 Firm Offers

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.

24.03.060 Offer and Acceptance in Formation of Contract

(a) Unless otherwise unambiguously indicated by the language or circumstances:

(1) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.

(2) 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.

(b) 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.

24.03.070 Additional Terms in Acceptance or Confirmation

(a) 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.

(b) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(1) The offer expressly limits acceptance to the terms of the offer;

(2) They materially alter it; or

(3) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(c) 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 title.

24.03.080 Course of Performance or Practical Construction

(a) Where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance, and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement.

(b) The express terms of the agreement and any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other; but when such construction is unreasonable, express terms shall control course of performance, and course of performance shall control both course of dealing and usage of trade (Section 24.01.140).

(c) Subject to the provisions of Section 24.03.090 on modification and waiver, such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance.

24.03.090 Modification, Rescission and Waiver

(a) An agreement modifying a contract within this article needs no consideration to be binding.

(b) 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.

(c) The requirements of the statute of frauds section of this title (Section 24.10.010) must be satisfied if the contract as modified is within their provisions.

(d) Although an attempt at modification or rescission does not satisfy the requirements of Subsections (b) or (c) of this section, it can operate as a waiver.

(e) 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.

24.03.100 Delegation of Performance; Assignment of Rights

(a) A party may perform his or her duty through a delegate unless otherwise agreed, or unless the other party has a substantial interest in having his or her 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.

(b) 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 or her by his or her contract, or impair materially his or her 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 or her entire obligation can be assigned despite agreement otherwise.

(c) 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.

(d) 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 or her to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.

(e) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity, and may without prejudice to his or her rights against the assignor demand assurances from the assignee (Section 24.11.030(d).

Chapter 24.04 General Obligation and Construction of Contract

24.04.010 General Obligation of Parties

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.

24.04.020 Unconscionable Contract or Clause

(a) 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.

(b) 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.

24.04.030 Allocation or Division of Risks

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.

24.04.040 Price Payable in Money, Goods, Realty, or Otherwise

(a) 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 or she is to transfer.

(b) 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.

24.04.050 Open Price Term

(a) 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:

(1) Nothing is said as to price; or

(2) The price is left to be agreed by the parties and they fail to agree; or

(3) 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.

(b) A price to be fixed by the seller, or by the buyer means a price for him or her to fix in good faith.

(c) 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 or her option treat the contract as canceled, or himself fix a reasonable price.

(d) 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 a case the buyer must return any goods already received, or if unable to do so must pay their reasonable value at the time of delivery, and the seller must return any portion of the price paid on account.

24.04.060 Output, Requirements and Exclusive Dealings

(a) 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.

(b) 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.

24.04.070 Delivery in Single Lot or Several Lots

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.

24.04.080 Absence of Specified Place for Delivery

Unless otherwise agreed:

(a) The place for delivery of goods is the seller's place of business, or if he or she has none his or her residence; but

(b) In a contract for sale 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

24.04.090 Absence of Specific Time Provisions; Notice of Termination

(a) 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.

(b) 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.

(c) 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.

24.04.100 Open Time for Payment or Running of Credit; Authority to Ship Under

reservation .

Unless otherwise agreed:

(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

(b) If the seller is authorized to send the goods he or she 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 24.06.130); and

(c) If delivery is authorized and made by way of documents of title otherwise than by Subsection (b) then payment is due at the time and place at which the buyer is to receive the documents regardless of where the goods are to be received; and

(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.

24.04.110 Options and Cooperation Respecting Performance

(a) An agreement for sale which is otherwise sufficiently definite (Section 24.03.040(c) 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.

(b) Unless otherwise agreed specifications relating to assortment of the goods are at the buyer's option and except as otherwise provided in Section 24.04.210(a)(3) and (3) specifications or arrangements relating to shipment are at the seller's option.

(c) 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:

(1) Is excused for any resulting delay in his or her own performance; and

(2) May also either proceed to perform in any reasonable manner or after the time for a material part of his or her own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.

24.04.120 Warranty of Title and Against Infringement; Buyer's Obligation Against

infringement.

Subject to Subsection (b) of this section, there is in a contract for sale a warranty by the seller that:

(a) The title conveyed shall be good and its transfer rightful; and

(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.

(1) A warranty under Subsection (a) of this section 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 or she is purporting to sell only such right or title as he or she or a third person may have.

(2) 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 furnished specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

24.04.130 Express Warranties by Affirmation, Promise, Description, Sample

Express warranties by the seller are created as follows:

(a) Any affirmation of fact or promise made by the seller 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.

(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.

(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.

(1) 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 or she 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.

24.04.140 Implied Warranty; Merchantability; Usage of Trade

(a) Unless excluded or modified (Section 24.04.260), 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.

(b) Goods to be merchantable must be at least such as those that pass without objection in the trade under the contract description; and

(1) In the case of fungible goods, are of fair average quality within the description; and

(2) Are fit for the ordinary purposes for which such goods are used; and

(3) Run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(4) Are adequately contained, packaged, and labeled as the agreement may require; and

(5) Conform to the promises or affirmations of fact made on the container or label if any.

(6) Unless excluded or modified (24.0426) other implied warranties may arise from course of dealing or usage of trade.

24.04.150 Implied Warranty; Fitness for Particular Purpose

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 Section 24.04.260 an implied warranty that the goods shall be fit for such purpose.

24.04.160 Implied Warranties; Exclusion of Sales of Blood, Blood Plasma, Human Tissue

or organs as medical services.

The implied warranties of merchantability and fitness shall not be applicable, so far as the transmission of certain infectious diseases such as viral hepatitis, cytomegalovirus, human immunodeficiency virus, malaria and syphilis, and potential immunologic reactions, which diseases and reactions cannot be detected by standard testing are concerned, to a contract for the sale of human blood, blood components, or other human tissue or organs from a blood bank or reservoir of such other tissue or organs. Blood, blood components or tissue or organs shall not for purposes of this article be considered commodities subject to sale or barter, but shall be considered as medical services.

24.04.170 Exclusion or Modification of Warranties

(a) 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 parole or extrinsic evidence (Section 24.03.020) negation or limitation is inoperative to the extent that such construction is unreasonable.

(b) Subject to Subsection (b) of this section, 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."

(1) 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

(2) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he or she 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

(3) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

(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 (Section 24.08.180 and Section 24.08.190).

24.04.180 Cattle, Hogs and Sheep; No Implied Warranty as to Disease

Notwithstanding Section 24.04.140, there is no implied warranty on the sale of cattle, hogs, or sheep that such cattle, hogs, or sheep are free from disease.

24.04.190 Cumulation and Conflict of Warranties Express or Implied

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:

(a) Exact or technical specifications displace an inconsistent sample or model or general language of description.

(b) A sample from an existing bulk displaces inconsistent general language of description.

(c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

24.04.200 Third-Party Beneficiaries of Warranties Express or Implied

A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods, and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section.

24.04.210 F.O.B. and F.A.S. Terms

(a) 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

(1) 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 (this section), and bear the expense and risk of putting them into the possession of the carrier; or

(2) When the term is F.O.B. the place of destination, the seller must at his or her own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this article (Section 24.04.210(c)).

(3) 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 or her own expense and risk load the goods on board. If the term is 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 24.04.210(c)(1)).

(b) 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

(1) At his or her 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

(2) Obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.

(c) Unless otherwise agreed in any case falling within Subsection (a) (1) or (3) or Subsection (b) 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 (this section). He or she may also at his or her option move the goods in any reasonable manner preparatory to delivery or shipment.

(1) 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.

24.04.220 C.I.F. and C.& F. Terms

(a) 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. & F. or C.F. means that the price so includes cost and freight to the named destination.

(b) 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 or her own expense and risk to:

(1) 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

(2) 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

(3) 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

(4) Prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; and

(5) Forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer's rights.

(c) Unless otherwise agreed the term C. & 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.

(d) Under the term C.I.F. or C. & 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.

24.04.230 C.I.F. or C. & F.; "Net Landed Weights"; "Payment on Arrival" Warranty of Condition on Arrival

Under a contract containing a term C.I.F. or C. & F.

(a) 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.

(b) An agreement described in Subsection (a) 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 identification to the contract for sale or delivery or on the passing of the risk of loss.

(c) 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.

24.04.240 Delivery "Ex-Ship."

(a) Unless otherwise agreed a term for delivery of goods "ex-ship" (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.

(b) Under such a term unless otherwise agreed

(1) 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.

(2) the risk of loss does not pass to the buyer until the goods leave the ship's tackle or are otherwise properly unloaded.

24.04.250 Form of Bill of Lading Required in Overseas Shipment; "Overseas."

(a) Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & 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. & F., received for shipment.

(b) Where in a case within Subsection (a) a 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

(1) Due tender of a single part is acceptable within the provisions of this chapter on cure of improper delivery (Section 24.04.260); and

(2) 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.

(c) 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.

24.04.260 "No Arrival, No Sale" Term

Under a term "no arrival, no sale" or terms of like meaning, unless otherwise

agreed,

(a) the seller must properly ship conforming goods, and if they arrive by any means he or she must tender them on arrival, but he or she assumes no obligation that the goods will arrive unless he or she has caused the non- arrival; and

(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 24.07.130).

24.04.270 "Letter of Credit" Term; "Confirmed Credit."

(a) Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.

(b) 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.

(c) 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.

24.04.280 Sale on Approval and Sale or Return; Consignment Sales and Rights of Creditors

(a) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction is

(1) A "sale on approval" if the goods are delivered primarily for use; and

(2) A "sale or return" if the goods are delivered primarily for resale.

(b) Except as provided in Subsection (c), 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.

(c) Where goods are delivered to a person for sale, and such person maintains a place of business at which he or she deals in goods of the kind involved, under a name other than the name of the person making delivery, then with respect to claims of creditors of the person conducting the business the goods are deemed to be on sale or return. The provisions of this section are applicable even though an agreement purports to reserve title to the person making delivery until payment or resale, or uses such words as "on consignment" or "on memorandum." However, this section is not applicable if the person is making delivery:

(1) Complies with an applicable law providing for a consignor's interest or the like to be evidenced by a sign; or

(2) Establishes that the person conducting the business is generally known by his or her creditors to be substantially engaged in selling the goods of others; or

(3) Complies with the filing provisions of the article on secured transactions (Chapter 42).

(d) 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 title (Section 24.10.010), and as contradicting the sale aspect of the contract within the provisions of this article on parole or extrinsic evidence (Section 24.10.020).

24.04.290 Special Incidents of Sale on Approval and Sale or Return

(a) Under a sale on approval unless otherwise agreed

(1) Although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; and

(2) 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

(3) 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.

(b) Under a sale or return unless otherwise agreed

(1) 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

(2) The return is at the buyer's risk and expense.

24.04.300 Sale by Auction

(a) In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.

(b) 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 or her discretion reopen the bidding, or declare the goods sold under the bid on which the hammer was falling.

(c) 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 or she 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 or her bid until the auctioneer's announcement of completion of the sale, but a bidder's retraction does not revive any previous bid.

(d) 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 or her 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.

Chapter 24.05 Title, Creditors, and Good Faith Purchases

24.05.010 Passing of Title; Reservation for Security; Limited Application of This Section

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:

(a) Title to goods cannot pass under a contract for sale prior to their identification to the contract (Section 24.06.010), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this title. 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.

(b) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his or her 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

(1) If the contract requires or authorizes the seller to send the goods to the buyer, but does not require him or her to deliver them at destination, title passes to the buyer at the time and place of shipment; but

(2) If the contract requires delivery at destination, title passes on tender there.

(1) If the seller is to deliver a document of title, title passes at the time when and the place where he or she delivers such documents; or

(2) 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.

(d) 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 "sale."

24.05.020 Rights of Seller's Creditors Against Sold Goods

(a) Except as provided in Subsections (b) and (c), 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 (Section 24.06.020 and Section 24.08.240).

(b) 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 or her a retention of possession by the seller is fraudulent under any rule of law of the jurisdiction where the goods are situated, except that retention of possession in good faith, and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.

(1) Under the provisions of the article on secured transactions (Chapters 24.42 through 24.48); or

(2) 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 jurisdiction where the goods are situated would apart from this article constitute the transaction a fraudulent transfer or voidable preference.

24.05.030 Power to Transfer; Good Faith Purchase of Goods; "Entrusting"

(a) A purchaser of goods acquires all titles which his or her 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

(1) The transferor was deceived as to the identity of the purchaser; or

(2) The delivery was in exchange for a check which is later dishonored; or

(3) It was agreed that the transaction was to be a "cash sale"; or

(4) The delivery was procured through fraud punishable as theft under the criminal law.

(b) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him or her power to transfer all rights of the entruster to a buyer in ordinary course of business.

(c) "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 theft under the criminal law.

(d) The rights of other purchasers of goods and of lien creditors are governed by the articles on secured transactions (Chapters 24.42 through 24.48) and documents of title (Chapter 7).

Chapter 24.06 Performance

24.06.010 Insurable Interest in Goods; Manner of Identification of Goods

(a) 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 or she 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 as follows:

(1) When contract is made if it is for the sale of goods already existing and identified;

(2) 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;

(3) 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 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.

(b) The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in him or her, and where the identification is by the seller alone he or she may until default or insolvency, or notification to the buyer that the identification is final substitute other goods for those identified.

24.06.020 Buyer's Right to Goods on Seller's Insolvency

(a) Subject to Subsection (b) 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 he or she has a special property under the provisions of Section 24.06.010 may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if the seller becomes insolvent within ten (10) days after receipt of the first installment on their price.

(b) If the identification creating his or her special property has been made by the buyer he or she acquires the right to recover the goods only if they conform to the contract for sale.

24.06.030 Manner of Seller's Tender of Delivery

(a) 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 or her to take delivery. The manner, time and place for tender are determined by the agreement and this article, and in particular

(1) Tender must be at a reasonable hour, and if it is of goods they must be kept available for a period reasonably necessary to enable the buyer to take possession; but

(2) Unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.

(b) Where the case is within Section 24.06.040 respecting shipment tender requires that the seller comply with its provisions.

(c) Where the seller is required to deliver at a particular destination tender requires that he or she comply with Subsection (a) and also in any appropriate case tender documents as described in Subsections (d) and (e) of this section.

(d) Where goods are in the possession of a bailee and are to be delivered without being moved

(1) 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

(2) 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.

(e) Where the contract requires the seller to deliver documents

(1) He must tender all such documents in correct form, except as provided in this article with respect to bills of lading in a set (Section 24.04.250(b); and

(2) Tender through customary banking channels is sufficient, and dishonor of a draft accompanying the documents constitutes nonacceptance or rejection.

24.06.040 Shipment by Seller

Where the seller is required or authorized to send the goods to the buyer and the contract does not require him or her to deliver them at a particular destination, then unless otherwise agreed he or she must

(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

(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

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.

24.06.050 Seller's Shipment Under Reservation

(a) Where the seller has identified goods to the contract by or before shipment,

(1) His procurement of a negotiable bill of lading to his or her own order, or otherwise reserves in him or her a security interest in the goods. His or her 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.

(2) A nonnegotiable bill of lading to himself or his or her nominee reserves possession of the goods as security, except in a case of conditional delivery (Section 24.06.070(b) a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession of the bill of lading.

(b) 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 Section 24.06.040, 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.

24.06.060 Rights of Financing Agency

(a) 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.

(b) 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 on its face.

24.06.070 Effect of Seller's Tender; Delivery on Condition

(a) Tender of delivery is a condition to the buyer's duty to accept the goods and, unless otherwise agreed, to his or her duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.

(b) Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his or her right as against the seller to retain or dispose of them is conditional upon his or her making the payment due.

24.06.080 Cure by Seller of Improper Tender or Delivery; Replacement

(a) 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 or her intention to cure, and may then within the contract time make a conforming delivery.

(b) 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 or she seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.

24.06.090 Risk of Loss in the Absence of Breach

(a) Where the contract requires or authorizes the seller to ship the goods by carrier

(1) If it does not require him or her 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 24.06.050); but

(2) If it does require him or her 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.

(b) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer

(1) On his or her receipt of a negotiable document of title covering the goods; or

(2) On acknowledgment by the bailee of the buyer's right to possession of the goods; or

(3) After his or her receipt of a nonnegotiable document of title or other written direction to deliver, as provided in Section 24.06.030(d)(2).

(c) In any case not within Subsection (a) or (b), the risk of loss passes to the buyer on his or her receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.

(d) 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 24.04.290) and on effect of breach on risk of loss (Section 24.06.100).

24.06.100 Effect of Breach on Risk of Loss

(a) 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.

(b) Where the buyer rightfully revokes acceptance he or she may to the extent of any deficiency in his or her effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.

(c) 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 or her effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.

24.06.110 Tender of Payment by Buyer; Payment by Check

(a) Unless otherwise agreed tender of payment is a condition to the seller's duty to tender and complete any delivery.

(b) 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.

(c) Subject to the provisions of this title on the effect of an instrument on an obligation, payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.

24.06.120 Payment by Buyer Before Inspection

(a) Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless

(1) The nonconformity appears without inspection; or

(2) Despite tender of the required documents the circumstances would justify injunction against honor under the provisions of this title (Section 24.30.140).

(b) Payment pursuant to Subsection (a) does not constitute an acceptance of goods, or impair the buyer's right to inspect, or any of his or her remedies.

24.06.130 Buyer's Right to Inspection of Goods

(a) Unless otherwise agreed and subject to Subsection (c), 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.

(b) 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.

(c) Unless otherwise agreed and subject to the provisions of this article on C.I.F. contracts (Section 24.04.230(c), the buyer is not entitled to inspect the goods before payment of the price when the contract provides

(1) For delivery "C.O.D." or on other like terms; or

(2) For payment against documents of title, except where such payment is due only after the goods are to become available for inspection.

(d) 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.

24.06.140 When Documents Deliverable on Acceptance; When on Payment

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.

24.06.150 Preserving Evidence of Goods in Dispute

In furtherance of the adjustment of any claim or dispute

(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

(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.

Chapter 24.07 Breach, Repudiation, and Excuse

24.07.010 Buyer's Rights on Improper Delivery

Subject to the provisions of this article on breach in installment contracts (Section 24.07.120), and unless otherwise agreed under the sections on contractual limitations of remedy (Section 24.08.180 and Section 24.08.190), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may:

(a) Reject the whole; or

(b) Accept the whole; or

24.07.020 Manner and Effect of Rightful Rejection

(a) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.

(b) Subject to the provisions of the two following sections on rejected goods (Section 24.07.030 and Section 24.07.040)

(1) After rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; and

(2) If the buyer has before rejection taken physical possession of goods in which he or she does not have a security interest under the provisions of this article (Section 24.08.110(c), he or she 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

(3) The buyer has no further obligations with regard to goods rightfully rejected.

(c) 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 24.08.030).

24.07.030 Merchant Buyer's Duties as to Rightfully Rejected Goods

(a) Subject to any security interest in the buyer (Section 24.08.110(c), 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 or her 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.

(b) When the buyer sells goods under Subsection (a), he or she 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.

(c) In complying with this section the buyer is held only to good faith, and good faith conduct there under is neither acceptance nor conversion nor the basis of an action for damages.

24.07.040 Buyer's Options as to Salvage of Rightfully Rejected Goods

Subject to the provisions of Section 24.07.030 on perishables if the seller gives no 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 her, or resell them for the seller's account with reimbursement as provided in Section 24.07.030. Such action is not acceptance or conversion.

24.07.050 Waiver of Buyer's Objections by Failure to Particularize

(a) The buyer's failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes him or her from relying on the unstated defect to justify rejection, or to establish breach

(1) Where the seller could have cured if it stated seasonably; or

(2) 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.

(b) Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent on the face of the documents.

24.07.060 What Constitutes Acceptance of Goods

(a) Acceptance of goods occurs when the buyer

(1) After a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming, or that he or she will take or retain them in spite of their nonconformity; or

(2) Fails to make an effective rejection (Section 24.07.020(a), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or

(3) 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.

(b) Acceptance of a part of any commercial unit is acceptance of that entire unit.

24.07.070 Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice of Claim or Litigation to Person Answerable over

(a) The buyer must pay at the contract rate for any goods accepted.

(b) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of 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.

(1) The buyer must within a reasonable time after he or she discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; and

(2) If the claim is one for infringement or the like (Section 24.04.130(c), and the buyer is sued as a result of such a breach he or she must so notify the seller within a reasonable time after he or she receives notice of the litigation, or be barred from any remedy over for liability established by the litigation.

(d) The burden is on the buyer to establish any breach with respect to the goods accepted.

(e) Where the buyer is sued for breach of a warranty or other obligation for which his or her seller is answerable over

(1) He may give his or her 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 or she will be bound in any action against him or her by his or her 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 or she is so bound.

(2) If the claim is one for infringement or the like (Section 24.04.130(c) the original seller may demand in writing that his or her buyer turn over to him or her control of the litigation including settlement, or else be barred from any remedy over, and if he or she 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.

(f) The provisions of Subsections (c), (d) and (e) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (Section 24.04.130(c).

24.07.080 Revocation of Acceptance in Whole or in Part

(a) The buyer may revoke his or her acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him or her if he or she has accepted it

(1) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

(2) Without discovery of such nonconformity if his or her acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.

(b) 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.

(c) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he or she had rejected them.

24.07.090 Right to Adequate Assurance of Performance

(a) 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 or she receives such assurance may if commercially reasonable suspend any performance for which he or she has not already received the agreed return.

(b) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

(c) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.

(d) 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.

24.07.100 Anticipatory Repudiation

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

(a) For a commercially reasonable time await performance by the repudiating party; or

(b) Resort to any remedy for breach (Section 24.08.030 and Section 24.08.110), even though he or she has notified the repudiating party that he or she would await the latter's performance and has urged retraction; and

(c) In either case suspend his or her 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 24.08.040).

24.07.110 Retraction of Anticipatory Repudiation

(a) Until the repudiating party's next performance is due he or she can retract his or her repudiation unless the aggrieved party has since the repudiation canceled or materially changed his or her position, or otherwise indicated that he or she considers the repudiation final.

(b) 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 24.07.090).

(c) 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.

24.07.120 "Installment Contract"; Breach

(a) 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.

(b) 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 (c) and the seller gives adequate assurance of its cure the buyer must accept that installment.

(c) 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 or she accepts a nonconforming installment without seasonably notifying of cancellation, or if he or she brings an action with respect only to past installments or demands performance as to future installments.

24.07.130 Casualty to Identified Goods

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 24.04.260) then

(a) If the loss is total the contract is avoided; and

(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 or her 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.

24.07.140 Substituted Performance

(a) 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.

(b) 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.

24.07.150 Excuse by Failure of Presupposed Conditions

Except so far as a seller may have assumed a greater obligation and subject to Section 24.07.140 on substituted performance;

(a) Delay in delivery or nondelivery in whole or in part by a seller who complies with Subsection (b) and (c) is not a breach of his or her 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.

(b) Where the causes mentioned in Subsection (a) affect only a part of the seller's capacity to perform, he or she must allocate production and deliveries among his or her customers but may at his or her option include regular customers not then under contract as well as his or her own requirements for further manufacture. He or she may so allocate in any manner which is fair and reasonable.

(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.

24.07.160 Procedure on Notice Claiming Excuse

(a) Where the buyer receives notification of a material or indefinite delay, or an allocation justified under Section 24.07.150 he or she 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 24.07.120), then also as to the whole,

(1) Terminate and thereby discharge any unexecuted portion of the contract; or

(2) Modify the contract by agreeing to take his or her available quota in substitution.

(b) 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.

(c) The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under Section 24.07.150.

Chapter 24.08 Remedies

24.08.010 Remedies for Breach of Collateral Contracts Not Impaired

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.

24.08.020 Seller's Remedies on Discovery of Buyer's Insolvency

(a) Where the seller discovers the buyer to be insolvent he or she may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this article (Section 24.08.050).

(b) Where the seller discovers that the buyer has received goods on credit while insolvent he or she 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 ten-day limitation does not apply. Except as provided in this section 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.

(c) The seller's right to reclaim under Subsection (b) is subject to the rights of a buyer in ordinary course or other good faith purchaser or lien creditor under this article (Section 24.05.030). Successful reclamation of goods excludes all other remedies with respect to them.

24.08.030 Seller's Remedies in General

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 24.07.120), then also with respect to the whole undelivered balance, the aggrieved seller may

(a) Withhold delivery of such goods;

(b) Stop delivery by any bailee as hereafter provided (Section 24.08.050);

(d) Resell and recover damages as hereafter provided (Section 24.08.060);

(e) Recover damages for non-acceptance (Section 24.08.080) or in a proper case the price (Section 24.08.090);

(f) Cancel.

24.08.040 Seller's Right to Identify Goods to the Contract Notwithstanding Breach or to Salvage Unfinished Goods

(a) An aggrieved seller under Section 24.08.030 may

(1) Identify to the contract conforming goods not already identified if at the time he or she learned of the breach they are in his or her possession or control;

(2) Treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.

(b) 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.

24.08.050 Seller's Stoppage of Delivery in Transit or Otherwise

(a) The seller may stop delivery of goods in the possession of a carrier or other bailee when he or she discovers the buyer to be insolvent (Section 24.08.020), 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.

(b) As against such buyer the seller may stop delivery until

(1) Receipt of the goods by the buyer; or

(2) Acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; or

(3) Such acknowledgment to the buyer by a carrier by reshipment or as warehouseman; or

(4) Negotiation to the buyer of any negotiable document of title covering the goods.

(c) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.

(d) 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.

(e) 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 the document.

(f) 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.

24.08.060 Seller's Resale Including Contract for Resale

(a) Under the conditions stated in Section 24.08.030 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 24.08.100), but less expenses saved in consequence of the buyer's breach.

(b) Except as otherwise provided in Subsection (c) 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.

(c) Where the resale is a private sale the seller must give the buyer reasonable notification of his or her intention to resell.

(d) Where the resale is at public sale

(1) 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

(2) 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

(3) 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

(4) The seller may buy.

(e) 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.

(f) The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (Section 24.08.070) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his or her security interest, as hereinafter defined (Section 24.08.110(c).

24.08.070 "Person in the Position of a Seller."

(a) 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 or her principal, or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.

(b) A person in the position of a seller may as provided in this article withhold or stop delivery (Section 24.08.050) and resell (Section 24.08.060) and recover incidental damages (Section 24.08.100).

24.08.080 Seller's Damages for Non-Acceptance or Repudiation

(a) Subject to Subsection (b) and to the provisions of this article with respect to proof of market price (Section 24.08.230), 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 24.08.100), but less expenses saved in consequence of the buyer's breach.

(b) If the measure of damages provided in Subsection (a) 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 24.08.100), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

24.08.090 Action for the Price

(a) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under Section 24.08.100, the price

(1) 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

(2) 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.

(b) Where the seller sues for the price he or she must hold for the buyer any goods which have been identified to the contract and are still in his or her control except that if resale becomes possible he or she 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 payment of the judgment entitles him or her to any goods not resold.

(c) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (Section 24.07.100), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under Section 24.08.080.

24.08.100 Seller's Incidental Damages

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.

24.08.110 Buyer's Remedies in General; Buyer's Security Interest in Rejected Goods

(a) 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 24.07.120), the buyer may cancel, and whether or not he or she has done so may in addition to recovering so much of the price as has been paid.

(1) "Cover" and have damages under Section 24.08.120 as to all the goods affected whether or not they have been identified to the contract; or

(2) Recover damages for non-delivery as provided in this article (Section 24.08.130).

(b) Where the seller fails to deliver or repudiates the buyer may also

(1) If the goods have been identified recover them as provided in this article (Section 24.06.020); or

(2) In a proper case obtain specific performance or replevy the goods as provided in this article (Section 24.08.160).

(c) On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his or her 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 24.08.060).

24.08.120 "Cover"; Buyer's Procurement of Substitute Goods

(a) After a breach within Section 24.08.110, 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.

(b) 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 24.08.150), but less expenses saved in consequence of the seller's breach.

24.08.130 Buyer's Damages for Non-Delivery or Repudiation

(a) Subject to the provisions of this article with respect to proof of market price (Section 24.08.230), 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 24.08.150), but less expenses saved in consequence of the seller's breach.

(b) 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.

24.08.140 Buyer's Damages for Breach in Regard to Accepted Goods

(a) Where the buyer has accepted goods and given notification (Section 24.07.070(c) he or she 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.

(b) 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.

24.08.150 Buyer's Incidental and Consequential Damages

(a) 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.

(b) Consequential damages resulting from the seller's breach include:

(1) 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

(2) Injury to person or property proximately resulting from any breach of warranty.

24.08.160 Buyer's Right to Specific Performance or Replevin

(a) Specific performance may be decreed where the goods are unique or in other proper circumstances.

(b) 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.

(c) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he or she 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.

24.08.170 Deduction of Damages from the Price

The buyer on notifying the seller of his or her 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.

24.08.180 Liquidation or Limitation of Damages - Deposits

(a) 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.

(b) 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 or her payment exceeds

(1) The amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with Subsection (a) or

(2) 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), whichever is smaller.

(c) The buyer's right to restitution under Subsection (b) is subject to offset to the extent that the seller establishes:

(1) A right to recover damages under the provisions of this article other than Subsection (a), and

(2) The amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.

(d) 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 (b); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his or her resale is subject to the conditions laid down in this article on resale by an aggrieved seller (Section 24.08.060).

24.08.190 Contractual Modification or Limitation of Remedy

(a) Subject to the provisions of Subsections (b) and (c) of this section and of Section 24.08.180 on liquidation and limitation of damages,

(1) 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

(2) 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.

(b) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title.

(c) 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.

24.08.200 Effect of "Cancellation" or "Rescission" on Claims for Antecedent Breach

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.

24.08.210 Remedies for Fraud

Remedies for material misrepresentation or fraud include all remedies available under this article for non-fraudulent 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.

24.08.220 Who Can Sue Third Parties for Injury to Goods

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.

(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;

(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 or her suit or settlement is, subject to his or her own interest, as a fiduciary for the other party to the contract;

24.08.230 Proof of Market Price; Time and Place

(a) 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 24.08.080 and Section 24.08.130) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.

(b) 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.

(c) 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 or she has given the other party such notice as the court finds sufficient to prevent unfair surprise.

24.08.240 Admissibility of Market Quotations

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.

24.08.250 Statute of Limitations in Contracts for Sale

An action for breach of any contract for sale must be commenced within four (4) years after the cause of action has accrued.

(a) 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.

(b) Where an action commenced within the time limited by Subsection (a) 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 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.

(c) This section does not alter the law on tolling of the statute of limitations nor do they apply to causes of action which have accrued before July 1, 1967.

Chapter 24.09 Leases of Goods

24.09.010 Short Title

This article shall be known and may be cited as the Turtle Mountain Band of Chippewa Indians Commercial Code - Leases of Goods.

24.09.020 Scope

This article applies to any transaction, regardless of form, that creates a lease.

24.09.030 Definitions; Index of Definitions

(a) In this article unless the context otherwise requires:

(1) "BUYER IN ORDINARY COURSE OF BUSINESS" means a person who in good faith and without knowledge that the sale to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving 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.

(2) "CANCELLATION" occurs when either party puts an end to the lease contract for default by the other party.

(3) "COMMERCIAL UNIT" 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.

(4) "CONFORMING" goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract.

(5) "CONSUMER LEASE" means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is a natural person and takes under the lease primarily for a personal, family, or household purpose.

(6) "FAULT" means wrongful act, omission, breach or default.

(7) "FINANCE LEASE" means a lease in which

(A) the lessor does not select, manufacture or supply the goods,

(B) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease, and

(i) the lessee receives a copy of the contract evidencing the lessor's purchase of the goods on or before signing the lease contract,

(ii) the lessee's approval of the contract evidencing the lessor's purchase of the goods is a condition to effectiveness of the lease contract,

(iii) the lessor

(I) informs the lessee in writing of the identity of the supplier unless the lessee has selected the supplier and directed the lessor to purchase the goods from the supplier,

(II) informs the lessee in writing that the lessee may have rights under the contract evidencing the lessor's purchase of the goods, and

(III) advises the lessee in writing to contact the supplier for a description of any such rights, or

(iv) the lease contract discloses all warranties and other rights provided to the lessee by the lessor and supplier in connection with the lease contract and informs the lessee that there are no warranties or other rights provided to the lessee by the lessor and supplier other than those disclosed in the lease contract.

(8) "GOODS" means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 24.11.090), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals.

(9) "INSTALLMENT LEASE CONTRACT" 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 "each delivery is a separate lease" or its equivalent.

(10) "LEASE" 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 is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease.

(11) "LEASE AGREEMENT" 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 or usage of trade or course of performance as provided in this article. Unless the context clearly indicates otherwise, the term includes a sublease agreement.

(12) "LEASE CONTRACT" 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.

(13) "LEASEHOLD INTEREST" means the interest of the lessor or the lessee under a lease contract.

(14) "LESSEE" 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 sublease.

(15) "LESSEE IN ORDINARY COURSE OF BUSINESS" means a person who in good faith and without knowledge that the lease to him or her is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. "Leasing" may be for cash or by exchange of other property or unsecured credit and includes receiving 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.

(16) "LESSOR" 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.

(17) "LESSOR'S RESIDUAL INTEREST" means the lessor's interest in the goods after expiration, termination or cancellation of the least contract.

(18) "LIEN" 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.

(19) "LOT" 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.

(20) "MERCHANT LESSEE" means a lessee that is a merchant with respect to goods of the kind subject to the lease.

(21) "PRESENT VALUE" means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate 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.

(22) "PURCHASE" includes taking by sale, lease, mortgage, security interest, pledge, gift or any other voluntary transaction creating an interest in goods.

(23) "SUBLEASE" 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.

(24) "SUPPLIER" means a person from whom a lessor buys or leases goods to be leased under a finance lease.

(25) "SUPPLY CONTRACT" means a contract under which a lessor buys or leases goods to be leased.

(26) "TERMINATION" occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.

(b) Other definitions applying to this article and the sections in which they appear are:

"ACCESSIONS." Section 24.11.100(a).

"CONSTRUCTION MORTGAGE." Section 24.11.090(a)(4).

"ENCUMBRANCE." Section 24.11.090(a)(5).

"FIXTURES." Section 24.11.090(a)(1).

"FIXTURE FILING." Section 24.11.090(a)(2).

"PURCHASE MONEY LEASE." Section 24.11.090(a)(3).

"ACCOUNT." Section 24.42.060.

"BETWEEN MERCHANTS." Section 24.02.040(c).

"BUYER." Section 24.02.030(a)(1).

"CHATTEL PAPER." Section 24.42.020(a)(13).

"CONSUMER GOODS." Section 24.42.060(a).

"DOCUMENT." Section 24.42.020(a)(32).

"ENTRUSTING." Section 24.05.030(c).

"GENERAL INTANGIBLES." Section 24.42.060.

"GOOD FAITH." Section 24.14.030(a)(4).

"INSTRUMENT." Section 24.14.040(d).

"MERCHANT" Section 24.02.040(a).

"MORTGAGE." Section 24.42.020(a)(57).

"PURSUANT TO COMMITMENT" Section 24.4205(1)(k).

"RECEIPT" Section 24.02.030(a)(3).

"SALE." Section 24.02.060(a).

"SALE ON APPROVAL." Section 24.04.280(a)(1).

"SALE OR RETURN." Section 24.04.280(a)(2).

"SELLER." Section 24.02.030(a)(4).

(d) In addition, Chapter 24.01 (commencing with Section 24.01.010) contains general definitions and principles of construction and interpretation applicable throughout this article.

24.09.040 Leases Subject to Other Statutes

(a) A lease, although subject to this article, is also subject to any applicable:

(1) Statute of the United States;

(2) Certificate of title statute of this Tribe;

(3) Certificate of title statute of another jurisdiction (Section 24.09.050); or

(4) Consumer protection statute of this Tribe.

(b) In case of conflict between the provisions of this article, other than Section 24.09.050, Section 24.11.040(c) and Section 24.11.050(c), and any statute referred to in Subsection (a) of this section, the provisions of that statute control.

24.09.050 Territorial Application of Article to Goods Covered by Certificate of Title

Subject to the provisions of Section 24.11.040(c) and Section 24.11.050(c), with respect to goods covered by a certificate of title issued under a statute of this or 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 (a) surrender of the certificate, or (b) four (4) months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.

24.09.060 Limitation on Power of Parties to Consumer Lease to Choose Applicable Law and Judicial Forum

(a) 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, in which the goods are to be used, or in which the lease is executed by the lessee, the choice is not enforceable.

(b) 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.

24.09.070 Waiver or Renunciation of Claim or Right After Default

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.

24.09.080 Unconscionability

(a) 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.

(b) 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.

(c) Before making a finding of unconscionability under Subsection (a) or (b) 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.

(d) In an action in which the lessee claims unconscionability with respect to a consumer lease:

(1) If the court finds unconscionability under Subsection (a) or (b) of this section, the court shall award reasonable attorney's fees to the lessee.

(2) If the court does not find unconscionability, and the lessee claiming unconscionability has brought or maintained an action he or she knew to be groundless, the court shall award reasonable attorney's fees to the party against whom the claim is made.

(3) In determining attorney's fees, the amount of the recovery on behalf of the claimant under Subsections (a) and (b) is not controlling.

Chapter 24.10 Formation and Construction of Lease Contract

24.10.010 Statute of Frauds

(a) A lease contract is not enforceable by way of action or defense unless:

(1) In a lease contract that is not a consumer lease, the total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars ($1000)

(2) 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.

(b) Any description of leased goods or of the lease term is sufficient and satisfies Subsection (a)(2) of this section, whether or not it is specific, if it reasonably identifies what is described.

(c) A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under Subsection (a)(2) of this section beyond the lease term and the quantity of goods shown in the writing.

(d) A lease contract that does not satisfy the requirements of Subsection (a) of this section, but which is valid in other respects, is enforceable:

(1) 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;

(2) 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

(3) With respect to goods that have been received and accepted by the lessee.

(e) The lease term under a lease contract referred to in Subsection (d) of this section is:

(1) 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;

(2) 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

(3) A reasonable lease term.

24.10.020 Final Written Expression; Parol or Extrinsic Evidence

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:

(a) By course of dealing or usage of trade or by course of performance; and

(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.

24.10.030 Seals Inoperative

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.

24.10.040 Formation in General

(a) 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.

(b) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.

(c) 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.

24.10.050 Firm Offers

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 months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

24.10.060 Offer and Acceptance in Formation of Lease Contract

(a) 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.

(b) 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.

24.10.070 Course of Performance or Practical Construction

(a) If a lease contract involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is relevant to determine the meaning of the lease agreement.

(b) The express terms of a lease agreement and any course of performance, as well as any course of dealing and usage of trade, must be construed whenever reasonable as consistent with each other; but if that construction is unreasonable, express terms control course of performance, course of performance controls both course of dealing and usage of trade, and course of dealing controls usage of trade.

(c) Subject to the provisions of Section 24.10.080 on modification and waiver, course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.

24.10.080 Modification, Rescission and Waiver

(a) An agreement modifying a lease contract needs no consideration to be binding.

(b) 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.

(c) Although an attempt at modification or rescission does not satisfy the requirements of Subsection (b) of this section, it may operate as a waiver.

(d) 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.

24.10.090 Lessee Under Finance Lease as Beneficiary of Supply Contract

(a) The benefit of the supplier's promises to the lessor under the supply contract and of all warranties, whether express or implied, under 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 subject to the terms of the supply contract and all of the supplier's defenses or claims arising there from.

(b) The extension of the benefit of the supplier's promises and warranties to the lessee in Subsection (a) of this section does not:

(1) modify the rights and obligations of the parties to the supply contract, whether arising there from or otherwise, or

(2) impose any duty or liability under the supply contract on the lessee.

(c) Any modification or rescission of the supply contract by the supplier and the lessor is effective against the lessee unless, prior to 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 supply contract is modified or rescinded after the lessee enters the finance lease, the lessee has a cause of action against the lessor. The lessee's recovery from such action shall put the lessee in as good a position as if the modification or rescission had not occurred.

(d) In addition to the extension of the benefit of the supplier's promises and warranties to the lessee under Subsection (a) of this section, the lessee retains all rights and remedies which the lessee may have against the supplier that arise from any agreement between the lessee and the supplier or from any other law.

24.10.100 Express Warranties

(a) Express warranties by the lessor are created as follows:

(1) 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.

(2) 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.

(3) 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.

(b) 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.

24.10.110 Warranties Against Interference and Against Infringement; Lessee's Obligation Against Infringement

(a) 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.

(b) 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.

(c) 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.

24.10.120 Implied Warranty of Merchantability

(a) 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.

(b) Goods to be merchantable must be at least such as

(1) Pass without objection in the trade under the description in the lease agreement;

(2) In the case of fungible goods, are of fair average quality within the description;

(3) Are fit for the ordinary purposes for which goods of that type are used;

(4) Run, within the variation permitted by the lease agreement, of even kind, quality and quantity within each unit and among all units involved;

(5) Are adequately contained, packaged and labeled as the lease agreement may require; and

(6) Conform to any promises or affirmations of fact made on the container or label.

24.10.130 Implied Warranty of Fitness for Particular Purpose

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.

24.10.140 Exclusion or Modification of Warranties

(a) 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 24.10.020 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable.

(b) Subject to Subsection (c) of this section, to exclude or modify the implied warranty of merchantability or any part of it the language must mention "merchantability," be by writing, and be conspicuous. Subject to Subsection (c) of this section, to exclude or modify any implied warranty of fitness the exclusion must be by 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."

(1) 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;

(2) 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

(3) An implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade.

(d) To exclude or modify a warranty against interference or against infringement pursuant to Section 24.10.110, or any part of it, the language must be specific, be by 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.

24.10.150 Cumulation and Conflict of Warranties Express or Implied

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:

(a) Exact or technical specifications displace an inconsistent sample or model or general language of description.

(b) A sample from an existing bulk displaces inconsistent general language of description.

(c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

24.10.160 Third Party Beneficiaries of Express and Implied Warranties

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. 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. 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.

24.10.170 Identification

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:

(a) When the lease contract is made if the lease contract is for a lease of goods that are existing and identified;

(b) 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

24.10.180 Insurance and Proceeds

(a) 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.

(b) 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.

(c) Notwithstanding a lessee's insurable interest under Subsections (a) and (b) 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.

(d) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.

(e) 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.

24.10.190 Risk of Loss

(a) 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.

(b) Subject to the provisions of this article on the effect of default on risk of loss in Section 24.10.200, if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:

(1) If the lease contract requires or authorizes the goods to be shipped by carrier:

(A) 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

(B) 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.

(2) 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.

(c) In any case not within Subsection (a) or (b) of this section, 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.

24.10.200 Effect of Default on Risk of Loss

(a) Where risk of loss is to pass to the lessee and the time of passage is not stated:

(1) 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.

(2) If the lessee rightfully revokes acceptance, he, to the extent of any deficiency in his or her effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.

(b) 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 or her effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time.

24.10.210 Casualty to Identified Goods

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 24.10.190, then:

(a) If the loss is total, the lease contract is avoided; and

(b) 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 or her option either treat the lease contract as avoided or, except in a finance 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.

Chapter 24.11 Effect of Lease Contract

24.11.010 Enforceability of Lease Contract

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.

24.11.020 Title to and Possession of Goods

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.

24.11.030 Alienability of Party's Interest Under Lease Contract or of Lessor's Residual Interest in Goods; Delegation of Performance; Assignment of Rights

(a) Any interest of a party under a lease contract and the lessor's residual interest in the goods may be transferred unless:

(1) Except as provided in Subsection (c)(1) of this section, the transfer is voluntary and the lease contract prohibits the transfer; or

(2) Except as provided in Subsection (c)(2) or (3) of this section, the transfer materially changes the duty of or materially increases the burden or risk imposed on the other party to the lease contract, and within a reasonable time after notice of the transfer the other party demands that the transferee comply with Subsection (b) of this section and the transferee fails to comply.

(b) Within a reasonable time after demand pursuant to subsection (a)(2) of this section, the transferee shall:

(1) Cure or provide adequate assurance that he or she will promptly cure any default other than one arising from the transfer;

(2) Compensate or provide adequate assurance that he or she will promptly compensate the other party to the lease contract and any other person holding an interest in the lease contract, except the party whose interest is being transferred, for any loss to that party resulting from the transfer;

(3) Provide adequate assurance of future due performance under the lease contract; and

(4) Assume the lease contract.

(c) No prohibition upon transfer of any interest of a party under a lease contract or the lessor's residual interest in the goods shall invalidate the creation or enforcement of a security interest in any interest of the lessor under a lease contract or the lessor's residual interest in the goods.

(1) Demand pursuant to Subsection (a)(2) of this section is without prejudice to the other party's rights against the transferee and the party whose interest is transferred.

(2) Subsection (a)(2) of this section shall not apply to

(A) the creation of a security interest in

(i) the interest of the lessor under the lease contract or

(ii) the lessor's residual interest in the goods, or

(B) the exercise of rights as a secured party pursuant to the security interest other than a transfer of the interest of the lessor under the lease contract or the lessor's residual interest in the goods pursuant to Section 24.52.040 or Section 24.52.050.

(3) Subsection (a)(2) of this section shall not affect the validity of a provision in a lease contract obligating the lessee to keep the lessee's interest in the lease contract or the goods free from liens or encumbrances.

(d) An assignment of "the lease" or of "all my rights under the lease" or an assignment in similar general terms is a transfer of rights, and unless the language or the circumstances, as in an assignment for security, indicate the contrary, the assignment is a delegation of duties by the assignor to the assignee and acceptance by the assignee constitutes a promise by him or her to perform those duties. This promise is enforceable by either the assignor or the other party to the lease contract.

(e) Unless otherwise agreed by the lessor and the lessee, no delegation of performance relieves the assignor as against the other party of any duty to perform or any liability for default.

(f) A right to damages for default with respect to the whole lease contract or a right arising out of the assignor's due performance of his or her entire obligation can be assigned despite agreement otherwise.

(g) To prohibit the transfer of an interest of a party under a lease contract, the language of prohibition must be specific, by a writing, and conspicuous.

24.11.040 Subsequent Lease of Goods by Lessor

(a) Subject to the provisions of Section 24.11.030, 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 (b) of this section and Section 24.13.270(d), 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. When goods have been delivered under a transaction of purchase the lessor has that power even though:

(1) The lessor's transferor was deceived as to the identity of the lessor;

(2) The delivery was in exchange for a check which is later dishonored;

(3) It was agreed that the transaction was to be a "cash sale"; or

(4) The delivery was procured through fraud punishable as larcenous under the criminal law.

(b) 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.

(c) 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 or another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

24.11.050 Sale or Sublease of Goods by Lessee

(a) Subject to the provisions of Section 24.11.030, 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 (b) of this section and Section 24.13.110(d), 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 set forth in the preceding sentence. When goods have been delivered under a transaction of lease the lessee has that power even though:

(1) The lessor was deceived as to the identity of the lessee;

(2) The delivery was in exchange for a check which is later dishonored; or

(3) The delivery was procured through fraud punishable as larcenous under the criminal law.

(b) 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.

(c) 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 or another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.

24.11.060 Priority of Certain Liens Arising by Operation of Law

If a person in the ordinary course of his or her 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.

24.11.070 Priority of Liens Arising by Attachment or Levy On, Security Interests In, and Other Claims to Goods

(a) Except as otherwise provided in Section 24.50.100, a creditor of a lessee takes subject to the lease contract.

(b) Except as otherwise provided in Subsections (c) and (d) of this section and in Section 24.50.100 and Section 24.11.080, a creditor of a lessor takes subject to the lease contract;

(1) Unless the creditor holds a lien that attached to the goods before the lease contract became enforceable;

(2) Unless the creditor holds a security interest in the goods, and the lessee did not give value and receive delivery of the goods without knowledge of the security interest; or

(3) Unless the creditor holds a security interest in the goods that attached and was perfected before

(A) the lease contract became enforceable,

(B) the lessee gave value and received delivery of the goods, or

(C) in the case of a purchase money security interest, the date that is twenty (20) days after the date that the lessor received possession of the goods or the date that the lessee received possession of the goods, whichever is earlier.

(c) A lessee in the ordinary course of business takes the leasehold interest free of a security interest in the goods created by the lessor even though the security interest is perfected and the lessee knows of its existence.

(d) A lessee other than a lessee in the ordinary course of business takes the leasehold interest free of a security interest to the extent that it secures future advances made after the secured party acquires knowledge of the lease or more than forty-five (45) days after the lease contract becomes enforceable, whichever first occurs, unless the future advances are made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the forty-five-day period.

24.11.080 Special Rights of Creditors

(a) 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 or void 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 or void.

(b) Nothing in this article impairs the rights of creditors of a lessor if the lease contract is made under circumstances which under any statute or rule of law apart from this article would constitute the transaction of a fraudulent transfer or voidable preference.

(c) 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.

24.11.090 Lessor's and Lessee's Rights When Goods Become Fixtures

(a) In this section:

(1) Goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law;

(2) A "fixture filing" is the filing, in the office where a mortgage on the real estate would be recorded, of a financing statement concerning goods that are or are to become fixtures, and conforming to the requirements of this title;

(3) 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;

(4) 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

(5) "Encumbrance" includes real estate mortgages and other liens on real estate, and all other rights in real estate that are not ownership interests.

(b) 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.

(d) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if:

(1) The lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, a fixture filing covering the fixtures is filed before the goods become fixtures or within twenty (20) days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate;

(2) A fixture filing covering the fixtures is filed 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;

(3) 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;

(4) The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable;

(5) The encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures; or

(6) 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.

(e) Notwithstanding Subsection (a) of Subsection (d) of this section but otherwise subject to Subsection (d), the interest of a lessor of fixtures 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.

(f) In cases not within the preceding subsections, priority between the interest of a lessor of fixtures 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.

(g) If the interest of a lessor has priority over all conflicting interests of all owners and encumbrancers of the real estate, the lessor or the lessee may

(1) on default, expiration, termination, or cancellation of the lease agreement by the other party but subject to the provisions of the lease agreement and this article, or

(2) if necessary to enforce his or her other rights and remedies 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 he or she 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.

24.11.100 Lessor's and Lessee's Rights When Goods Become Accessions

(a) Goods are "accessions" when they are installed in or affixed to other goods.

(b) 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 (d) of this section.

(c) 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 (d) 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.

(d) The interest of a lessor or a lessee under a lease contract described in Subsection (b) or (c) of this section is subordinate to the interest of

(1) 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

(2) 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.

(e) When under Subsections (b) or (c) and (d) 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 may

(1) 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

(2) if necessary to enforce his or her other rights and remedies under this article, remove the goods from the whole, free and clear of all interests in the whole, but he or she 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.

Chapter 24.12 Performance of Lease Contract: Repudiated, Substituted, and Excused

24.12.010 Insecurity: Adequate Assurance of Performance

(a) A lease contract imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired.

(b) 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 or she has not already received the agreed return.

(c) 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.

(d) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards.

(e) Acceptance of any nonconforming delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.

24.12.020 Anticipatory Repudiation

(a) If either party repudiates a lease contract, other than a consumer lease, 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:

(1) For a commercially reasonable time, await retraction of repudiation and performance by the repudiating party;

(2) Make demand pursuant to Section 24.12.010, and await assurance of future performance adequate under the circumstances of the particular case; or

(3) 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. In addition, whether or not the aggrieved party is pursuing one of the foregoing remedies, 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 pursuant to Section 24.13.240.

(b) The rights and remedies of the parties to a consumer lease in connection with a repudiation of that lease shall be determined under other laws, and this section shall not affect the applicability or interpretation of those laws.

24.12.030 Retraction of Anticipatory Repudiation

(a) Until the repudiating party's next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has canceled the lease contract or materially changed the aggrieved party's position or otherwise indicated that the aggrieved party considers the repudiation final.

(b) 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 24.12.010.

(c) 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.

24.12.040 Substituted Performance

(a) 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.

(b) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation:

(1) 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

(2) 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.

24.12.050 Excused Performance

Subject to Section 24.12.040, on substituted performance, the following rules apply:

(a) Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with Paragraph (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.

(b) 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 or she shall allocate production and deliveries among his or her customers, but at his or her option may include regular customers not then under contract for sale or lease, as well as his or her own requirements for further manufacture, he or she may so allocate in any manner that is fair and reasonable.

(c) 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.

24.12.060 Procedure on Excused Performance

(a) If the lessee receives notification of a material or indefinite delay or an allocation justified under Section 24.12.050, the lessee may 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 as in Section 24.13.100:

(1) Terminate the lease contract pursuant to Section 24.13.050(b); or

(2) Except in a finance 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.

(b) If, after receipt of a notification from the lessor under Section 24.12.050, 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.

24.12.070 Irrevocable Promises; Finance Leases

(a) 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.

(b) A promise that has become irrevocable and independent under Paragraph (a) of this section:

(1) Is effective and enforceable between the parties, and by or against third parties including assignees of the parties, and

(2) Is not subject to cancellation, termination, modification, repudiation, excuse, or substitution without the consent of the party to whom the promise runs.

This section shall 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.

Chapter 24.13 Default

24.13.010 Default Procedure

(a) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this article.

(b) 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 the article, as provided in the lease agreement.

(c) 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.

(d) Except as otherwise provided in this article or the lease agreement, the rights and remedies referred to in Subsections (b) and (c) of this section are cumulative.

(e) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this article as to the goods, or under other applicable law as to both the real property and the goods in accordance with his or her rights and remedies in respect of the real property, in which case this article does not apply.

24.13.020 Notice After Default

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.

24.13.030 Modification or Impairment of Rights and Remedies

(a) 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.

(b) 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.

(c) Consequential damages may be liquidated under Section 24.13.040, or may otherwise be limited, altered, or excluded unless the limitation, alteration, 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.

(d) 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.

24.13.040 Liquidation of Damages

(a) 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.

(b) 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.

(c) If the lessor justifiably withholds or stops delivery of goods because of the lessee's default or insolvency (Sections 24.1325 or 24.1326), the lessee is entitled to restitution of any amount by which the sum of his or her payments exceeds:

(1) 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

(2) In the absence of those terms, twenty percent 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).

(d) A lessee's right to restitution under Subsection (3) of this section is subject to offset to the extent the lessor establishes:

(1) A right to recover damages under the provisions of this article other than Subsection (1) of this section; and

(2) The amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.

24.13.050 Cancellation and Termination and Effect of Cancellation, Termination, Rescission, or Fraud on Rights and Remedies

(a) 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.

(b) 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.

(c) 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.

(d) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this article for default.

(e) 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.

24.13.060 Statute of Limitations

(a) 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. In a lease contract that is not a consumer lease, by the original lease contract the parties may reduce the period of limitation to not less than one (1) year.

(b) 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.

(c) If an action commenced within the time limited by Subsection (a) 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.

(d) 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.

24.13.070 Proof of Market Rent; Time and Place

(a) Damages based on market rent (Section 24.13.190 or Section 24.13.280) 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 time of the default.

(b) 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.

(c) 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 or she has given the other party notice the court finds sufficient to prevent unfair surprise.

(d) 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.

24.13.080 Lessee's Remedies

(a) If a lessor fails to deliver the goods in conformity to the lease contract (Section 24.13.090) or repudiates the lease contract (Section 24.12.020), or a lessee rightfully rejects the goods (Section 24.13.090) or justifiably revokes acceptance of the goods (Section 24.13.170), 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 24.13.100), the lessor is in default under the lease contract and the lessee may:

(1) Cancel the lease contract (Section 24.13.050(a));

(2) Recover so much of the rent and security as has been paid, but in the case of an installment lease contract the recovery is that which is just under the circumstances;

(3) Cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (Section 24.13.180 and Section 24.13.200), or recover damages for nondelivery (Section 24.13.190 and Section 24.13.200).

(b) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also:

(1) If the goods have been identified, recover them (Section 24.13.220); or

(2) In a proper case, obtain specific performance or replevy the goods (Section 24.13.210).

(c) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and remedies provided in this article except to the extent that this article makes the right or remedy available only upon the occurrence of a default described in Subsection (a) or (b).

(d) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages (Section 24.13.190(d)).

(e) On rightful rejection or justifiable revocation of 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 the provisions of Section 24.13.270(e).

(f) Subject to the provisions of Section 24.12.070, 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.

24.13.090 Lessee's Rights on Improper Delivery; Rightful Rejection

(a) Subject to the provisions of Section 24.13.100, 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.

(b) 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.

24.13.100 Installment Lease Contracts; Rejection and Default

(a) 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 (b) of this section and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.

(b) 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 beings an action with respect only to past deliveries or demands performance as to future deliveries.

24.13.110 Merchant Lessee's Duties as to Rightfully Rejected Goods

(a) Subject to any security interest of a lessee (Section 24.13.080(e), 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 or her 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.

(b) If a merchant lessee (Subsection (a) or any other lessee (Section 24.13.120) disposes of goods, he or she 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 of the gross proceeds.

(c) In complying with this section or Section 24.13.120, 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.

(d) A purchaser who purchases in good faith from a lessee pursuant to this section or Section 24.13.120 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.

24.13.120 Lessee's Duties as to Rightfully Rejected Goods

(a) Except as otherwise provided with respect to goods that threaten to decline in value speedily (Section 24.13.110) and subject to any security interest of a lessee (Section 24.13.080(e):

(1) The lessee, after rejection of goods in the lessee's possession, shall hold them with reasonable care at the lessor's or supplier's disposition for a reasonable time after the lessee's reasonable notification of rejection;

(2) 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 24.13.110; but

(3) The lessee has no further obligations with regard to goods rightfully rejected.

(b) Action by the lessee pursuant to Subsection (a) of this section is not acceptance or conversion.

24.13.130 Cure by Lessor of Improper Delivery; Replacement

(a) If any tender or delivery by the lessor or the supplier is rejected because it is 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.

(b) 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 or she seasonably notifies the lessee.

24.13.140 Waiver of Lessee's Objections

(a) 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:

(1) If, stated seasonably, the lessor or the supplier could have cured it (Section 24.13.130); or

(2) 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.

(b) A lessee's failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent on the face of the documents.

24.13.150 Acceptance of Goods

(a) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and:

(1) 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

(2) The lessee fails to make an effective rejection of the goods (Section 24.13.090(b).

(b) Acceptance of a part of any commercial unit is acceptance of that entire unit.

24.13.160 Effect of Acceptance of Goods; Notice of Default; Burden of Establishing Default After Acceptance; Notice of Claim or Litigation to Person Answerable over

(a) 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;

(b) A lessee's acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, other than a consumer lease in which the supplier assisted in the preparation of the lease contract or participated in negotiating the terms of the lease contract with the lessor, 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.

(1) Within a reasonable time after the lessee discovers or should have discovered any default,

(A) the lessee shall notify the lessor, or be barred from any remedy against the lessor, and, in addition,

(B) in the case of a finance lease, the lessee shall notify the supplier or be barred from any remedy against the supplier;

(2) Within a reasonable time after the lessee receives notice of litigation for infringement or the like (Section 24.10.110) the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and

(3) The burden is on the lessee to establish any default.

(d) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over:

(1) The lessee may give the lessor or the supplier written notice of the litigation. If the notice states that the lessor or the supplier may come in and defend, and that if the lessor or the supplier does not do so he or she will be bound in any action against him or her by the lessee by any determination of fact common to the two litigations, then unless the lessor or the supplier after seasonable receipt of the notice does come in and defend he or she is so bound.

(2) 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 24.10.110) 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.

(e) The provisions of Subsections (c) and (d) of this section apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (Section 24.10.110)

(f) Subsection (c) shall not apply to a consumer lease.

24.13.170 Revocation of Acceptance of Goods

(a) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if he or she has accepted it:

(1) 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

(2) 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.

(b) 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.

(c) A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.

24.13.180 Cover; Substitute Goods

(a) After default by a lessor under the lease contract (Section 24.13.080(a), 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.

(b) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 24.13.040) or determined by agreement of the parties (Section 24.13.030 and Section 24.01.020(c), if a lessee's cover is by lease agreement substantially similar to the original lease agreement and the lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages

(1) the present value, as of the date of the commencement of the new lease agreement, of the difference between the total rent for the lease term of the new lease agreement and the total rent for the then remaining lease term of the original lease agreement; and

(2) any incidental or consequential damages less expenses saved in consequence of the lessor's default.

(c) If the lessee's cover is by lease agreement that qualifies for treatment under Subsection (b) of this section, the lessee may elect to proceed under Subsection (b) of this section or Section 24.13.190. If a lessee's cover is by lease agreement that for any reason does not qualify for treatment under Subsection (b) of this section, or is by purchase or otherwise, the lessee may recover from the lessor under Section 24.13.190 as if the lessee had elected not to cover.

24.13.190 Lessee's Damages for Non-Delivery, Repudiation, Default and Breach of Warranty in Regard to Accepted Goods

(a) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 24.13.040) or determined by agreement of the parties (Section 24.01.020(c), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement, whether or not the lease agreement qualifies for treatment under Section 24.13.180(b), or is by purchase or otherwise, the measure of damages for default by the lessor (Section 24.13.080(a) is the present value as of the date of the default of the difference between the then market rent and 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.

(b) 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.

(c) If the lessee has accepted goods and given notification (Section 24.13.160(c), the measure of damages for nonconforming tender or delivery 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.

(d) 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.

24.13.200 Lessee's Incidental and Consequential Damages

(a) 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.

(b) Consequential damages resulting from a lessor's default include:

(1) 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

(2) Injury to person or property proximately resulting from any breach of warranty.

24.13.210 Lessee's Right to Specific Performance or Replevin

(a) Specific performance may be decreed if the goods are unique or in other proper circumstances.

(b) 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.

(c) 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.

24.13.220 Lessee's Right to Goods on Lessor's Insolvency

(a) Subject to Subsection (b) 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 24.10.170) 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 days after receipt of the first installment of rent and security.

(b) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.

24.13.230 Lessor's Rights

(a) 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 24.13.100), the lessee is in default under the lease contract and the lessor may:

(1) Cancel the lease contract (Section 24.13.050(a);

(2) Proceed respecting goods not identified to the lease contract (Section 24.13.240);

(3) Withhold delivery of the goods and take possession of goods previously delivered (Section 24.13.250);

(4) Stop delivery of the goods by any bailee (Section 24.13.260);

(5) Dispose of the goods and recover damages (Section 24.13.270), or retain the goods and recover damages (Section 24.13.280), or in a proper case recover rent (Section 24.13.290).

(b) If a lessee is otherwise in default under a lease contract, the lessor may exercise any right or remedy provided in this article except to the extent that this article makes the right or remedy available only upon the occurrence of a default in Subsection (a) of this section.

24.13.240 Lessor's Right to Identify Goods to Lease Contract

(a) A lessor aggrieved under Section 24.13.230(a) may:

(1) 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

(2) Dispose of goods (Section 24.13.270(a) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.

(b) 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.

24.13.250 Lessor's Right to Possession of Goods

(a) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.

(b) The lessor has on default by the lessee under the lease contract 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 24.13.270).

(c) The lessor may proceed under Subsection (b) of this section without judicial process if that can be done without breach of the, peace or the lessor may proceed by action.

24.13.260 Lessor's Stoppage of Delivery in Transit or Otherwise

(a) 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.

(b) In pursuing its remedies under Subsection (a) of this section, the lessor may stop delivery until

(1) Receipt of the goods by the lessee;

(2) Acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or

(3) Such an acknowledgment to the lessee by a carrier via reshipment or as warehouseman.

(c) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.

(d) 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.

(e) 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.

24.13.270 Lessor's Rights to Dispose of Goods

(a) After a default by a lessee under the lease contract (Section 24.13.230(a) or after the lessor refuses to deliver or takes possession of goods (Section 24.13.250 or 24.1326), the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale or otherwise.

(b) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 24.13.040) or determined by agreement of the parties (Section 24.13.030 and Section 24.01.020(c), if the disposition is by lease agreement substantially similar to the original lease agreement and the lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages

(1) accrued and unpaid rent as of the date of commencement of the term of the new lease agreement,

(2) the present value as of the date of commencement of the term of the new lease agreement of the difference between the total rent of the then remaining lease term of the original lease agreement and the total rent for the lease term of the new lease agreement, and

(3) any incidental damages allowed under Section 24.13.300, less expenses saved in consequence of the lessee's default.

(c) If the lessor's disposition is by lease agreement that qualifies for treatment under Subsection (b) of this section, the lessor may elect to proceed under Subsection (b) or Section 24.13.280. If the lessor's disposition is by lease agreement that for any reason does not qualify for treatment under Subsection (b) of this section, or is by sale or otherwise, the lessor may recover from the lessee under Section 24.13.280 as if the lessor had elected not to dispose of the goods.

(d) 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.

(e) 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 (Section 24.13.080(e).

24.13.280 Lessor's Damages for Non-Acceptance or Repudiation

(a) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 24.13.040) or determined by agreement of the parties (Section 24.13.030 and Section 24.01.020(c), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and disposition is by lease agreement, whether or not the lease agreement qualifies for treatment under Section 24.13.270(b), or is by sale or otherwise, the lessor may recover from the lessee as damages for default by the lessee (Section 24.13.230(a)

(1) accrued and unpaid rent as of the date the lessor obtained possession of the goods or such earlier date as the lessee has made an effective tender of possession of the goods back to the lessor,

(2) the present value as of the date determined under Paragraph (1) of the difference between the total rent for the then remaining lease term of the original lease agreement and the market rent at the time determined under Paragraph (1) and at the place where the goods were located on that date computed for the same lease term, and

(3) any incidental damages allowed under Section 24.13.200, less expenses saved in consequence of the lessee's default.

(b) If the measure of damages provided in Subsection (a) 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 24.13.300, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition.

24.13.290 Lessor's Action for a Rent

(a) After default by the lessee under the lease contract (Section 24.13.230(a), if the lessor complies with Subsection (b) of this section, the lessor may recover from the lessee as damages:

(1) For goods accepted by the lessee and not repossessed by or effectively tendered back to the lessor, and for conforming goods lost or damaged after risk of loss passes to the lessee (Section 24.10.190),

(A) Accrued and unpaid rent as of the date of entry of judgment in favor of lessor,

(B) The present value as of the date determined under subparagraph (A) of the rent for the then remaining lease term of the lease agreement, and

(C) Any incidental damages allowed under Section 24.13.300, less expenses saved in consequence of the lessee's default; and

(2) For goods identified to the lease contract where the lessor has never delivered the goods or has taken possession of them or the lessee has effectively tendered them back to the lessor, if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that such an effort will be unavailing

(A) Accrued and unpaid rent as of the date of entry of judgment in favor of the lessor,

(B) The present value as of the date determined under Subparagraph (A) of the rent for the then remaining lease term of the lease agreement, and

(b) Except as provided in Subsection (c) 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.

(c) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to Subsection (a) 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 will be governed by Section 24.13.270 or Section 24.13.280, and the lessor will cause an appropriate credit to be provided against any judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to Section 24.13.270 or Section 24.13.280.

(d) Payment of the judgment for damages obtained pursuant to Subsection (a) of this section entitles the lessee to use and possession of the goods not then disposed of for the remaining lease term of the lease agreement, provided that the lessee complies with all other terms and conditions of the lease agreement.

(e) After a lessee has wrongfully rejected or revoked acceptance of goods, has failed to pay rent then due, or has repudiated (Section 24.12.020), a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for nonacceptance under Sections 24.1327 and 24.1328.

24.13.300 Lessor's Incidental Damages

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.

24.13.310 Lessor's Right to Recover for Damage to Residual Interest

In addition to any other recovery permitted by this article, the lessor shall be entitled to 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.

24.13.320 Standing to Sue Third Parties for Injury to Goods

(a) 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

(1) the lessor has a right of action against the third party, and

(2) the lessee also has a right of action against the third party if the lessee

(A) Has a security interest in the goods;

(B) Has an insurable interest in the goods; or

(C) 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.

(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 lease contract and there is no arrangement between them for disposition of the recovery, his or her suit or settlement, subject to his or her own interest, is as a fiduciary for the other party to the lease contract.

Chapter 24.14 Negotiable Instruments

24.14.010 Short Title

This article may be cited as Turtle Mountain Band of Chippewa Indians Commercial Code Negotiable Instruments.

24.14.020 Subject Matter

(a) This article applies to negotiable instruments. It does not apply to money, to payment orders governed by Section 25.05.050, or to securities governed by Chapter 24.38.

(b) If there is conflict between this chapter and Chapter 24.04 or Chapter 24.38, Chapter 24.04, this chapter and Chapter 24.38 govern.

(c) 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.

24.14.030 Definitions

(a) In this article:

(1) "ACCEPTOR" means a drawee who has accepted a draft.

(2) "DRAWEE" means a person ordered in a draft to make payment.

(3) "DRAWER" means a person who signs or is identified in a draft as a person ordering payment.

(4) "GOOD FAITH" means honesty in fact and the observance of reasonable commercial standards of fair dealing.

(5) "MAKER" means a person who signs or is identified in a note as a person undertaking to pay.

(6) "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.

(7) "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.

(8) "PARTY" means a party to an instrument.

(9) "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.

(10) "PROVE" with respect to a fact means to meet the burden of establishing the fact (Section 24.01.100(h).

(11) "REMITTER" means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.

(b) Other definitions applying to this article and the sections in which they appear are:

"ACCEPTANCE" Section 24.17.090(a)

"ACCOMMODATED PARTY" Section 24.17.190(a)

"ACCOMMODATION PARTY" Section 24.17.190(a)

"ALTERATION" Section 24.17.070(a)

"ANOMALOUS ENDORSEMENT" Section 24.15.050(d)

"BLANK ENDORSEMENT" Section 24.15.050(b)

"CASHIER'S CHECK" Section 24.14.040(i)

"CERTIFICATE OF DEPOSIT" Section 24.14.040(l)

"CERTIFIED CHECK" Section 24.17.090(d)

"CHECK" Section 24.14.040(h)

"CONSIDERATION" Section 24.16.030(b)

"DRAFT" Section 24.14.040(g)

"HOLDER IN DUE COURSE" Section 24.16.020

"INCOMPLETE INSTRUMENT" Section 24.14.150(a)

"ENDORSEMENT" Section 24.15.040(a)

"ENDORSER" Section 24.15.040(b)

"INSTRUMENT" Section 24.14.040(d)

"ISSUE" Section 24.14.050(a)

"ISSUER" Section 24.14.050(a)

"NEGOTIABLE INSTRUMENT" Section 24.14.040

"NEGOTIATION" Section 24.15.010(a)

"NOTE" Section 24.14.040(g)

"PAYABLE AT A DEFINITE TIME" Section 24.14.080(b)

"PAYABLE ON DEMAND" Section 24.14.080

"PAYABLE TO BEARER" Section 24.14.090(a)

"PAYABEL TO ORDER" Section 24.14.090(b)

"PAYMENT" Section 24.19.020

"PERSON ENTITLED TO ENFORCE" Section 24.16.010

"PRESENTMENT" Section 24.16.010

"REACQUISITION" Section 24.15.070

"SPECIAL ENDORSEMENT" 24.1505(1)

"TELLER'S CHECK" Section 24.14.040(j)

"TRANSFER OF INSTRUMENT" Section 24.15.030

"TRAVELERS CHECK" Section 24.14.040(k)

"VALUE" Section 24.16.030

"BANK" Section 24.20.050(a)

"BANKING DAY" Section 24.20.040(a)(3)

"CLEARING HOUSE" Section 24.20.040(a)(4)

"COLLECTING BANK" Section 24.20.050(e)

"DEPOSITORY BANK" Section 24.20.050(b)

"DOCUMENTARY DRAFT" Section 24.20.040(a)(6)

"INTERMEDIARY BANK" Section 24.20.050(d)

"ITEM" Section 24.20.040(a)(9)

"PAYOR BANK" Section 24.20.050(c)

"SUSPENDS PAYMENTS" Section 24.20.040(a)(12)

(d) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

24.14.040 Negotiable Instrument

Except as provided in Subsections (c) and (d), "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:

(a) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(b) Is payable on demand or at a definite time; and

(c) 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

(1) an undertaking or power to give, maintain, or protect collateral to secure payment,

(2) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or

(3) a waiver of the benefit of any law intended for the advantage or protection of an obligor.

(d) "INSTRUMENT" means a negotiable instrument.

(e) An order that meets all of the requirements of Subsection (c), except Paragraph (1), and otherwise falls within the definition of "check" in Subsection (f) is a negotiable instrument and a check.

(f) 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.

(g) 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.

(h) "CHECK" means

(1) a draft, other than a documentary draft, payable on demand and drawn on a bank or

(2) 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."

(i) "CASHIER'S CHECK" means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.

(j) "TELLER'S CHECK" means a draft drawn by a bank

(1) on another bank, or

(2) payable at or through a bank.

(k) "TRAVELER'S CHECK" means an instrument that

(1) is payable on demand,

(2) is drawn on or payable at or through a bank,

(3) is designated by the term "traveler's check" or by a substantially similar term, and

(4) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.

(l) "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.

24.14.050 Issue of Instrument

(a) "Issue" means the first delivery of an instrument by the maker or drawer, whether to a holder or non-holder, for the purpose of giving rights on the instrument to any person.

(b) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but non-issuance 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.

24.14.060 Unconditional Promise or Order

(a) Except as provided in this section, for the purposes of Section 24.14.040, a promise or order is unconditional unless it states

(1) an express condition to payment,

(2) that the promise or order is subject to or governed by another writing, or

(3) that rights or obligations with respect to the promise or order are stated in another writing. A reference to another writing does not of itself make the promise or order conditional.

(b) A promise or order is not made conditional

(1) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration, or

(2) because payment is limited to resort to a particular fund or source.

(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 Section 24.14.040(a). 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.

(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 Section 24.14.040(a); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.

24.14.070 Instrument Payable in Foreign Money

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.

24.14.080 Payable on Demand or at Definite Time

(a) A promise or order is "payable on demand" if it

(1) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or

(2) does not state any time of payment.

(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

(1) prepayment,

(2) acceleration,

(3) extension at the option of the holder, or

(4) extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.

(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.

24.14.090 Payable to Bearer or to Order

(a) A promise or order is payable to bearer if it:

(1) 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;

(2) Does not state a payee; or

(3) States that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.

(b) A promise or order that is not payable to bearer is payable to order if it is payable

(1) to the order of an identified person or

(2) to an identified person or order. A promise or order that is payable to order is payable to the identified person.

(c) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to Section 24.15.050(a). An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to Section 24.15.050(b).

24.14.100 Identification of Person to Whom Instrument Is Payable

(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.

(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.

(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:

(1) 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.

(2) If an instrument is payable to:

(A) 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;

(B) 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;

(C) 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

(D) 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.

(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.

24.14.110 Place of Payment

Except as otherwise provided for items in Chapter 24.04, 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.

24.14.120 Interest

(a) Unless otherwise provided in the instrument,

(1) an instrument is not payable with interest, and

(2) interest on an interest-bearing instrument is payable from the date of the instrument.

(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.

24.14.130 Date of Instrument

(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 Section 24.23.010(c), an instrument payable on demand is not payable before the date of the instrument.

(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.

24.14.140 Contradictory Terms of Instrument

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.

24.14.150 Incomplete Instrument

(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.

(b) Subject to Subsection (c), if an incomplete instrument is an instrument under Section 24.14.040, 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 24.14.040, but, after completion, the requirements of Section 24.14.040 are met, the instrument may be enforced according to its terms as augmented by completion.

(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 24.14.070.

(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.

24.14.160 Joint and Several Liability Contribution

(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 endorsers are jointly and severally liable in the capacity in which they sign.

(b) Except as provided in Section 24.17.190(e) 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.

(c) Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under Subsection (b) of a party having the same joint and several liability to receive contribution from the party discharged.

24.14.170 Other Agreements Affecting Instrument

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.

24.14.180 Statute of Limitations

(a) Except as provided in Subsection (e), 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.

(b) Except as provided in Subsection (d) or (e), 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.

(c) Except as provided in Subsection (d), an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three years after dishonor of the draft or ten years after the date of the draft, whichever period expires first.

(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 years after demand for payment is made to the acceptor or issuer, as the case may be.

(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.

(f) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced

(1) within six (6)n 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

(2) within six (6) years after the date of the acceptance if the obligation of the acceptor is payable on demand.

(g) Unless governed by other law regarding claims for indemnity or contribution, an action

(1) for conversion of an instrument, for money had and received, or like action based on conversion,

(2) for breach of warranty, or

(3) 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 cause of action accrues.

24.14.190 Notice of Right to Defend Action

In an action for breach of an obligation for which a third person is answerable over pursuant to this article or Article 4, the defendant may give the third person written notice of the litigation, and the person notified may then give similar notice to any other person who is answerable over. If the notice states

(a) that the person notified may come in and defend and

(b) 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.

Chapter 24.15 Negotiation, Transfer, and Endorsement

24.15.010 Negotiation

(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.

(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 endorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.

24.15.020 Negotiation Subject to Rescission

(a) Negotiation is effective even if obtained

(1) from an infant, a corporation exceeding its powers, or a person without capacity,

(2) by fraud, duress, or mistake, or

(3) in breach of duty or as part of an illegal transaction.

(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.

24.15.030 Transfer of Instrument Rights Acquired by Transfer

(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.

(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.

(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of endorsement by the transferor, the transferee has a specifically enforceable right to the unqualified endorsement of the transferor, but negotiation of the instrument does not occur until the endorsement is made.

(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.

24.15.040 Endorsement

(a) "ENDORSEMENT" 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

(1) negotiating the instrument,

(2) restricting payment of the instrument, or

(3) incurring endorser's liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an endorsement 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 endorsement. 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.

(b) "ENDORSER" means a person who makes an endorsement.

(c) For the purpose of determining whether the transferee of an instrument is a holder, an endorsement that transfers a security interest in the instrument is effective as an unqualified endorsement of the instrument.

(d) If an instrument is payable to a holder under a name that is not the name of the holder, endorsement 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.

24.15.050 Special Endorsement; Blank Endorsement; Anomalous Endorsement

(a) If an endorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the endorsement identifies a person to whom it makes the instrument payable, it is a "special endorsement," When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the endorsement of that person. The principles stated in Section 24.14.100 apply to special endorsements.

(b) If an endorsement is made by the holder of an instrument and it is not a special endorsement, it is a "blank endorsement." When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.

(c) The holder may convert a blank endorsement that consists only of a signature into a special endorsement by writing, above the signature of the endorser, words identifying the person to whom the instrument is made payable.

(d) "Anomalous endorsement" means an endorsement made by a person who is not the holder of the instrument. An anomalous endorsement does not affect the manner in which the instrument may be negotiated.

24.15.060 Restrictive Endorsement

(a) An endorsement 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.

(b) An endorsement stating a condition to the right of the endorsee to receive payment does not affect the right of the endorsee 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.

(1) described in Section 24.21.010(b), or

(2) 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 endorser or for a particular account, the following rules apply:

(A) A person, other than a bank, who purchases the instrument when so endorsed converts the instrument unless the amount paid for the instrument is received by the endorser or applied consistently with the endorsement.

(B) A depositary bank that purchases the instrument or takes it for collection when so endorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the endorser or applied consistently with the endorsement.

(C) 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 endorser or applied consistently with the endorsement.

(D) Except as otherwise provided in paragraph (C), a payor bank or intermediary bank may disregard the endorsement and is not liable if the proceeds of the instrument are not received by the endorser or applied consistently with the endorsement.

(d) Except for an endorsement covered by Subsection (c), if an instrument bears an endorsement using words to the effect that payment is to be made to the endorsee as agent, trustee, or other fiduciary for the benefit of the endorser or another person, the following rules apply:

(1) Unless there is notice of breach of fiduciary duty as provided in Section 24.16.070, a person who purchases the instrument from the endorsee or takes the instrument from the endorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the endorsee without regard to whether the endorsee violates a fiduciary duty to the endorser.

(2) A subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the endorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.

(e) The presence on an instrument of an endorsement 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) or has notice or knowledge of breach of fiduciary duty as stated in Subsection (d).

(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 endorsement to which this section applies and the payment is not permitted by this section.

24.15.070 Reacquisition

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 endorsements 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 endorser whose endorsement is canceled is discharged, and the discharge is effective against any subsequent holder.

Chapter 24.16 Enforcement of Instruments

24.16.010 Person Entitled to Enforce Instrument

"Person entitled to enforce" an instrument means

(a) the holder of the instrument,

(b) a non-holder in possession of the instrument who has the rights of a holder, or

(c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 24.16.090 or Section 24.17.180. 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.

24.16.020 Holder in Due Course

(a) Subject to Subsection (c) and Section 24.14.060, "holder in due course" means the holder of an instrument if:

(1) 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

(2) The holder took the instrument

(A) for value,

(B) in good faith,

(C) 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,

(D) without notice that the instrument contains an unauthorized signature or has been altered,

(E) without notice of any claim to the instrument described in Section 24.16.060, and

(F) without notice that any party has a defense or claim in recoupment described in Section 24.16.050.

(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under Subsection (a), 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.

(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

(1) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding,

(2) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or

(3) as the successor in interest to an estate or other organization.

(d) If, under Section 24.16.030(a)(1), 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.

(e) If

(1) the person entitled to enforce an instrument has only a security interest in the instrument and

(2) 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.

(f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.

(g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.

24.16.030 Value and Consideration

(a) An instrument is issued or transferred for value if:

(1) The instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;

(2) The transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;

(3) 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;

(4) The instrument is issued or transferred in exchange for a negotiable instrument; or

(5) 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.

(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)(1), the instrument is also issued for consideration.

24.16.040 Overdue Instrument

(a) An instrument payable on demand becomes overdue at the earliest of the following times:

(1) On the day after the day demand for payment is duly made;

(2) If the instrument is a check, ninety (90) days after its date; or

(3) 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.

(b) With respect to an instrument payable at a definite time the following rules apply:

(1) 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.

(2) 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.

(3) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.

(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:

24.16.050 Defenses and Claims in Recoupment

(a) Except as stated in Subsection (b), the right to enforce the obligation of a party to pay an instrument is subject to the following:

(1) A defense of the obligor based on

(A) infancy of the obligor to the extent it is a defense to a simple contract,

(B) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor,

(C) 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

(D) discharge of the obligor in insolvency proceedings;

(2) 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

(3) 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.

(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 Subsection (a)(1) of this section, but is not subject to defenses of the obligor stated in Subsection (a)(1)(B)of this section, or claims in recoupment stated in Subsection (a)(3) of this section against a person other than the holder.

(c) Except as stated in Subsection (a)(2), 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 24.16.060) 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.

(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) 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.

24.16.060 Claims to an Instrument

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.

24.16.070 Notice of Breach of Fiduciary Duty

(a) In this section:

(1) "Fiduciary" means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument.

(2) "Represented person" means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph (1) is owed.

(b) If

(1) an instrument is taken from a fiduciary for payment or collection or for value,

(2) the taker has knowledge of the fiduciary status of the fiduciary, and

(3) 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:

(A) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person.

(B) 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.

(4) 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.

(5) 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

(A) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary,

(B) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or

24.16.080 Proof of Signatures and Status as Holder in Due Course

(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 Section 24.17.020.

(b) If the validity of signatures is admitted or proved and there is compliance with Subsection (a), a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under Section 24.16.010, 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.

24.16.090 Enforcement of Lost, Destroyed, or Stolen Instrument

(a) A person not in possession of an instrument is entitled to enforce the instrument if

(1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred,

(2) the loss of possession was not the result of a transfer by the person or a lawful seizure, and

(3) 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.

(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 24.16.080 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.

24.16.100 Effect of Instrument on Obligation for Which Taken

(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 endorser of the instrument.

(b) Unless otherwise agreed and except as provided in Subsection (a), 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:

(1) 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.

(2) 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.

(3) Except as provided in paragraph (4) below, 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.

(4) 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.

(1) that stated in Subsection (a) if the instrument is one on which a bank is liable as maker or acceptor, or

(2) that stated in Subsection (b) in any other case.

24.16.110 Accord and Satisfaction by Use of Instrument

(a) If a person against whom a claim is asserted proves that

(1) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim,

(2) the amount of the claim was unliquidated or subject to a bona fide dispute, and

(3) the claimant obtained payment of the instrument, the following subsections apply.

(b) Unless Subsection (c) below 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.

(1) The claimant, if an organization, proves that

(A) 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

(B) the instrument or accompanying communication was not received by that designated person, office, or place.

(2) 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 paragraph (1)(A).

(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.

24.16.120 Lost, Destroyed, or Stolen Cashier's Check, Teller's Check or Certified Check

(a) In this section:

(1) "Check" means a cashier's check, teller's check, or certified check.

(2) "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.

(3) "Declaration of loss" means a written statement, made under penalty of perjury, to the effect that

(A) the declarer lost possession of a check,

(B) 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 check or teller's check,

(D) 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.

(4) "Obligated bank" means the issuer of a cashier's check or teller's check or the acceptor of a certified check.

(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

(1) 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,

(2) the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check,

(3) the communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid, and

(4) 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:

(A) The claim becomes enforceable at the later of

(i) the time the claim is asserted; or

(ii) the ninetieth (90) day following the date of the check, in the case of a cashier's check or teller's check, or the ninetieth day following the date of the acceptance, in the case of a certified check; or

(B) 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; or

(C) if the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check; or

(D) 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 Section 24.22.020(a)(1), payment to the claimant discharges all liability of the obligated bank with respect to the check.

(c) If the obligated bank pays the amount of a check to a claimant under Subsection (b)(4) and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to

(1) refund the payment to the obligated bank if the check is paid, or

(2) pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.

(d) If a claimant has the right to assert a claim under Subsection (b) 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 24.16.090.

Chapter 24.17 Liability of Parties

24.17.010 Signature

(a) A person is not liable on an instrument unless

(1) the person signed the instrument, or

(2) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under Section 24.22.020.

(b) A signature may be made

(1) manually or by means of a device or machine, and

(2) 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.

24.17.020 Signature by Representative

(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.

(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:

(1) 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.

(2) Subject to Subsection (c), if

(A) the form of the signature does not show unambiguously that the signature is made in a representative capacity, or

(B) 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.

(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.

24.17.030 Unauthorized Signature

(a) Unless otherwise provided in this article or Article 4, 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.

(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.

(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.

24.17.040 Impostors Fictitious Payees

(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 endorsement of the instrument by any person in the name of the payee is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.

(b) If

(1) a person whose intent determines to whom an instrument is payable (Section 24.14.100(a) or Section 24.14.100(b)) does not intend the person identified as payee to have any interest in the instrument, or

(2) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special endorsement:

(A) Any person in possession of the instrument is its holder.

(B) An endorsement by any person in the name of the payee stated in the instrument is effective as the endorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.

(1) it is made in a name substantially similar to that of the payee or

(2) 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

(d) With respect to an instrument to which Subsection (a) or (b) 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.

24.17.050 Employer's Responsibility for Fraudulent Endorsement by Employee

(a) In this section:

(1) "Employee" includes an independent contractor and employee of an independent contractor retained by the employer.

(2) "Fraudulent endorsement" means

(A) in the case of an instrument payable to the employer, a forged endorsement purporting to be that of the employer, or

(B) in the case of an instrument with respect to which the employer is the issuer, a forged endorsement/purporting to be that of the person identified as payee.

(3) "Responsibility" with respect to instruments means authority

(A) to sign or indorse instruments on behalf of the employer,

(B) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition,

(D) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, to control the disposition of instruments to be issued in the name of the employer, or

(E) 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.

(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 endorsement of the instrument, the endorsement is effective as the endorsement 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.

(1) it is made in a name substantially similar to the name of that person or

(2) the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.

24.17.060 Negligence Contributing to Forged Signature or Alteration of Instrument

(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.

(b) Under Subsection (a), 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.

(c) Under Subsection (a), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under Subsection (b), the burden of proving failure to exercise ordinary care is on the person precluded.

24.17.070 Alteration

(a) "Alteration" means

(1) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or

(2) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.

(b) Except as provided in Subsection (c), 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.

(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

(1) according to its original terms, or

(2) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.

24.17.080 Drawee Not Liable on Unaccepted Draft

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.

24.17.090 Acceptance of Draft Certified Check

(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.

(b) Draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.

(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

(d) "Certified check" means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in Subsection (a) 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.

24.17.100 Acceptance Varying Draft

(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.

(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.

(c) If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and endorser that does not expressly assent to the acceptance is discharged.

24.17.110 Refusal to Pay Cashier's Checks, Teller's Checks, and Certified Checks

(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.

(b) If the obligated bank wrongfully refuses to pay a cashier's check or certified check, stops payment of a teller's check, or 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.

(c) Expenses or consequential damages under Subsection (b) are not recoverable if the refusal of the obligated bank to pay occurs because

(1) the bank suspends payments,

(2) 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,

(3) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or

(4) payment is prohibited by law.

24.17.120 Obligation of Issuer of Note or Cashier's Check

The issuer of a note or cashier's check or other draft drawn on the drawer is obliged to pay the instrument

(a) 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

(b) if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in Section 24.14.150 and Section 24.17.070. The obligation is owed to a person entitled to enforce the instrument or to an endorser who paid the instrument under Section 24.17.150.

24.17.130 Obligation of Acceptor

(a) The acceptor of a draft is obliged to pay the draft

(1) 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,

(2) if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or

(3) if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in Section 24.14.150 and Section 24.17.070. The obligation is owed to a person entitled to enforce the draft or to the drawer or an endorser who paid the draft under Section 24.17.140 or Section 24.17.150.

(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

(1) the certification or acceptance does not state an amount,

(2) the amount of the instrument is subsequently raised, and

(3) 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.

24.17.140 Obligation of Drawer

(a) This section does not apply to cashier's checks or other drafts drawn on the drawer.

(b) If an unaccepted draft is dishonored, the drawer is obliged to pay the draft

(1) 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

(2) if the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in Section 24.14.150 and Section 24.17.070. The obligation is owed to a person entitled to enforce the draft or to an endorser who paid the draft under Section 24.17.150.

(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 endorser under Section 24.17.150(a) and Section 24.17.150(c).

(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) to pay the draft if the draft is not a check. A disclaimer of the liability stated in Subsection (b) is not effective if the draft is a check.

(f) If

(1) a check is not presented for payment or given to a depositary bank for collection within thirty (30) days after its date,

(2) the drawee suspends payments after expiration of the thirty-day period without paying the check, and

(3) 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.

24.17.150 Obligation of Endorser

(a) Subject to Subsections (b), (c), (d), and (e) and to Section 24.17.190(d), if an instrument is dishonored, an endorser is obliged to pay the amount due on the instrument

(1) according to the terms of the instrument at the time it was indorsed, or

(2) if the endorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in Section 24.14.150 and Section 24.17.070. The obligation of the endorser is owed to a person entitled to enforce the instrument or to a subsequent endorser who paid the instrument under this section.

(b) If an endorsement states that it is made "without recourse" or otherwise disclaims liability of the endorser, the endorser is not liable under Subsection (a) to pay the instrument.

(c) If notice of dishonor of an instrument is required by Section 24.18.030 and notice of dishonor complying with that section is not given to an endorser, the liability of the endorser under Subsection (a) is discharged.

(d) If a draft is accepted by a bank after an endorsement is made, the liability of the endorser under Subsection (a) is discharged.

(e) If an endorser of a check is liable under Subsection (a) and the check is not presented for payment, or given to a depositary bank for collection, within thirty (30) days after the day the endorsement was made, the liability of the endorser under Subsection (a) is discharged.

24.17.160 Transfer Warranties

(a) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that:

(1) The warrantor is a person entitled to enforce the instrument;

(2) All signatures on the instrument are authentic and authorized;

(3) The instrument has not been altered;

(4) The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor; and

(5) 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.

(b) A person to whom the warranties under Subsection (a) 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.

(c) The warranties stated in Subsection (a) 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) is discharged to the extent of any loss caused by the delay in giving notice of the claim.

(d) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

24.17.170 Presentment Warranties

(a) If an unaccepted draft is presented to the drawee for payment, or acceptance and the drawee pays or accepts the draft,

(1) the person obtaining payment or acceptance, at the time of presentment, and

(2) 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:

(A) 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;

(B) The draft has not been altered; and

(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.

(c) If a drawee asserts a claim for breach of warranty under Subsection (a) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under Section 24.17.040 or Section 24.17.050 or the drawer is precluded under Section 24.17.060 or Section 24.23.060 from asserting against the drawee the unauthorized endorsement or alteration.

(d) If

(1) a dishonored draft is presented for payment to the drawer or an endorser or

(2) any other instrument is presented for payment to a party obliged to pay the instrument, and

(3) payment is received, the following rules apply:

(A) 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.

(B) 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.

(e) The warranties stated in Subsections (a) and (d) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty 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) is discharged to the extent of any loss caused by the delay in giving notice of the claim.

(f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

24.17.180 Payment or Acceptance by Mistake

(a) Except as provided in Subsection (c), if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that

(1) payment of the draft had not been stopped pursuant to Section 24.23.030, or

(2) 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.

(b) Except as provided in Subsection (c), if an instrument has been paid or accepted by mistake and the case is not covered by Subsection (a), the person paying or accepting may, to the extent permitted by the law governing mistake and restitution,

(1) recover the payment from the person to whom or for whose benefit payment was made, or

(2) in the case of acceptance, may revoke the acceptance.

(c) The remedies provided by Subsection (a) or (b) 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 24.17.170 or Section 24.23.070.

(d) Notwithstanding Section 24.21.150, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under Subsection (a) or (b), 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.

24.17.190 Instruments Signed for Accommodation

(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."

(b) An accommodation party may sign the instrument as maker, drawer, acceptor, or endorser and, subject to Subsection (d), 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.

(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 endorsement 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 24.19.050, 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.

(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

(1) execution of judgment against the other party has been returned unsatisfied,

(2) the other party is insolvent or in an insolvency proceeding,

(3) the other party cannot be served with process, or

(4) it is otherwise apparent that payment cannot be obtained from the other party.

(e) An accommodation party who pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.

24.17.200 Conversion of Instrument

(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

(1) the issuer or acceptor of the instrument, or

(2) a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.

(b) In an action under Subsection (a), the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiffs interest in the instrument.

(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.

24.17.210 Collection Costs and Expenses Liability of Issuer of Dishonored Check

(a) If a merchant or place of business conspicuously posts a notice on its premises or if a merchant or place of business regularly extends credit and prints a notice on its customer statements of such size and location as to be conspicuous, stating that a fee will be assessed against returned checks, any person who issues a check or other draft to the merchant or place of business which is not honored for any of the following reasons upon presentment is liable for all reasonable costs and expenses of collection:

(1) The drawer's account is closed;

(2) The drawer's account does not have sufficient funds; or

(3) The drawer does not have sufficient credit with the drawee.

(b) The costs and expenses provided for in this section are reasonable if they do not exceed twenty dollars ($20).

24.17.220 Circumstances Under Which Issuer of Dishonored Check Liable Reasonable Costs and Expenses

(a) Any person who issues a check or other draft to the Tribe or any of its political subdivisions which is not honored for any of the following reasons upon presentation is liable for all reasonable costs and expenses of collection:

(1) The drawer's account is closed;

(2) The drawer's account does not have sufficient funds; or

(3) The drawer does not have sufficient credit with the drawee.

(b) The costs and expenses provided for in this section are considered reasonable if they do not exceed twenty dollars.

Chapter 24.18 Dishonor

24.18.010 Presentment

(a) "Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument

(1) 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

(2) to accept a draft made to the drawee.

(b) The following rules are subject to Article 4, agreement of the parties, and clearinghouse rules and the like:

(1) 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 anyone of two or more makers, acceptors, drawees, or other payors.

(2) Upon demand of the person to whom presentment is made, the person making presentment must

(A) exhibit the instrument,

(B) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and

(3) Without dishonoring the instrument, the party to whom presentment is made may

(A) return the instrument for lack of a necessary endorsement, or

(B) 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.

(4) 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 cut-off hour not earlier than two (2:00) p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.

24.18.020 Dishonor

(a) Dishonor of a note is governed by the following rules:

(1) 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.

(2) 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.

(3) If the note is not payable on demand and paragraph (2) does not apply, the note is dishonored if it is not paid on the day it becomes payable.

(b) Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:

(1) 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 24.22.010 or Section 24.22.020, or becomes accountable for the amount of the check under Section 24.04.020.

(2) If a draft is payable on demand and Paragraph (1) 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.

(3) If a draft is payable on a date stated in the draft, the draft is dishonored if

(A) 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

(B) presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment.

(4) 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.

(c) Dishonor of an unaccepted documentary draft occurs according to the rules stated in Subsection (b) (2), (3), and (4), 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.

(d) Dishonor of an accepted draft is governed by the following rules:

(1) 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.

(2) 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.

(e) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under Section 24.18.040, dishonor occurs without presentment if the instrument is not duly accepted or paid.

(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.

24.18.030 Notice of Dishonor

(a) The obligation of an endorser stated in Section 24.17.150(a) and the obligation of a drawer stated in Section 24.17.140(d) may not be enforced unless

(1) the endorser or drawer is given notice of dishonor of the instrument complying with this section, or

(2) notice of dishonor is excused under Section 24.18.040(b).

(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.

(c) Subject to Section 24.18.040(c), with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given

(1) 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

(2) 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.

24.18.040 Excused Presentment and Notice of Dishonor

(a) Presentment for payment or acceptance of an instrument is excused if

(1) the person entitled to present the instrument cannot with reasonable diligence make presentment,

(2) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings,

(3) by the terms of the instrument presentment is not necessary to enforce the obligation of endorsers or the drawer,

(4) the drawer or endorser 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

(5) the drawer instructed the drawee not to payor accept the draft or the drawee was not obligated to the drawer to pay the draft.

(b) Notice of dishonor is excused if

(1) by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or

(2) the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.

(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.

24.18.050 Evidence of Dishonor

(a) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:

(1) A document regular in form as provided in Subsection (b) which purports to be a protest;

(2) 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;

(3) 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.

(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.

Chapter 24.19 Discharge and Payment

24.19.010 Discharge and Effect of Discharge

(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.

(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.

24.19.020 Payment

(a) Subject to Subsection (b), an instrument is paid to the extent payment is made

(1) by or on behalf of a party obliged to pay the instrument, and

(2) 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 24.16.060 by another person.

(b) The obligation of a party to pay the instrument is not discharged under Subsection (a) if:

(1) A claim to the instrument under Section 24.16.060 is enforceable against the party receiving payment and

(A) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or

(B) 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

(2) 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.

24.19.030 Tender of Payment

(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.

(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 endorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.

(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.

24.19.040 Discharge by Cancellation or Renunciation

(a) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument

(1) 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,

(2) or by agreeing not to sue or otherwise renouncing rights against the party by a signed writing.

(b) Cancellation or striking out of an endorsement pursuant to Subsection (a) does not affect the status and rights of a party derived from the endorsement.

24.19.050 Discharge of Endorsers and Accommodation Parties

(a) In this section, the term "endorser" includes a drawer having the obligation described in Section 24.17.140(d).

(b) Discharge, under Section 24.19.040, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right of recourse against the discharged party.

(c) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an endorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the endorser or accommodation party proves that the extension caused loss to the endorser or accommodation party with respect to the right of recourse.

(d) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an endorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the endorser or accommodation party with respect to the right of recourse. The loss suffered by the endorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.

(e) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an endorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent

(1) the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or

(2) the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.

(f) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under Subsection (e), the party is deemed to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.

(g) Under Subsection (e) or (t), impairing value of an interest in collateral includes

(1) failure to obtain or maintain perfection or recordation of the interest in collateral,

(2) release of collateral without substitution of collateral of equal value,

(3) failure to perform a duty to preserve the value of collateral owed, under article 9 or other law, to a debtor or surety or other person secondarily liable, or

(4) failure to comply with applicable law in disposing of collateral.

(h) An accommodation party is not discharged under Subsection (c), (d), or (e) unless the person entitled to enforce the instrument knows of the accommodation or has notice under Section 24.17.190(c) that the instrument was signed for accommodation.

(i) A party is not discharged under this section if

(1) the party asserting discharge consents to the event or conduct that is the basis of the discharge, or

(2) the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on surety ship or impairment of collateral.

Chapter 24.20 Bank Deposits and Collections

24.20.010 Short Title

This article may be cited as Turtle Mountain Band of Chippewa Indians Commercial Code; Bank Deposits and Collections.

24.20.020 Applicability

(a) To the extent that items within this article are also within articles 3 and 8, they are subject to those articles. If there is conflict, this article governs Article 3, but Article 8 governs this article.

(b) The liability of a bank for action or nonaction with respect to an 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.

24.20.030 Variation by Agreement; Measure of Damages; Certain Action Constituting Ordinary Care

(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.

(b) Federal Reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under Subsection (a), whether or not specifically assented to by all parties interested in items handled.

(c) Action or nonaction 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 nonaction 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.

(d) The specification or approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.

(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.

24.20.040 Definitions; Index of Definitions

(a) In this article, unless the context otherwise requires:

(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;

(2) "Afternoon" means the period of a day between noon and midnight;

(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;

(4) "Clearing house" means an association of banks or other payors regularly clearing items;

(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;

(6) "Documentary draft" means a draft to be presented for acceptance or payment if specified documents, certificated securities (Chapters 24.42 through 24.48) or instructions for uncertificated securities (Chapters 24.42 through 24.48) or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;

(7) "Draft" means a draft as defined in Section 24.14.040(g) or an item, other than an instrument, that is an order;

(8) "Drawee" means a person ordered in a draft to make payment;

(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 or a credit or debit card slip;

(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;

(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;

(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.

(b) Other definitions applying to this article and the sections in which they appear are:

"AGREEMENT FOR ELECTRONIC PRESENTMENT" Section 24.20.100

"BANK" Section 24.20.050

"COLLECTING BANK" Section 24.20.050

"DEPOSITORY BANK" Section 24.20.050

"INTERMEDIARY BANK" Section 24.20.050

"PAYOR BANK" Section 24.20.050

"PRESENTING BANK" Section 24.20.050

"PRESENTMENT NOTICE" Section 24.20.100

"ACCEPTANCE" Section 24.17.090(a)

"ALTERATION" Section 24.17.070

"CASHIER'S CHECK" this section

"CERTIFICATE OF DEPOSTI" this section

"CERTIFIED CHECK" Section 24.17.090

"CHECK" Section 24.14.040(h)

"GOOD FAITH" Section 24.14.030(a)(4)

"HOLDERIN DUE COURSE" Section 24.16.020

"INSTRUMENT" Section 24.16.040

"NOTICE OF DISHONOR" Section 24.18.030

"ORDER" Section 24.14.030(a)(6)

"ORDINARY CARE" Section 24.14.030(a)(7)

"PERSON ENTITLED TO ENFORCE" Section 24.16.010

"PRESENTMENT" Section 24.18.010

"PROMISE" Section 24.14.030(a)(9)

"PROVE" Section 24.14.030(a)(10)

"TELLER'S CHECK" this section

"UNAUTHORIZED SIGNATURE" Section 24.17.030

(d) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

24.20.050 "Bank"; "Depositary Bank"; "Payor Bank"; "Intermediary Bank"; "Collecting Bank"; "Presenting Bank"

In this article:

(a) "BANK" means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company;

(b) "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;

(d) "INTERMEDIARY BANK" means a bank to which an item is transferred in course of collection except the depositary or payor bank;

(e) "COLLECTING BANK" means a bank handling an item for collection except the payor bank;

(f) "PRESENTING BANK" means a bank presenting an item except a payor bank.

24.20.060 Payable Through or Payable at Bank Collecting Bank

(a) If an item states that it is "payable through" a bank identified in the item, (1) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and the item may be presented for payment only by or through the bank.

(b) If an item states that it is "payable at" a bank identified in the item, the item is equivalent to a draft drawn on the bank.

24.20.070 Separate Office of a Bank

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 notices or orders must be given under this article and under Article 3.

24.20.080 Time of Receipt of Items

(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 two (2:00) p.m. or later as a cutoff hour for the handling of money and items and the making of entries on its books.

(b) An item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.

24.20.090 Delays

(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 endorsers or liability to its transferor or a prior party.

(b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this article or by instructions is excused if (1) 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 the bank exercises such diligence as the circumstances require.

24.20.100 Electronic Presentment

(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.

(b) Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.

(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 indicate.

24.20.110 Statute of Limitations

An action to enforce an obligation, duty, or right arising under this article must be commenced within three years after the cause of action accrues.

Chapter 24.21 Collection of Items: Depositary and Collecting Banks

24.21.010 Status of Collecting Bank as Agent and Provisional Status of Credits; Applicability of Article; Item Endorsed "Pay Any Bank"

(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 endorsement or lack of endorsement 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 the parties clearly establishes that a particular bank has purchased the item and is the owner of it.

(b) After an item has been endorsed with the words "pay any bank" or the like, only a bank may acquire the rights of a holder until the item has been:

(1) Returned to the customer initiating collection; or

(2) Specially endorsed by a bank to a person who is not a bank.

24.21.020 Responsibility for Collection or Return When Action Timely

(a) A collecting bank must exercise ordinary care in:

(1) Presenting an item or sending it for presentment;

(2) 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;

(3) Settling for an item when the bank receives final settlement; and

(4) Notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof

(b) A collecting bank exercises ordinary care under Subsection (a) 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.

(c) Subject to Subsection (a)(1), 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.

24.21.030 Effect of Instructions

Subject to Article 3 concerning conversion of instruments (Section 24.17.200) and restrictive endorsements (Section 24.15.060), 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.

24.21.040 Methods of Sending and Presenting; Sending Directly to Payor Bank

(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.

(b) A collecting bank may send:

(1) An item directly to the payor bank;

(2) An item to a nonbank payor if authorized by its transferor; and

(3) An item other than documentary drafts to a nonbank payor, if authorized by Federal Reserve regulation or operating circular, clearinghouse rule, or the like.

(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.

24.21.050 Depositary Bank Holder of Unendorsed Item

If a customer delivers an item to a depositary bank for collection:

(a) 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 endorses the item, and, if the bank satisfies the other requirements of Section 24.16.020, it is a holder in due course; and

(b) 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.

24.21.060 Transfer Between Banks

Any agreed method that identifies the transferor bank is sufficient for the item's further transfer to another bank

24.21.070 Transfer Warranties

(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:

(1) The warrantor is a person entitled to enforce the item;

(2) All signatures on the item are authentic and authorized;

(3) The item has not been altered;

(4) The item is not subject to a defense or claim in recoupment (Section 24.16.050(a) of any party that can be asserted against the warrantor; and

(5) 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.

(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

(1) according to the terms of the item at the time it was transferred, or

(2) if the transfer was of an incomplete item, according to its terms when completed as stated in Section 24.14.150 and Section 24.17.070. 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 endorsement stating that it is made "without recourse" or otherwise disclaiming liability.

(c) A person to whom the warranties under Subsection (a)(1) 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.

(d) The warranties stated in Subsection (a)(1) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty 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.

(e) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

24.21.080 Presentment Warranties

(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft,

(1) the person obtaining payment or acceptance, at the time of presentment, and

(2) 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:

(B) The draft has not been altered; and

(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

(1) breach of warranty is a defense to the obligation of the acceptor, and

(2) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover form a warrantor for breach of warranty the amounts stated in this subsection.

(c) If a drawee asserts a claim for breach of warranty under Subsection (a)(1)(A) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under Section 24.17.040 or Section 24.17.050 or the drawer is precluded under Section 24.17.060 or Section 24.17.060 from asserting against the drawee the unauthorized endorsement or alteration.

(d) If (1) a dishonored draft is presented for payment to the drawer or an endorser or 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.

(e) The warranties stated in Subsections(a)(1) and (4) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty 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.

(f) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

24.21.090 Encoding and Retention Warranties

(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.

(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.

(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.

24.21.100 Security Interest of Collecting Bank in Items, Accompanying Documents and Proceeds

(a) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:

(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;

(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

(3) If it makes an advance on or against the item.

(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.

(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 accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to Article 9, but:

(1) No security agreement is necessary to make the security interest enforceable (Section 24.49.030(a)(1);

(2) No filing is required to perfect the security interest; and

(3) The security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.

24.21.110 When Bank Gives Value for Purposes of Holder in Due Course

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 24.16.020 on what constitutes a holder in due course.

24.21.120 Presentment by Notice of Item Not Payable By, Through, or at a Bank Liability of Drawer or Endorser

(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 written 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 24.18.010 by the close of the bank's next banking day after it knows of the requirement.

(b) If presentment is made by notice and payment, acceptance, or request for compliance with a requirement under Section 24.18.010 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 endorser by sending it notice of the facts.

24.21.130 Medium and Time of Settlement by Bank

(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:

(b) 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

(1) 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;

(2) With respect to tender of settlement by credit in an account in a federal reserve bank, when the credit is made;

(3) 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

(4) With respect to tender of settlement by a funds transfer, when payment is made pursuant to Section 24.28.060(a) to the person receiving settlement.

(d) If the tender of settlement is not by a medium authorized by Subsection (a) or the time of settlement is not fixed by Subsection (a), no settlement occurs until the tender of settlement is accepted by the person receiving settlement.

(e) If settlement for an item is made by cashier's check or teller's check and the person receiving settlement, before its midnight deadline:

(f) Presents or forwards the check for collection, settlement is formal when the check is finally paid; or

(g) Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.

(h) 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 made by the bank receiving settlement if there are funds available in the account for the amount of the item.

24.21.140 Right of Charge-Back or Refund; Liability of Collecting Bank; Return of Item

(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.

(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.

(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 24.22.010).

(d) The right to charge back is not affected by:

(1) Previous use of a credit given for the item; or

(2) Failure by any bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.

(e) A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.

(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.

24.21.150 Final Payment of Item by Payor Bank When Provisional Debits and Credits Become Final When Certain Credits Become Available for Withdrawal

(a) An item is finally paid by a payor bank when the bank has first done any of the following:

(1) Paid the item in cash;

(2) Settled for the item without having a right to revoke the settlement under statute, clearing-house rule," or agreement; or

(3) Made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearinghouse rule, or agreement.

(b) If provisional settlement for an item does not become final, the item is not finally paid.

(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.

(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.

(e) Subject to

(1) applicable law stating a time for availability of funds and

(2) 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:

(A) 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;

(B) 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.

(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.

24.21.160 Insolvency and Preference

(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.

(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.

(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.

(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.

Chapter 24.22 Collection of Items: Payor Banks

24.22.010 Deferred Posting Recovery of Payment by Return of Items Time of Dishonor Return of Items by Payor Bank

(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:

(1) Returns the item; or

(2) Sends written notice of dishonor or nonpayment if the item is unavailable for return.

(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).

(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.

(d) An item is returned:

(1) 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

(2) In all other cases, when it is sent or delivered to the bank's customer or transferor or pursuant to instructions.

24.22.020 Payor Bank's Responsibility for Late Return of Item

(a) If an item is presented to and received by a payor bank, the bank is accountable for the amount of:

(1) 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 payor return the item or send notice of dishonor until after its midnight deadline; or

(2) 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.

(b) The liability of a payor bank to pay an item pursuant to Subsection (a) is subject to defenses based on breach of a presentment warranty (Section 24.21.080) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.

24.22.030 When Items Subject to Notice, Stop-Payment Order, Legal Process, or Setoff Order in Which Items May Be Charged or Certified

(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:

(1) The bank accepts or certifies the item;

(2) The bank pays the item in cash;

(3) The bank settles for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement;

(4) The bank becomes accountable for the amount of the item under Section 24.22.020 dealing with the payor bank's responsibility for late return of items; or

(5) With respect to checks, a cutoff hour no earlier than one 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.

(b) Subject to Subsection (a), items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.

Chapter 24.23 Relationship Between Payor Bank and Its Customer

24.23.010 When Bank May Charge Customer's Account

(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.

(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.

(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 Section 24.23.030(b) 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 24.22.030. 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 of subsequent items under Section 24.23.020.

(d) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:

(1) The original terms of the altered item; or

(2) 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.

24.23.020 Bank's Liability to Customer for Wrongful Dishonor; Time of Determining Insufficiency of Account

(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.

(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.

(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 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 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.

24.23.030 Customer's Right to Stop Payment Burden of Proof of Loss

(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 24.22.030. 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.

(b) A stop-payment order is effective for six months, but it lapses after fourteen (14) calendar days if the original order was oral and was not confirmed in writing within that period. Stop-payment order may be renewed for additional six-month periods by a writing given to the bank within a period during which the stop-payment order is effective.

(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 24.23.020.

24.23.040 Bank Not Obligated to Pay Check More than Six Months Old

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 months after its date, but it may charge its customer's account for a payment made thereafter in good faith.

24.23.050 Death or Incompetence of Customer

(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.

(b) Even with knowledge, a bank may for ten days after the date of death payor certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.

24.23.060 Customer's Duty to Discover and Report Unauthorized Signature or Alteration

(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.

(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 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.

(c) If a bank sends or makes available a statement of account or items pursuant to Subsection (a), 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.

(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), the customer is precluded from asserting against the bank:

(1) 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

(2) 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 days, in which to examine the item or statement of account and notify the bank.

(e) If Subsection (d) 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) 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) does not apply.

(f) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer (Subsection (a) 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 24.21.080 with respect to the unauthorized signature or alteration to which the preclusion applies.

24.23.070 Payor Bank's Right to Subrogation on Improper Payment

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:

(a) Of any holder in due course on the item against the drawer or maker;

(b) Of the payee or any other holder of the item against the drawer or maker either on the item or under the transaction out of which the item arose; and

(c) Of the drawer or maker against the payee or any other holder of the item with respect to the transaction out of which the item arose.

Chapter 24.24 Collection of Documentary Drafts

24.24.010 Handling of Documentary Drafts; Duty to Send for Presentment and to Notify Customer of Dishonor

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.

24.24.020 Presentment of "On-Arrival" Drafts

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 payor 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.

24.24.030 Responsibility of Presenting Bank for Documents and Goods; Report of Reasons for Dishonor; Referee in Case of Need

(a) Unless otherwise instructed and except as provided in Article 5, a bank presenting a documentary draft:

(1) Must deliver the document to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise, only on payment; and

(2) 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 therefore, and must require instructions.

(b) However, the presenting bank is under no obligation with respect to goods presented 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.

24.24.040 Privilege of Presenting Bank to Deal with Goods; Security Interest for Expenses

(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.

(b) For its reasonable expenses incurred by action under Subsection (a), 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.

Chapter 24.25 Funds Transfers

24.25.010 Short Title

This article may be cited as Turtle Mountain Band of Chippewa Indians Commercial Code - Funds Transfers.

24.25.020 Subject Matter

Except as otherwise provided in Section 24.25.080, this article applies to funds transfers defined in Section 24.25.040.

24.25.030 Definitions; "Payment Order."

(a) In this article:

(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:

(A) The instruction does not state a condition to payment to the beneficiary other than time of payment,

(B) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender, and

(C) 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.

(2) "BENEFICIARY" means the person to be paid by the beneficiary's bank.

(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.

(4) "RECEIVING BANK" means the bank to which the sender's instruction is addressed.

(5) "SENDER" means the person giving the instruction to the receiving bank.

(b) If an instruction complying with Subsection (a)(1) is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment.

24.25.040 Definitions; "Funds Transfer."

In this article:

(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 funds 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.

(b) "INTERMEDIARY BANK" means a receiving bank other than the originator's bank or the beneficiary's bank.

(d) "ORIGINATOR'S BANK" means

(1) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or

(2) the originator if the originator is a bank.

24.25.050 Other Definitions

(a) In this section:

(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.

(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.

(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.

(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.

(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.

(6) "GOOD FAITH" means honesty in fact and the observance of reasonable commercial standards of fair dealing.

(7) "PROVE" with respect to a fact means to meet the burden of establishing the fact (Section 24.01.100(h).

(b) Other definitions applying to this article and the sections in which they appear are:

"ACCEPTANCE" Section 24.26.090

"BENEFICIARY" Section 24.25.030(a)(2)

"BENEFICIARY'S BANK" Section 24.25.030(a)(3)

"EXECUTED" Section 24.27.010(a)

"EXECUTION DATE" Section 24.27.010(b)

"FUNDS TRANSFER" Section 24.25.040(a)

"FUNDS TRANSFER SYSTEM RULE" Section 24.29.010(b)

"INTERMEDIARY BANK" Section 24.25.040(b)

"ORIGINATOR" Section 24.25.040(c)

"ORIGINATOR'S BANK" Section 24.25.040(d)

"PAYMENT BY BENEFICIARY'S BANK TO BENEFICIARY" Section 24.28.050

"PAYMENT BY ORIGINATOR TO BENEFICIARY" Section 24.28.060

"PAYMENT BY SENDER TO RECEIVING BANK" Section 24.28.030

"PAYMENT DATE" Section 24.28.010

"PAYMENT ORDER" Section 24.25.030

"RECEIVING BANK" Section 24.25.030

"SECURITY PROCEDURE" Section 24.26.010

"SENDER" Section 24.25.030

"CLEARING HOUSE" Section 24.20.040(a)(4)

"ITEM" Section 24.20.040(a)(9)

"SUSPENDS PAYMENTS" Section 24.20.040(a)(12)

(d) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

24.25.060 Time Payment Order Is Received

(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 as defined in 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.

(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.

24.25.070 Federal Reserve Regulations and Operating Circulars

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.

24.25.080 Exclusion of Consumer Transactions Governed by Federal Law

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, P.L. 95-630, 92 Stat. 3728, 15 U.S.C. 2493 et seq.) as amended from time to time.

Chapter 24.26 Issue and Acceptance of Payment Order.

24.26.010 Security Procedure

"SECURITY PROCEDURE" means a procedure established by agreement of a customer and a receiving bank for the purpose of

(a) verifying that a payment order or communication amending or canceling a payment order is that of the customer, or

(b) 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. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.

24.26.020 Authorized and Verified Payment Orders

(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.

(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

(1) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and

(2) 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.

(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

(1) 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

(2) 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.

(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).

(e) This section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.

(f) Except as provided in this section and in Section 24.26.030(a)(1), rights and obligations arising under this section or Section 24.4A.203 may not be varied by agreement.

24.26.030 Unenforceability of Certain Verified Payment Orders

(a) If an accepted payment order is not, under Section 24.26.020(a), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to Section 24.26.020(b), the following rules apply:

(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.

(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

(A) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedures, or

(B) 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.

(b) This section applies to amendments of payment orders to the same extent it applies to payment orders.

24.26.040 Refund of Payment and Duty of Customer to Report with Respect to Unauthorized Payment Order

(a) If a receiving bank accepts a payment order issued in the name of its customer as sender which is

(1) not authorized and not effective as the order of the customer under Section 24.26.020, or

(2) not enforceable, in whole or in part, against the customer under Section 24.26.030, 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 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.

(b) Reasonable time under Subsection (a) may be fixed by agreement as stated in Section 24.01.130(a), but the obligation of a receiving bank to refund payment as stated in Subsection (a) may not otherwise be varied by agreement.

24.26.050 Erroneous Payment Orders

(a) If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order

(1) erroneously instructed payment to a beneficiary not intended by the sender,

(2) erroneously instructed payment in an amount greater than the amount intended by the sender, or

(3) was an erroneously transmitted duplicate of a payment order previously sent by the sender, the following rules apply:

(A) If the sender proves that the sender or a person acting on behalf of the sender pursuant to Section 24.26.060 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 (B) and (C).

(B) If the funds transfer is completed on the basis of an erroneous payment order described in clause (1) or (2) Subsection (a), 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.

(C) If the funds transfer is completed on the basis of a payment order described in clause (2) of Subsection (a), 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.

(b) If (1) the sender of an erroneous payment order described in Subsection (a)(1) is not obliged to pay all or part of the order, and (2) 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.

24.26.060 Transmission of Payment Order Through Funds-Transfer or Other Communication System

(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.

(b) This section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders.

24.26.070 Misdescription of Beneficiary

(a) Subject to Subsection (b), 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,

(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:

(1) Except as otherwise provided in Subsection (c), 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.

(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.

(c) If (i) a payment order described in Subsection (b) 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 Subsection (b)(1), the following rules apply:

(1) If the originator is a bank, the originator is obliged to pay its order.

(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.

(d) In a case governed by Subsection (b)(1), 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:

(1) If the originator is obliged to pay its payment order as stated in Subsection (c), the originator has the right to recover.

(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.

24.26.080 Misdescription of Intermediary Bank or Beneficiary's Bank

(a) This subsection applies to a payment order identifying an intermediary bank or the beneficiary's bank only by an identifying number.

(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.

(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.

(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.

(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.

(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 Subsection (b)(1), 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.

(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.

(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 Section 24.27.020(a)(1).

24.26.090 Acceptance of Payment Order

(a) Subject to Subsection (d), a receiving bank other than the beneficiary's bank accepts a payment order when it executes the order.

(b) Subject to Subsections (c) and (d), a beneficiary's bank accepts a payment order at the earliest of the following times:

(1) when the bank (i) pays the beneficiary as stated in subdivision Section 24.28.050(a) or (b), 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; or

(2) when the bank receives payment of the entire amount of the sender's order pursuant to Section 24.28.030(a)(1) or Section 24.28.030(a)(2); or

(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 (1) hour after that time, or (ii) one (1) 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.

(c) Acceptance of a payment order cannot occur before the order is received by the receiving bank. Acceptance does not occur under Subsection (b)(2) or (b)(3) 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.

(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 Section 24.26.110(b), the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.

24.26.100 Rejection of Payment Order

(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,

(1) any means complying with the agreement is reasonable and

(2) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.

(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 Section 24.26.110(d) 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.

(c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.

(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.

24.26.110 Cancellation and Amendment of Payment Order

(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.

(b) Subject to Subsection (a), 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.

(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.

(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.

(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 that is a duplicate of a payment order previously issued by the sender, (b) that orders payment to a beneficiary not entitled to receive payment from the originator, or (3) that orders payments 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.

(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.

(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.

(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.

(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.

(h) A funds-transfer system rule is not effective to the extent it conflicts with Subsection (c)(2).

24.26.120 Liability and Duty of Receiving Bank Regarding Unaccepted Payment Order

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 24.26.090, 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.

Chapter 24.27 Execution of Sender's Payment Order by Receiving Bank

24.27.010 Execution and Execution Date

(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.

(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

(c) 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.

24.27.020 Obligation of Receiving Bank in Execution of Payment Order

(a) Except as provided in subsections (b) through (d), if the receiving bank accepts a payment order pursuant to Section 24.26.090(a), the bank has the following obligations in executing the order:

(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 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.

(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.

(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.

(c) Unless Subsection (a)(2) 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.

(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.

24.27.030 Erroneous Execution of Payment Order

(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 Section 24.28.020(c) 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.

(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 Section 24.28.020(c) 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.

(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.

24.27.040 Duty of Sender to Report Erroneously Executed Payment Order

If the sender of a payment order that is erroneously executed as stated in Section 24.27.030 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 Section 24.28.020(d) 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.

24.27.050 Liability for Late or Improper Execution or Failure to Execute Payment Order

(a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of Section 24.27.020 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 improper execution. Except as provided in subsection (c), additional damages are not recoverable.

(b) If execution of a payment order by a receiving bank in breach of Section 24.27.020 results in (1) noncompletion of the funds transfer, (2) failure to use an intermediary bank designated by the originator, or issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by subsection (1), resulting from the improper execution. Except as provided in subsection (c), additional damages are not recoverable.

(c) In addition to the amounts payable under subsection (a) and (b), damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank.

(d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, but are not otherwise recoverable.

(e) Reasonable attorney's fees are recoverable if demand for compensation under subsection (a) or (b) is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under subsection (d) and the agreement does not provide for damages, reasonable attorney's fees are recoverable if demand for compensation under subsection (d) is made and refused before an action is brought on the claim.

(f) Except as stated in this section, the liability of a receiving bank under subsections (a) and (b) may not be varied by agreement.

Chapter 24.28 Payment

24.28.010 Payment Date

"Payment date" of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary's bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary's bank and, unless otherwise determined, is the day the order is received by the beneficiary's bank.

24.28.020 Obligation of Sender to Pay Receiving Bank

(a) This section is subject to Section 24.26.050 and Section 24.26.070.

(b) With respect to a payment order issued to the beneficiary's bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.

(c) This subsection is subject to subsection (e) and to Section 24.27.030. With respect to a payment order issued to a receiving bank other than the beneficiary's bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender's order. Payment by the sender is not due until the execution date of the sender's order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary's bank of a payment order instructing payment to the beneficiary of that sender's payment order.

(d) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in Section 24.26.040 and Section 24.27.040, interest is payable on the refundable amount from the date of payment.

(e) If a funds transfer is not completed as stated in subsection (c) and an intermediary bank is obliged to refund payment as stated in subsection (d) but is unable to do so because not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in Section 24.27.020(a)(1), to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in subsection (d).

(f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subsection (c) or to receive refund under subsection (d) may not be varied by agreement.

24.28.030 Payment by Sender to Receiving Bank

(a) Payment of the sender's obligation under Section 24.28.020 to pay the receiving bank occurs as follows:

(1) If the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a federal reserve bank or through a funds-transfer system.

(2) If the sender is a bank and the sender (i) credited an account of the receiving bank with the sender, or (ii) caused an account of the receiving bank in another bank to be credited, payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact.

(3) If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account.

(b) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender's obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subsection has been exercised.

(c) If two banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under Section 24.28.020 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff, each bank has made payment to the other.

(d) In a case not covered by subsection (a), the time when payment of the sender's obligation under Section 24.28.020(b) or Section 24.28.020(c) occurs is governed by applicable principles of law that determine when an obligation is satisfied.

24.28.040 Obligation of Beneficiary's Bank to Pay and Give Notice to Beneficiary

(a) Subject to Section 24.26.110(d), Section 24.28.050(d) and Section 24.28.050(e), if a beneficiary's bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.

(b) If a payment order accepted by the beneficiary's bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight (12:00 a.m.) of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first class mail, or any other means reasonable in the circumstances. If the bank fails to give the required notice, the bank is obliged to pay interest to beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. No other damages are recoverable. Reasonable attorney fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.

(c) The right of a beneficiary to receive payment and damages as stated in subsection (a) may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subsection (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.

24.28.050 Payment by Beneficiary's Bank to Beneficiary

(a) If the beneficiary's bank credits an account of the beneficiary of a payment of order, payment of the bank's obligation under Section 24.28.040(a) occurs when and to the extent (i) the beneficiary is notified of the right to withdraw the credit, (ii) the bank lawfully applies the credit to a debt of the beneficiary by the bank.

(b) If the beneficiary's bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank's obligation under Section 24.28.040(a) occurs is governed by principles of law that determine when an obligation is satisfied.

(c) Except as stated in subsections (c) and (d), and if the beneficiary's bank pays the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.

(d) A funds-transfer system rule may provide that payments made to the beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary's bank of the payment order it accepted. A beneficiary's bank that makes a payment that is provisional under the rule is entitle to refund from the beneficiary if (i) the rule requires that both beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated, (ii) the beneficiary, the beneficiary's bank and the originator's bank agreed to be bound by the rule, and (iii) the beneficiary's bank did not receive payment of the payment order that it accepted. If the beneficiary is obliged to refund payment to the beneficiary's bank, acceptance of the payment order by the beneficiary's bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under Section 24.28.060.

(e) This subsection applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that (i) nets obligations multilaterally among participants, and (ii) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one or more participants that do not meet their settlement obligations. If the beneficary's bank in the funds transfer accepts a payment order and the stems fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer, (i) the acceptance by the beneficiary's bank is nullified and no person has any right or obligation based on the acceptance, (ii) the beneficiary's bank is entitled to recover payment from the beneficiary, (iii) no payment by the originator to the beneficiary occurs under Section 24.26.060, and (iv) subject to Section 24.28.020(e), each sender in the funds transfer is excused from its obligation to pay its payment order under Section 24.28.020(c) because the funds transfer has not been completed.

24.28.060 Payment by Originator to Beneficiary – Discharge of Underlying Obligation

(a) Subject to Section 24.26.110(e), Section 24.28.050(d), and Section 24.28.050(e), the originator of a funds transfer pays the beneficiary of the originator's payment order

(1) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary's bank in the funds transfer and

(2) in the amount equal to the amount of the order accepted by the beneficiary's bank, but not more than the amount of the originator's order.

(b) If payment under subsection (a) is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless

(1) the payment under subsection (a) as made by means prohibited by the contract of the beneficiary with respect to the obligation,

(2) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary's bank, notified the originator of the beneficiary's refusal of the payment,

(3) funds either respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary , and

(4) the beneficiary would suffer a loss that could reasonable have been avoided if payment had been made by a means complying with the contract, if payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary's bank under Section 24.28.040(a).

(c) For the purpose of determining whether discharge of an obligation occurs under subsection (b), if the beneficiary's bank accepts a payment order in an amount equal to the amount of the originator's payment order less charges of one or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator's order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges.

(d) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary.

Chapter 24.29 Miscellaneous Provisions

24.29.010 Variation by Agreement and Effect of Funds-Transfer System Rule

(a) Except as otherwise provided in this article, the rights and obligations of a party to a funds transfer may be varied by agreement of the affected party.

(b) "Funds-transfer system rule" means a rule of an association of banks

(1) governing transmission of payment orders by means of a funds-transfer system of the association or rights and obligations with respect to those orders, or

(2) to the extent the rule governs rights and obligations between banks that are parties to a funds-transfer in which a federal reserve bank, acting as an intermediary bank, sends a payment order to the beneficiary's bank. Except as otherwise provided in this article, a funds-transfer system rule governing rights and obligations of parties other than participating banks using the system to the extent stated in Section 24.28.040(c), Section 24.28.050(d) and Section 24.29.070(c).

24.29.020 Creditor Process Served on Receiving Bank – Setoff by Beneficiary's Bank

(a) As used in this section, "creditor process" means levy, attachment, garnishment, notice of lien, sequestration or similar process issued by or on behalf of a creditor or other claimant with respect to an account.

(b) This subsection applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.

(c) If a beneficiary's bank has received a payment order for payment to the beneficiary's account in the bank the following rules apply:

(1) The bank may credit the beneficiary's account. The amount credited may be set off against an obligation owed by the beneficiary to the bank or may be applied to satisfy creditor process served on the bank with respect to the account.

(2) The bank may credit the beneficiary's account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal.

(3) If creditor process with respect to the beneficiary's account has been served and the bank has had a reasonable opportunity to act on it, the bank may not reject the payment order except for a reason unrelated to the service of process.

(d) Creditor process with respect to a payment by the originator to the beneficiary's bank with respect to the debt owed by that bank to the beneficiary. Any other bank served with the creditor process is not obliged to act with respect to the process.

24.29.030 Injunction or Restraining Order with Respect to Funds Transfer

For proper cause and in compliance with applicable law, a court may restrain (i) a person from issuing a payment order to initiate a funds transfer, (ii) an originator's bank from executing the payment order of the originator, or (iii) the beneficiary's bank from releasing funds to the beneficiary or the beneficiary from withdrawing the funds. A court may not otherwise restrain a person from issuing a payment order, paying or recovering payment of a payment order, or otherwise acting with the respect to a funds transfer.

24.29.040 Order in Which Items and Payment Orders May Be Charged to Account; Order of Withdrawals from Account

(a) If a receiving bank has received more than one payment order of the sender or one or more payment orders and other items that are payable from the sender's account, the bank may charge the sender's account with respect to the various orders and items in any sequence.

(b) In determining whether a credit to an account has been withdrawn by the holder of the account or applied to a debt of the holder of the account, credits first made to the account are first withdrawn or applied.

24.29.050 Preclusion of Objection to Debit of Customer's Account

If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer's objection to the payment within one (1) year after the notification was received by the customer.

24.29.060 Rate of Interest

(a) If, under this article, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined

(1) by agreement of the sender and receiving bank, or

(2) by a funds-transfer system rule if the payment order is transmitted through a funds-transfer system.

(b) If the amount of interest is not determined by an agreement or rule as stated in subsection (a), the amount is calculated by multiplying the applicable federal funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable federal funds rate is the average of the federal funds rates published by the federal reserve bank of New York for each of the days for which interest is payable divided by three hundred sixty (360). The federal funds rate for any day on which a published rate is not available is the same as the published rate for the next preceding day for which there is a published rate. If a receiving bank that accepted a payment order is required to refund payment to the sender of the order because the funds transfer was not completed, but the failure to complete was not due to any fault by the bank, the interest payable is reduced by a percentage equal to the reserve requirement on deposits of the receiving bank.

24.29.070 Choice of Law

(a) The following rules apply unless the affected parties otherwise agree or subsection (c) applies:

(1) The rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located.

(2) The rights and obligations between the beneficiary's bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary's bank is located.

(3) The issue of when payment is made pursuant to a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary's bank is located.

(b) If the parties described in each paragraph of subsection (a) have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction.

(1) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system, or

(2) the rights and obligations of some or all parties to a funds transfer any part of which is carried out by means of the system.

(d) A choice of law made pursuant to clause

(1) is binding on participating banks. A choice of law made pursuant to clause

(2) is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system. The law of a jurisdiction selected pursuant to this subsection may govern, whether or not that law bears a reasonable relation to the matter in issue.

(e) In the event of inconsistency between an agreement under subsection (b) and a choice-of-law rule under subsection (c), the agreement under subsection (b) prevails.

(f) If a funds transfer is made by use of more than one funds-transfer system and there is inconsistency between choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction that has the most significant relationship to the matter in issue.

Chapter 24.30 Letters of Credit

24.30.010 Short Title

This chapter may be cited as the Uniform Commercial Code - Letters of Credit.

24.30.020 Definitions

(a) In this chapter:

(1) "Adviser" means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed, or amended.

(2) "Applicant" means a person at whose request or for whose account a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer.

(3) "Beneficiary" means a person who under the terms of a letter of credit is entitled to have its complying presentation honored. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit.

(4) "Confirmer" means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.

(5) "Dishonor" of a letter of credit means failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit.

(6) "Document" means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion:

(A) Which is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in subsection (a) of Section 24.30.080; and

(B) Which is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.

(7) "Good faith" means honesty in fact in the conduct or transaction concerned. The definition of "good faith" in Section 24.30.090 does not apply to this chapter.

(8) "Honor" of a letter of credit means performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, "honor" occurs:

(A) Upon payment;

(B) If the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or

(C) If the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.

(9) "Issuer" means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes.

(10) "Letter of credit" means a definite undertaking that satisfies the requirements of Section 24.30.040 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.

(11) "Nominated person" means a person whom the issuer:

(A) Designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit; and

(B) Undertakes by agreement or custom and practice to reimburse.

(12) "Presentation" means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.

(13) "Presenter" means a person making a presentation as or on behalf of a beneficiary or nominated person.

(14) "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.

(15) "Successor of a beneficiary" means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, and receiver.

(b) Definitions in other chapters applying to this chapter and the sections in which they appear are:

(1) "Accept" or "acceptance". Section 24.17.090.

(2) "Value". Section 24.16.030 and Section 24.15.030.

(c) Chapter 24.01 contains certain additional general definitions and principles of construction and interpretation applicable throughout this chapter.

24.30.030 Scope

(a) This chapter applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.

(b) The statement of a rule in this chapter does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this chapter.

(c) With the exception of this subsection, subsections (a) and (d) of this section, subdivisions (9) and (10) of subsection (a) of Section 24.30.020 subsection (d) of Section 24.30.060, and subsection (d) of Section 24.30.140, and except to the extent prohibited under Section 24.01.160 and subsection (d) of Section 24.30.170, the effect of this chapter may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this chapter.

(d) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.

24.30.040 Formal Requirements

A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated:

(a) By a signature; or

(b) In accordance with the agreement of the parties or the standard practice referred to in subsection (e) of Section 24.30.080.

24.30.050 Consideration

Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.

24.30.060 Issuance - Amendment - Cancellation - Duration

(a) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides.

(b) After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer, and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.

(c) If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one year after its stated date of issuance or, if none is stated, after the date on which it is issued.

(d) A letter of credit that states that it is perpetual expires five years after its stated date of issuance, or if none is stated, after the date on which it is issued.

24.30.070 Confirmer - Nominated Person - Adviser

(a) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.

(b) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.

(c) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amendment, or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.

(d) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under subsection (c). The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.

24.30.080 Issuer's Rights and Obligations

(a) Except as otherwise provided in Section 24.30.090, an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection (e), appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in Section 24.30.130 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.

(b) An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:

(1) To honor;

(2) If the letter of credit provides for honor to be completed more than seven business days after presentation, to accept a draft or incur a deferred obligation; or

(3) To give notice to the presenter of discrepancies in the presentation.

(c) Except as otherwise provided in subsection (d), an issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.

(d) Failure to give the notice specified in subsection (b) or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in subsection (a) of Section 24.30.090 or expiration of the letter of credit before presentation.

(e) An issuer shall observe the standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer's observance of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present evidence of the standard practice.

(f) An issuer is not responsible for:

(1) The performance or nonperformance of the underlying contract, arrangement, or transaction;

(2) An act or omission of others; or

(3) Observance or knowledge of the usage of a particular trade other than the standard practice referred to in subsection 5.

(g) If an undertaking constituting a letter of credit under subdivision (10) of subsection (a) of Section 24.30.020 contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.

(h) An issuer that has dishonored a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.

(i) An issuer that has honored a presentation as permitted or required by this chapter:

(1) Is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds;

(2) Takes the documents free of claims of the beneficiary or presenter;

(3) Is precluded from asserting a right of recourse on a draft under Section 24.17.140 and Section 24.17.150;

(4) Except as otherwise provided in Section 24.30.100 and Section 24.30.170, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentation; and

(5) Is discharged to the extent of its performance under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.

24.30.090 Fraud - Forgery

(a) If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:

(1) The issuer shall honor the presentation, if honor is demanded by:

(A) A nominated person who has given value in good faith and without notice of forgery or material fraud;

(B) A confirmer who has honored its confirmation in good faith;

(C) A holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person; or

(D) An assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and

(2) The issuer, acting in good faith, may honor or dishonor the presentation in any other case.

(b) If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction, temporarily or permanently, may enjoin the issuer from honoring a presentation or may grant similar relief against the issuer or other persons only if the court finds that:

(1) The relief is not prohibited under law applicable to an accepted draft or deferred obligation incurred by the issuer;

(2) A beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;

(3) All of the conditions to entitle a person to the relief under the law of the Tribe have been met; and

(4) On the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for protection under subdivision (1) of subsection (a).

24.30.100 Warranties

(a) If its presentation is honored, the beneficiary warrants:

(1) To the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in subsection (a) of Section 24.30.090; and

(2) To the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.

(b) The warranties in subsection 1 are in addition to warranties arising under Chapter 24.14 – Chapter 24.19, Chapter 24.20 – Chapter 24.24, Chapter 24.32 – Chapter 24.37, and Chapter 24.38 – Chapter 24.48 because of the presentation or transfer of documents covered by any of those chapters.

24.30.110 Remedies

(a) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer's obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant's election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document.

(b) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.

(c) If an adviser or nominated person other than a confirmer breaches an obligation under this chapter or an issuer breaches an obligation not covered in subsection (a) or (b), a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (a) and (b).

(d) An issuer, nominated person, or adviser who is found liable under subsection (a), (b), or (c) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date.

(e) Reasonable attorney's fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this chapter.

(f) Damages that would otherwise be payable by a party for breach of an obligation under this chapter may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.

24.30.120 Transfer of Letter of Credit

(a) Except as otherwise provided in Section 24.30.130, unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.

(b) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if:

(1) The transfer would violate applicable law; or

(2) The transferor or transferee has failed to comply with any requirement stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice referred to in subsection (e) of Section 24.30.080 or is otherwise reasonable under the circumstances.

24.30.130 Transfer by Operation of Law

(a) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.

(b) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in subsection (e), an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice referred to in subsection (e) of Section 24.30.080 or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer.

(c) An issuer is not obliged to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized.

(d) Honor of a purported successor's apparently complying presentation under subsection (a) or (b) has the consequences specified in subsection (i) of Section 24.30.080 even if the purported successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary are forged documents for the purposes of Section 24.30.090.

(e) An issuer whose rights of reimbursement are not covered by subsection (d) or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (b).

(f) A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section.

24.30.140 Assignment of Proceeds

(a) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit. The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.

(b) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit.

(c) An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.

(d) An issuer or nominated person has no obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor.

(e) Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.

(f) Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by Chapters 24.42 through 24.48 or other law. Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by Chapters 24.42 through 24.48 or other law.

24.30.150 Statute of Limitations

An action to enforce a right or obligation arising under this chapter must be commenced within one year after the expiration date of the relevant letter of credit or one year after the claim for relief accrues, whichever occurs later. A claim for relief accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.

24.30.160 Choice of Law and Forum

(a) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in Section 24.30.040 or by a provision in the person's letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.

(b) Unless subsection (a) applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person's undertaking. If more than one address is indicated, the person is considered to be located at the address from which the person's undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection.

(c) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the uniform customs and practice for documentary credits, to which the letter of credit, confirmation, or other undertaking is expressly made subject. If:

(1) This chapter would govern the liability of an issuer, nominated person, or adviser under subsection (a) or (b);

(2) The relevant undertaking incorporates rules of custom or practice; and

(3) There is conflict between this chapter and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in subsection (c) of Section 24.30.030.

(d) If there is conflict between this chapter and Chapter 24.14 – Chapter 24.19, Chapter 24.20 – Chapter 24.24, Chapter 24.25 – Chapter 24.29, or Chapter 24.42 - Chapter 24.48, this chapter governs.

(e) The forum for settling disputes arising out of an undertaking within this chapter may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a).

24.30.170 Subrogation of Issuer, Applicant, and Nominated Person

(a) An issuer that honors a beneficiary's presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary and of the applicant to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.

(b) An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter, or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection (a).

(c) A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:

(1) The issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant;

(2) The beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and

(3) The applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.

(d) Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections (a) and (b) do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (c) do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.

24.30.180 Security Interest of Issuer or Nominated Person

(a) An issuer or nominated person has a security interest in a document presented under a letter of credit to the extent that the issuer or nominated person honors or gives value for the presentation.

(b) So long as and to the extent that an issuer or nominated person has not been reimbursed or has not otherwise recovered the value given with respect to a security interest in a document under subsection (a), the security interest continues and is subject to Chapters 24.42 through 24.48, but:

(1) A security agreement is not necessary to make the security interest enforceable under subdivision (3) of subsection (b) of Section 24.43.030;

(2) If the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; and

(3) If the document is presented in a written or other tangible medium and is not a certificated security, chattel paper, a document of title, an instrument, or a letter of credit, the security interest is perfected and has priority over a conflicting security interest in the document so long as the debtor does not have possession of the document.

Chapter 24.31 [Reserved]

Chapter 24.32 Warehouse Receipts, Bills of Lading and Other Documents of Title

24.32.010 Short Title

This chapter shall be known and may be cited as Turtle Mountain Band of Chippewa Indians Commercial Code: Documents of Title.

24.32.020 Definitions; Index of Definitions

(a) In this article, unless the context otherwise requires:

(1) "BAILEE" means the person who by a warehouse receipt, bill of lading or other document of title acknowledges possession of goods and contracts to deliver them.

(2) "CONSIGNEE" means the person named in a bill to whom or to whose order the bill promises delivery.

(3) "CONSIGNOR" means the person named in a bill as the person from whom the goods have been received for shipment.

(4) "DELIVERY ORDER" means a written order to deliver goods directed to a warehouseman, carrier or other person who in the ordinary course of business issues warehouse receipts or bills of lading.

(5) "DOCUMENT" means document of title as defined in the general definitions in Article 1 (Section 24.01.100).

(6) "GOODS" means all things which are treated as movable for the purposes of a contract of storage or transportation.

(7) "ISSUER" means a bailee who issues a document except that in relation to an unaccepted delivery order it means the person who orders the possessor of goods to deliver. Issuer includes any person for whom an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, notwithstanding that the issuer received no goods or that the goods were misdescribed or that in any other respect the agent or employee violated his or her instructions.

(8) "WAREHOUSEMAN" is a person engaged in the business of storing goods for hire.

(b) Other definitions applying to this article or to specified parts thereof, and the sections in which they appear are:

"DULY NEGOTIATE." Section 24.36.010.

"PERSON ENTITLED UNDER THE DOCUMENT." Section 24.35.030(d).

"CONTRACT FOR SALE." Section 24.02.060(a).

"OVERSEAS." Section 24.04.250(c)

"RECEIPT" OF GOODS." Section 24.02.030(a)(3).

(d) In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

24.32.030 Relation of Article to Treaty, Statute, Tariff, Classification or Regulation

To the extent that any treaty or statute of the United States, regulatory statute of the Tribe or tariff, classification or regulation filed or issued pursuant thereto is applicable, the provisions of this article are subject thereto.

24.32.040 Negotiable and Nonnegotiable Warehouse Receipt, Bill of Lading or Other Document of Title

(a) A warehouse receipt, bill of lading or other document of title is negotiable:

(1) If by its terms the goods are to be delivered to bearer or to the order of a named person; or

(2) Where recognized in overseas trade, if it runs to a named person or assigns.

(b) Any other document is nonnegotiable. A bill of lading in which it is stated that the goods are consigned to a named person is not made negotiable by a provision that the goods are to be delivered only against a written order signed by the same or another named person.

24.32.050 Construction Against Negative Implication

The omission from either Section 24.32.020 or Section 24.32.030 of this chapter of a provision corresponding to a provision made in the other part does not imply that a corresponding rule of law is not applicable.

Chapter 24.33 Warehouse Receipts; Special Provisions

24.33.010 Who May Issue a Warehouse Receipt; Storage Under Government Bond

(a) A warehouse receipt may be issued by any warehouseman.

(b) Where goods including distilled spirits and agricultural commodities are stored under a statute requiring a bond against withdrawal or a license for the issuance of receipts in the nature of warehouse receipts, a receipt issued for the goods has like effect as a warehouse receipt even though issued by a person who is the owner of the goods and is not a warehouseman.

24.33.020 Form of Warehouse Receipt; Essential Terms; Optional Terms

(a) A warehouse receipt need not be in any particular form.

(b) Unless a warehouse receipt embodies within its written or printed terms each of the following, the warehouseman is liable for damages caused by the omission to a person injured thereby:

(1) The location of the warehouse where the goods are stored;

(2) The date of issue of the receipt;

(3) The consecutive number of the receipt;

(4) A statement whether the goods received will be delivered to the bearer, to a specified person, or to a specified person or his or her order;

(5) The rate of storage and handling charges, except that where goods are stored under a field warehousing arrangement a statement of that fact is sufficient on a nonnegotiable receipt;

(6) A description of the goods or of the packages containing them;

(7) The signature of the warehouseman, which may be made by his or her authorized agent;

(8) If the receipt is issued for goods of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership; and

(9) A statement of the amount of advances made and of liabilities incurred for which the warehouseman claims a lien or security interest (Section 24.33.090). If the precise amount of such advances made or of such liabilities incurred is, at the time of the issue of the receipt, unknown to the warehouseman or to his or her agent who issues it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient.

(c) A warehouseman may insert in his or her receipt any other terms which are not contrary to the provisions of this title and do not impair his or her obligation of delivery (Section 24.35.030) or his or her duty of care (Section 24.33.040). Any contrary provisions shall be ineffective.

24.33.030 Liability for Nonreceipt or Misdescription

A party to or purchaser for value in good faith of a document of title other than a bill of lading relying in either case upon the description therein of the goods may recover from the issuer damages caused by the nonreceipt or misdescription of the goods, except to the extent that the document conspicuously indicates that the issuer does not know whether any part or all of the goods in fact were received or conform to the description, as where the description is in terms of marks or labels or kind, quantity or condition, or the receipt or description is qualified by "contents, condition and quality unknown," "said to contain" or the like, if such indication be true, or the party or purchaser otherwise has notice.

24.33.040 Duty of Care; Contractual Limitation of Warehouseman's Liability

(a) A warehouseman is liable for damages for loss of or injury to the goods caused by his or her failure to exercise such care in regard to them as a reasonably careful person would exercise under like circumstances, but unless otherwise agreed he or she is not liable for damages which could not have been avoided by the exercise of such care.

(b) Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage, and setting forth a specific liability per article or item, or value per unit of weight, beyond which the warehouseman shall not be liable; provided, however, that such liability may on written request of the bailor at the time of signing such storage agreement or within a reasonable time after receipt of the warehouse receipt be increased on part or all of the goods there under, in which event increased rates may be charged based on such increased valuation, but that no such increase shall be permitted contrary to a lawful limitation of liability contained in the warehouseman's tariff, if any. No such limitation is effective with respect to the warehouseman's liability for conversion to his or her own use.

(c) Reasonable provisions as to the time and manner of presenting claims and instituting actions based on the bailment may be included in the warehouse receipt or tariff.

24.33.050 Title Under Warehouse Receipt Defeated in Certain Cases

A buyer in the ordinary course of business of fungible goods sold and delivered by a warehouseman who is also in the business of buying and selling such goods takes free of any claim under a warehouse receipt even though it has been duly negotiated.

24.33.060 Termination of Storage at Warehouseman's Option

(a) A warehouseman may on notifying the person on whose account the goods are held and any other person known to claim an interest in the goods require payment of any charges and removal of the goods from the warehouse at the termination of the period of storage fixed by the document, or, if no period is fixed, within a stated period not less than thirty (30) days after the notification. If the goods are not removed before the date specified in the notification, the warehouseman may sell them in accordance with the provisions of the sections on enforcement of a warehouseman's lien (Section 24.33.100).

(b) If a warehouseman in good faith believes that the goods are about to deteriorate or decline in value to less than the amount of his or her lien within the time prescribed in subsection (a) for notification, advertisement and sale, the warehouseman may specify in the notification any reasonable shorter time for removal of the goods and in case the goods are not removed, may sell them at public sale held not less than one week after a single advertisement or posting.

(c) If as a result of a quality or condition of the goods of which the warehouseman had no notice at the time of deposit the goods are a hazard to other property or to the warehouse or to persons, the warehouseman may sell the goods at public or private sale without advertisement on reasonable notification to all persons known to claim an interest in the goods. If the warehouseman after a reasonable effort is unable to sell the goods he or she may dispose of them in any lawful manner and shall incur no liability by reason of such disposition.

(d) The warehouseman must deliver the goods to any person entitled to them under this article upon due demand made at any time prior to sale or other disposition under this section.

(e) The warehouseman may satisfy his or her lien from the proceeds of any sale or disposition under this section but must hold the balance for delivery on the demand of any person to whom he or she would have been bound to deliver the goods.

24.33.070 Goods Must Be Kept Separate; Fungible Goods

(a) Unless the warehouse receipt otherwise provides, a warehouseman must keep separate the goods covered by each receipt so as to permit at all times identification and delivery of those goods except that different lots of fungible goods may be commingled.

(b) Fungible goods so commingled are owned in common by the persons entitled thereto and the warehouseman is severally liable to each owner for that owner's share. Where because of over issue a mass of fungible goods is insufficient to meet all the receipts, which the warehouseman has issued against it, the persons entitled include all holders to whom over issued receipts have been duly negotiated.

24.33.080 Altered Warehouse Receipts

Where a blank in a negotiable warehouse receipt has been filled in without authority, a purchaser for value and without notice of the want of authority may treat the insertion as authorized. Any other unauthorized alteration leaves any receipt enforceable against the issuer according to its original tenor.

24.33.090 Lien of Warehouseman

(a) A warehouseman has a lien against the bailor on the goods covered by a warehouse receipt or on the proceeds thereof in his or her possession for charges for storage or transportation (including demurrage and terminal charges), insurance, labor, or charges present or future in relation to the goods, and for expenses necessary for preservation of the goods or reasonably incurred in their sale pursuant to law. If the person on whose account the goods are held is liable for like charges or expenses in relation to other goods whenever deposited and it is stated in the receipt that a lien is claimed for charges and expenses in relation to other goods, the warehouseman also has a lien against him or her for such charges and expenses whether or not the other goods have been delivered by the warehouseman. But against a person to whom a negotiable warehouse receipt is duly negotiated a warehouseman's lien is limited to charges in an amount or at a rate specified on the receipt or if no charges are so specified then to a reasonable charge for storage of the goods covered by the receipt subsequent to the date of the receipt.

(b) The warehouseman may also reserve a security interest against the bailor for a maximum amount specified on the receipt for charges other than those specified in subsection (a), such as for money advanced and interest. Such a security interest is governed by the article on secured transactions (Article 9).

(c) A warehouseman's lien for charges and expenses under subsection (a) or a security interest under subsection (b) is also effective against any person who so entrusted the bailor with possession of the goods that a pledge of them by him or her to a good faith purchaser for value would have been valid but is not effective against a person as to whom the document confers no right in the goods covered by it under Section 24.36.030.

(d) A warehouseman loses his or her lien on any goods which he or she voluntarily delivers or which he or she unjustifiably refuses to deliver.

24.33.100 Enforcement of Warehouseman's Lien

(a) Except as provided in subsection (b), a warehouseman's lien may be enforced by public or private sale of the goods in bloc or in parcels, at any time or place and on any terms which are commercially reasonable, after notifying all persons known to claim an interest in the goods. Such notification must include a statement of the amount due, the nature of the proposed sale and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the warehouseman is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the warehouseman either sells the goods in the usual manner in any recognized market therefore, or if he or she sells at the price current in such market at the time of his or her sale, or if he or she has otherwise sold in conformity with commercially reasonable practices among dealers in the type of goods sold, he or she has sold in a commercially reasonable manner. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable except in cases covered by the preceding sentence.

(b) A warehouseman's lien on goods other than goods stored by a merchant in the course of his or her business may be enforced only as follows:

(1) All persons known to claim an interest in the goods must be notified.

(2) The notification must be delivered in person or sent by registered or certified letter to the last known address of any person to be notified.

(3) The notification must include an itemized statement of the claim, a description of the goods subject to the lien, a demand for payment within a specified time not less than ten days after receipt of the notification, and a conspicuous statement that unless the claim is paid within that time the goods will be advertised for sale, and sold by auction at a specified time and place.

(4) The sale must conform to the terms of the notification.

(5) The sale must be held at the nearest suitable place to that where the goods are held or stored.

(6) After the expiration of the time given in the

(c) Before any sale pursuant to this section any person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred under this section. In that event the goods must not be sold, but must be retained by the warehouseman subject to the terms of the receipt and this article.

(d) The warehouseman may buy at any public sale pursuant to this section.

(e) A purchaser in good faith of goods sold to enforce a warehouseman's lien takes the goods free of any rights of persons against whom the lien was valid, despite noncompliance by the warehouseman with the requirements of this section.

(f) The warehouseman may satisfy his or her lien from the proceeds of any sale pursuant to this section but must hold the balance, if any, for delivery on demand to any person to whom he or she would have been bound to deliver the goods.

(g) The rights provided by this section shall be in addition to all other rights allowed by law to a creditor against his or her debtor.

(h) Where a lien is on goods stored by a merchant in the course of his or her business the lien may be enforced in accordance with either subsection (a) or (b).

(i) The warehouseman is liable for damages caused by failure to comply with the requirements for sale under this section and in case of willful violation is liable for conversion.

Chapter 24.34 Bills of Lading: Special Provisions

24.34.010 Liability for Nonreceipt or Misdescription; "Said to Contain"; "Shipper's Load and Count"; Improper Handling

(a) A consignee of a nonnegotiable bill who has given value in good faith or a holder to whom a negotiable bill has been duly negotiated relying in either case upon the description therein of the goods, or upon the date therein shown, may recover from the issuer damages caused by the misdating of the bill or the nonreceipt or misdescription of the goods, except to the extent that the document indicates that the issuer does not know whether any part or all of the goods in fact were received or conform to the description, as where the description is in terms of marks or labels or kind, quantity, or condition or the receipt or description is qualified by "contents or condition of contents of packages unknown," "said to contain," "shipper's weight," "load and count" or the like, if such indication be true.

(b) When goods are loaded by an issuer who is a common carrier, the issuer must count the packages of goods if package freight and ascertain the kind and quantity if bulk freight. In such cases "shipper's weight, load and count" or other words indicating that the description was made by the shipper are ineffective except as to freight concealed by packages.

(c) When bulk freight is loaded by a shipper who makes available to the issuer adequate facilities for weighing such freight, an issuer who is a common carrier must ascertain the kind and quantity within a reasonable time after receiving the written request of the shipper to do so. In such cases "shipper's weight" or other words of like purport are ineffective.

(d) The issuer may by inserting in the bill the words "shipper's weight, load and count" or other words of like purport indicate that the goods were loaded by the shipper; and if such statement be true the issuer shall not be liable for damages caused by the improper loading. But their omission does not imply liability for such damages.

(e) The shipper shall be deemed to have guaranteed to the issuer the accuracy at the time of shipment of the description, marks, labels, number, kind, quantity, condition and weight, as furnished by him; and the shipper shall indemnify the issuer against damage caused by inaccuracies in such particulars. The right of the issuer to such indemnity shall in no way limit his or her responsibility and liability under the contract of carriage to any person other than the shipper.

24.34.020 Through Bills of Lading and Similar Documents

(a) The issuer of a through bill of lading or other document embodying an undertaking to be performed in part by persons acting as its agents or by connecting carriers is liable to anyone entitled to recover on the document for any breach by such other persons or by a connecting carrier of its obligation under the document but to the extent that the bill covers an undertaking to be performed overseas or in territory not contiguous to the continental United States or an undertaking including matters other than transportation this liability may be varied by agreement of the parties.

(b) Where goods covered by a through bill of lading or other document embodying an undertaking to be performed in part by persons other than the issuer are received by any such person, he or she is subject with respect to his or her own performance while the goods are in his or her possession to the obligation of the issuer. His or her obligation is discharged by delivery of the goods to another such person pursuant to the document, and does not include liability for breach by any other such persons or by the issuer.

(c) The issuer of such through bill of lading or other document shall be entitled to recover from the connecting carrier or such other person in possession of the goods when the breach of the obligation under the document occurred, the amount it may be required to pay to anyone entitled to recover on the document therefore, as may be evidenced by any receipt, judgment, or transcript thereof, and the amount of any expense reasonably incurred by it in defending any action brought by anyone entitled to recover on the document therefore.

24.34.030 Diversion; Reconsignment; Change of Instructions

(a) Unless the bill of lading otherwise provides, the carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods on instructions from:

(1) The holder of a negotiable bill; or

(2) The consignor on a nonnegotiable bill notwithstanding contrary instructions from the consignee; or

(3) The consignee on a nonnegotiable bill in the absence of contrary instructions from the consignor, if the goods have arrived at the billed destination or if the consignee is in possession of the bill; or

(4) The consignee on a nonnegotiable bill if he or she is entitled as against the consignor to dispose of them.

(b) Unless such instructions are noted on a negotiable bill of lading, a person to whom the bill is duly negotiated can hold the bailee according to the original terms.

24.34.040 Bills of Lading in a Set

(a) Except where customary in overseas transportation, a bill of lading must not be issued in a set of parts. The issuer is liable for damages caused by violation of this subsection.

(b) Where a bill of lading is lawfully drawn in a set of parts, each of which is numbered and expressed to be valid only if the goods have not been delivered against any other part, the whole of the parts constitutes one bill.

(c) Where a bill of lading is lawfully issued in a set of parts and different parts are negotiated to different persons, the title of the holder to whom the first due negotiation is made prevails as to both the document and the goods even though any later holder may have received the goods from the carrier in good faith and discharged the carrier's obligation by surrender of his or her part.

(d) Any person who negotiates or transfers a single part of a bill of lading drawn in a set is liable to holders of that part as if it were the whole set.

(e) The bailee is obliged to deliver in accordance with this section of this article against the first presented part of a bill of lading lawfully drawn in a set. Such delivery discharges the bailee's obligation on the whole bill.

24.34.050 Destination Bills

(a) Instead of issuing a bill of lading to the consignor at the place of shipment a carrier may at the request of the consignor procure the bill to be issued at destination or at any other place designated in the request.

(b) Upon request of anyone entitled as against the carrier to control the goods while in transit and on surrender of any outstanding bill of lading or other receipt covering such goods, the issuer may procure a substitute bill to be issued at any place designated in the request.

24.34.060 Altered Bills of Lading

An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill enforceable according to its original tenor.

24.34.070 Lien of Carrier

(a) A carrier has a lien on the goods covered by a bill of lading for charges subsequent to the date of its receipt of the goods for storage or transportation (including demurrage and terminal charges), and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale pursuant to law. But against a purchaser for value of a negotiable bill of lading a carrier's lien is limited to charges stated in the bill or the applicable tariffs, or if no charges are stated then to a reasonable charge.

(b) A lien for charges and expenses under subsection (a) on goods which the carrier was required by law to receive for transportation is effective against the consignor or any person entitled to the goods unless the carrier had notice that the consignor lacked authority to subject the goods to such charges and expenses. Any other lien under subsection (a) is effective against the consignor and any person who permitted the bailor to have control or possession of the goods unless the carrier had notice that the bailor lacked such authority.

(c) A carrier loses his or her lien on any goods which he or she voluntarily delivers or which he or she unjustifiably refuses to deliver.

24.34.080 Enforcement of Carrier's Lien

(a) A carrier's lien may be enforced by public or private sale of the goods, in bloc or in parcels, at any time or place and on any terms which are commercially reasonable, after notifying all persons known to claim an interest in the goods. Such notification must include a statement of the amount due, the nature of the proposed sale and the time and place of any public sale. The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the carrier is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the carrier either sells the goods in the usual manner in any recognized market therefore, or if he or she sells at the price current in such market at the time of his or her sale or if he or she has otherwise sold in conformity with commercially reasonable practices among dealers in the type of goods sold he or she has sold in a commercially reasonable manner. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable except in cases covered by the preceding sentence.

(b) Before any sale pursuant to this section any person claiming a right in the goods may pay the amount necessary to satisfy the lien and the reasonable expenses incurred under this section. In that event the goods must not be sold, but must be retained by the carrier subject to the terms of the bill and this article.

(d) A purchaser in good faith of goods sold to enforce a carrier's lien takes the goods free of any rights of persons against whom the lien was valid, despite noncompliance by the carrier with the requirements of this section.

(e) The carrier may satisfy his or her lien from the proceeds of any sale pursuant to this section but must hold the balance, if any, for delivery on demand to any person to whom he or she would have been bound to deliver the goods.

(f) The rights provided by this section shall be in addition to all other rights allowed by law to a creditor against his or her debtor.

(g) A carrier's lien may be enforced in accordance with either subsection (a) or the procedure set forth in subsection (b) of Section 24.33.100.

(h) The carrier is liable for damages caused by failure to comply with the requirements for sale under this section and in case of willful violation is liable for conversion.

24.34.090 Duty of Care; Contractual Limitation of Carrier's Liability

(a) A carrier who issues a bill of lading whether negotiable or nonnegotiable must exercise the degree of care in relation to the goods which a reasonably careful person would exercise under like circumstances. This subsection does not repeal or change any law or rule of law which imposes liability upon a common carrier for damages not caused by its negligence.

(b) Damages may be limited by a provision that the carrier's liability shall not exceed a value stated in the document if the carrier's rates are dependent upon value, and the consignor by the carrier's tariff is afforded an opportunity to declare a higher value or a value as lawfully provided in the tariff, or where no tariff is filed he or she is otherwise advised of such opportunity; but no such limitation is effective with respect to the carrier's liability for conversion to its own use.

(c) Reasonable provisions as to the time and manner of presenting claims and instituting actions based on the shipment may be included in a bill of lading or tariff.

Chapter 24.35 Warehouse Receipts and Bills of Lading: General Obligations

24.35.010 Irregularities in Issue of Receipt or Bill or Conduct of Issuer

The obligations imposed by this article on an issuer apply to a document of title regardless of the fact that:

(a) The document may not comply with the requirements of this article or of any other law or regulation regarding its issue, form or content; or

(b) The issuer may have violated laws regulating the conduct of his or her business; or

(d) The person issuing the document does not come within the definition of warehouseman if it purports to be a warehouse receipt.

24.35.020 Duplicate Receipt or Bill; over Issue

Neither a duplicate nor any other document of title purporting to cover goods already represented by an outstanding document of the same issuer confers any right in the goods, except as provided in the case of bills in a set, over issue of documents for fungible goods and substitutes for lost, stolen or destroyed documents. But the issuer is liable for damages caused by his or her over issue or failure to identify a duplicate document as such by conspicuous notation on its face.

24.35.030 Obligation of Warehouseman or Carrier to Deliver; Excuse

(a) The bailee must deliver the goods to a person entitled under the document who complies with subsections (b) and (c), unless and to the extent that the bailee establishes any of the following:

(1) Delivery of the goods to a person whose receipt was rightful as against the claimant;

(2) Damage to or delay, loss or destruction of the goods for which the bailee is not liable;

(3) Previous sale or other disposition of the goods in lawful enforcement of a lien or on warehouseman's lawful termination of storage;

(4) The exercise by a seller of his or her right to stop delivery pursuant to the provisions of the article on sales (Section 24.08.050);

(5) A diversion, reconsignment or other disposition pursuant to the provisions of this article (Section 24.34.030) or tariff regulating such right;

(6) Release, satisfaction or any other fact affording a personal defense against the claimant;

(7) Any other lawful excuse.

(b) A person claiming goods covered by a document of title must satisfy the bailee's lien where the bailee so requests or where the bailee is prohibited by law from delivering the goods until the charges are paid.

(c) Unless the person claiming is one against whom the document confers no right under Section 24.36.030(a), he or she must surrender for cancellation or notation of partial deliveries any outstanding negotiable document covering the goods, and the bailee must cancel the document or conspicuously note the partial delivery thereon or be liable to any person to whom the document is duly negotiated.

(d) "Person entitled under the document" means holder in the case of a negotiable document, or the person to whom delivery is to be made by the terms of or pursuant to written instructions under a nonnegotiable document.

24.35.040 No Liability for Good Faith Delivery Pursuant to Receipt or Bill

A bailee who in good faith including observance of reasonable commercial standards has received goods and delivered or otherwise disposed of them according to the terms of the document of title or pursuant to this article is not liable therefore. This rule applies even though the person from whom he or she received the goods had no authority to procure the document or to dispose of the goods and even though the person to whom he or she delivered the goods had no authority to receive them.

Chapter 24.36 Warehouse Receipts and Bills of Lading: Negotiation of Transfer

24.36.010 Form of Negotiation and Requirements Of" Due Negotiation."

(a) A negotiable document of title running to the order of a named person is negotiated by his or her endorsement and delivery. After his or her endorsement in blank or to bearer any person can negotiate it by delivery alone.

(b) A negotiable document of title is also negotiated by delivery alone when by its original terms it runs to bearer.

(1) When a document running to the order of a named person is delivered to him or her, the effect is the same as if the document had been negotiated.

(c) Negotiation of a negotiable document of title after it has been endorsed to a specified person requires endorsement by the special endorsee as well as delivery.

(d) A negotiable document of title is "duly negotiated" when it is negotiated in the manner stated in this section to a holder who purchases it in good faith without notice of any defense against or claim to it on the part of any person and for value, unless it is established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a money obligation.

(e) Endorsement of a nonnegotiable document neither makes it negotiable nor adds to the transferee's rights.

(f) The naming in a negotiable bill of a person to be notified of the arrival of the goods does not limit the negotiability of the bill nor constitute notice to a purchaser thereof of any interest of such person in the goods.

24.36.020 Rights Acquired by Due Negotiation

(a) Subject to Section 24.36.030 and to the provisions of Section 24.33.050 on fungible goods, a holder to whom a negotiable document of title has been duly negotiated acquires thereby:

(1) Title to the document;

(2) Title to the goods;

(3) All rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and

(4) The direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of any defense or claim by him or her except those arising under the terms of the document or under this article. In the case of a delivery order the bailee's obligation accrues only upon acceptance and the obligation acquired by the holder is that the issuer and any endorser will procure the acceptance of the bailee.

(b) Subject to Section 24.36.030, title and rights so acquired are not defeated by any stoppage of the goods represented by the document or by surrender of such goods by the bailee, and are not impaired even though the negotiation or any prior negotiation constituted a breach of duty or even though any person has been deprived of possession of the document by misrepresentation, fraud, accident, mistake, duress, loss, theft or conversion, or even though a previous sale or other transfer of the goods or document has been made to a third person.

24.36.030 Document of Title to Goods Defeated in Certain Cases

(a) A document of title confers no right in goods against a person who before issuance of the document had a legal interest or a perfected security interest in them and who neither:

(1) Delivered or entrusted them or any document of title covering them to the bailor or his or her nominee with actual or apparent authority to ship, store or sell or with power to obtain delivery under this article (Section 24.35.030) or with power of disposition under this title (Section 24.05.030 and Section 24.50.070) or other statute or rule of law; nor

(2) Acquiesced in the procurement by the bailor or his or her nominee of any document of title.

(b) Title to goods based upon an unaccepted delivery order is subject to the rights of anyone to whom a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. Such a title may be defeated under Section 24.36.040 to the same extent as the rights of the issuer or a transferee from the issuer.

(c) Title to goods based upon a bill of lading issued to a freight forwarder is subject to the rights of anyone to whom a bill issued by the freight forwarder is duly negotiated; but delivery by the carrier in accordance with part 4 of this article pursuant to its own bill of lading discharges the carrier's obligation to deliver.

24.36.040 Rights Acquired in the Absence of Due Negotiation; Effect of Diversion; Seller's Stoppage of Delivery

(a) A transferee of a document, whether negotiable or nonnegotiable, to whom the document has been delivered but not duly negotiated, acquires the title and rights which his or her transferor had or had actual authority to convey.

(b) In the case of a nonnegotiable document, until but not after the bailee receives notification of the transfer, the rights of the transferee may be defeated:

(1) By those creditors of the transferor who could treat the sale as void under Section 24.05.020; or

(2) By a buyer from the transferor in ordinary course of business if the bailee has delivered the goods to the buyer or received notification of his or her rights; or

(3) As against the bailee by good faith dealings of the bailee with the transferor.

(c) A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading which causes the bailee not to deliver to the consignee defeats the consignee's title to the goods if they have been delivered to a buyer in ordinary course of business and in any event defeats the consignee's rights against the bailee.

(d) Delivery pursuant to a nonnegotiable document may be stopped by a seller under Section 24.08.050, and subject to the requirement of due notification there provided. A bailee honoring the seller's instructions is entitled to be indemnified by the seller against any resulting loss or expense.

24.36.050 Endorser Not a Guarantor for Other Parties

The endorsement of a document of title issued by a bailee does not make the endorser liable for any default by the bailee or by previous endorsers.

24.36.060 Delivery Without Endorsement - Right to Compel Endorsement

The transferee of a negotiable document of title has a specifically enforceable right to have his or her transferor supply any necessary endorsement but the transfer becomes a negotiation only as of the time the endorsement is supplied.

24.36.070 Warranties on Negotiation or Transfer of Receipt or Bill

Where a person negotiates or transfers a document of title for value otherwise than as a mere intermediary under Section 24.36.080, then unless otherwise agreed he or she warrants to his or her immediate purchaser only in addition to any warranty made in selling the goods:

(a) That the document is genuine; and

(b) That he or she has no knowledge of any fact which would impair its validity or worth; and

(c) That his or her negotiation or transfer is rightful and fully effective with respect to the title to the document and the goods it represents.

24.36.080 Warranties of Collecting Bank as to Documents

A collecting bank or other intermediary known to be entrusted with documents on behalf of another or with collection of a draft or other claim against delivery of documents warrants by such delivery of the documents on1y its own good faith and authority. This rule applies even though the intermediary has purchased or made advances against the claim or draft to be collected.

24.36.090 Receipt or Bill- When Adequate Compliance with Commercial Contract

The question whether a document is adequate to fulfill the obligations of a contract for sale or the conditions of a credit is governed by the articles on sales (Section 24.43.030) and on letters of credit (Chapter 24.30).

Chapter 24.37 Warehouse Receipts and Bills of Lading: Miscellaneous Provisions

24.37.010 Lost or Missing Documents

(a) If a document has been lost, stolen or destroyed, a court may order delivery of the goods or issuance of a substitute document and the bailee may without liability to any person comply with such order. If the document was negotiable the claimant must post security approved by the court to indemnify any person who may suffer loss as a result of nonsurrender of the document. If the document was not negotiable, such security may be required at the discretion of the court. The court may also in its discretion order payment of the bailee's reasonable costs and counsel fees.

(b) A bailee who without court order delivers goods to a person claiming under a missing negotiable document is liable to any person injured thereby, and if the delivery is not in good faith becomes liable for conversion. Delivery in good faith is not conversion if made in accordance with a filed classification or tariff or, where no classification or tariff is filed, if the claimant posts security with the bailee in an amount at least double the value of the goods at the time of posting to indemnify any person injured by the delivery who files a notice of claim within one year after the delivery.

24.37.020 Attachment of Goods Covered by a Negotiable Document

Except where the document was originally issued upon delivery of the goods by a person who had no power to dispose of them, no lien attaches by virtue of any judicial process to goods in the possession of a bailee for which a negotiable document of title is outstanding unless the document be first surrendered to the bailee or its negotiation enjoined, and the bailee shall not be compelled to deliver the goods pursuant to process until the document is surrendered to him or her or impounded by the court. One who purchases the document for value without notice of the process or injunction takes free of the lien imposed by judicial process.

24.37.030 Conflicting Claims; Interpleader

If more than one person claims title or possession of the goods, the bailee is excused from delivery until he or she has had a reasonable time to ascertain the validity of the adverse claims or to bring an action to compel all claimants to interplead and may compel such interpleader, either in defending an action for nondelivery of the goods, or by original action, whichever is appropriate.

Chapter 24.38 Investment Securities

24.38.010 Short Title

This article shall be known and may be cited as Turtle Mountain Band of Chippewa Indians Commercial Code; Investment Securities.

24.38.020 Definitions; Index of Definitions

(a) In this article, unless the context otherwise requires:

(1) A "CERTIFICATED SECURITY" is a share, participation, or other interest in property of or an enterprise of the issuer or an obligation of the issuer which is

(A) Represented by an instrument issued in bearer or registered form;

(B) of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment; and

(C) Either one of a class or series or by its terms divisible into a class or series of shares, participations, interests, or obligations.

(2) An "UNCERTIFICATED SECURITY" is a share, participation, or other interest in property or an enterprise of the issuer or an obligation of the issuer which is not represented by an instrument and the transfer of which is registered upon books maintained for that purpose by or on behalf of the issuer;

(A) of a type commonly dealt in on securities exchanges or markets; and

(B) either one of a class or series or by its terms divisible into a class or series of shares, participations, interests, or obligations.

(3) A "SECURITY" is either a certificated or an uncertificated security. If a security is certificated, the terms "security" and "certificated security" may mean either the intangible interest, the instrument representing that interest, or both, as the context requires. A writing that is a certificated security is governed by this article and not by any other section of this code, even though it also meets the requirements of other sections of this code. This section does not apply to money. If a certificated security has been retained by or surrendered to the issuer or its transfer agent for reasons other than registration of transfer, other temporary purpose, payment, exchange, or acquisition by the issuer, that security shall be treated as an uncertificated security for purposes of this article.

(4) A certificated security is in "registered form" if

(A) it specifies a person entitled to the security or the rights it represents, and

(B) its transfer may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security so states.

(5) A certificated security is in "bearer form" if it runs to bearer according to its terms and not by reason of any endorsement.

(b) A "SUBSEQUENT PURCHASER" is a person who takes other than by original issue.

(c) A "CLEARING CORPORATION" is a corporation registered as a "clearing agency" under the federal securities laws or a corporation:

(1) At least ninety percent (90%) of whose capital stock is held by or for one or more organizations, none of which, other than a national securities exchange or association, holds in excess of twenty percent of the capital stock of the corporation, and each of which is

(A) subject to supervision or regulation pursuant to the provisions of federal, tribal, or state banking or insurance laws,

(B) a broker or dealer or investment company registered under the federal securities laws, or

(2) Any remaining capital stock of which is held by individuals who have purchased it at or prior to the time of their taking office as directors of the corporation and who have purchased only so much of the capital stock as is necessary to permit them to qualify as directors.

(d) A "custodian bank" is a bank or trust company that is supervised and examined by federal, tribal, or state authority having supervision over banks and is acting as custodian for a clearing corporation.

(e) Other definitions applying to this article or to specified sections thereof and the sections in which they appear are:

"Adverse claim." Section 24.40.020(b).

"Bona fide purchaser." Section 24.40.020(c).

"Broker." Section 24.40.030.

"Debtor." Section 24.42.020(a)(30).

"Financial intermediary." Section 24.40.130.

"Guarantee of the signature." Section 24.41.020(d).

"Initial transaction statement." Section 24.41.080(d).

"Instruction." Section 24.40.080(d).

"Intermediary Bank." Section 24.20.050(d).

"Issuer." Section 24.39.010.

"Over issue." Section 24.38.040(b).

"Secured Party." Section 24.4205(1)(l).

"Security Agreement." Section 24.4205(1)(m).

(f) In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.

24.38.030 Issuer's Lien

(a) A lien upon a security in favor of an issuer thereof is valid against a purchaser only if:

(1) the security is certificated and the right of the issuer to the lien is noted conspicuously thereon; or

(2) the security is uncertificated and a notation of the right of the issuer to the lien is contained in the initial transaction statement sent to the purchaser or, if his or her interest is transferred to him or her other than by registration of transfer, pledge, or release, the initial transaction statement sent to the registered owner or the registered pledgee.

24.38.040 Effect of over Issue; "Over Issue."

(a) The provisions of this article which validate a security or compel its issue, or reissue do not apply to the extent that validation, issue, or reissue would result in over issue if:

(1) an identical security which does not constitute an over issue is reasonably available for purchase, the person entitled to issue or validation may compel the issuer to purchase the security for him or her and either to deliver a certificated security or to register the transfer of an uncertificated security to him, against surrender of any certificated security he or she holds; or

(2) a security is not so available for purchase, the person entitled to issue or validation may recover from the issuer the price he or she or the last purchaser for value paid for it with interest from the date of his or her demand.

(b) "Over issue" means the issue of securities in excess of the amount which the issuer has corporate power to issue.

24.38.050 Certificated Securities Negotiable; Statements and Instructions Not Negotiable; Presumptions

(a) Certificated securities governed by this article are negotiable instruments.

(b) Statements (Section 24.41.080), notices, or the like, sent by the issuer of uncertificated securities and instruction (Section 24.40.080) are neither negotiable instruments nor certificated securities.

(1) unless specifically denied in the pleadings, each signature on a certificated security, in a necessary endorsement, on an initial transaction statement, or on an instruction, is admitted;

(2) if the effectiveness of a signature is put in issue, the burden of establishing it is on the party claiming under the signature, but the signature is presumed to be genuine or authorized;

(3) if signatures on a certificated security are admitted or established, production of the security entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security;

(4) if signatures on an initial transaction statement are admitted or established, the facts stated in the statement are presumed to be true as of the time of its issuance; and

(5) after it is shown that a defense or defect exists, the plaintiff has the burden of establishing that he or she or some person under whom he or she claims is a person against whom the defense or defect is ineffective (Section 24.39.020).

24.38.060 Applicability

The law (including the conflict of laws rules) of the jurisdiction of organization of the issuer governs the validity of a security, the effectiveness of registration by the issuer, and the rights and duties of the issuer with respect to:

(a) registration of transfer of a certificated security;

(b) registration of transfer, pledge, or release of an uncertificated security; and

24.38.070 Securities Transferable; Action for Price

(a) Unless otherwise agreed and subject to any applicable law or regulation respecting short sales, a person obligated to transfer securities may transfer any certificated security of the specified issue in bearer form or registered in the name of the transferee, or indorsed to him or her or in blank, or he or she may transfer an equivalent uncertificated security to the transferee or a person designated by the transferee.

(b) If the buyer fails to pay the price as it comes due under a contract of sale, the seller may recover the price of:

(1) certificated securities accepted by the buyer;

(2) uncertificated securities that have been transferred to the buyer or a person designated by the buyer; and

(3) other securities if efforts at their resale would be unduly burdensome or if there is no readily available market for their resale.

24.38.080 Registration of Pledge and Release of Uncertificated Securities

A security interest in an uncertificated security may be evidenced by the registration of pledge to the secured party or a person designated by him. There can be no more than one registered pledge of an uncertificated security at any time. The registered owner of an uncertificated security is the person in whose name the security is registered, even if the security is subject to a registered pledge. The rights of a registered pledgee of an uncertificated security under this article are terminated by the registration of release.

Chapter 24.39 Issue; Issuer

24.39.010 "Issuer."

(a) With respect to obligations on or defenses to a security, "issuer" includes a person who:

(1) places or authorizes the placing of his or her name on a certificated security (otherwise than as authenticating trustee, registrar, transfer agent, or the like) to evidence that it represents a share, participation, or other interest in his or her property or in an enterprise, or to evidence his or her duty to perform an obligation represented by the certificated security;

(2) creates shares, participations or other interests in his or her property, or in an enterprise or undertakes obligations, which shares, participations, interests, or obligations are uncertificated securities;

(3) directly or indirectly creates fractional interests in his or her rights or property, which fractional interests are represented by certificated securities; or

(4) becomes responsible for or in place of any other person described as an issuer in this section.

(b) With respect to obligations on or defenses to a security, a guarantor is an issuer to the extent of his or her guaranty, whether or not his or her obligation is noted on a certificated security or on statements of uncertificated securities sent pursuant to Section 24.41.080.

(c) With respect to registration of transfer, pledge, or release (Section 24.41.010 to Section 24.41.080, inclusive), "issuer" means a person on whose behalf transfer books are maintained.

24.39.020 Issuer's Responsibility and Defenses - Notice of Defect or Defense

(a) Even against a purchaser for value and without notice, the terms of a security include:

(1) if the security is certificated, those stated on the security;

(2) if the security is uncertificated, those contained in the initial transaction statement sent to such purchaser, or if his or her interest is transferred to him or her other than by registration of transfer, pledge, or release, the initial transaction statement sent to the registered owner or registered pledgee; and

(3) those made part of the security by reference, on the certificated security or in the initial transaction statement, to another instrument, indenture, or document or to a constitution, statute, ordinance, rule, regulation, order or the like, to the extent that the terms referred to do not conflict with the terms stated on the certificated security or contained in the statement. A reference under this paragraph does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even though the certificated security or statement expressly states that a person accepting it admits notice.

(b) A certificated security in the hands of a purchaser for value or an uncertificated security as to which an initial transaction statement has been sent to a purchaser for value, other than a security issued by a government or governmental agency or unit, even though issued with a defect going to its validity, is valid with respect to the purchaser if he or she is without notice of the particular defect unless the defect involves a violation of constitutional provisions, in which case the security is valid with respect to a subsequent purchaser for value and without notice of the defect. This subsection applies to an issuer that is a government or governmental agency or unit only if either there has been substantial compliance with the legal requirements governing the issue or the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.

(c) Except as provided in the case of certain unauthorized signatures (Section 24.39.060), lack of genuineness of a certificated security or an initial transaction statement is a complete defense, even against a purchaser for value and without notice.

(d) All other defenses of the issuer of a certificated or uncertificated security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken without notice of the particular defense.

(e) Nothing in this section shall be construed to affect the right of a party to a "when, as and if issued" or a "when distributed" contract to cancel the contract in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement pursuant to which the security is to be issued or distributed.

24.39.030 Staleness as Notice of Defects or Defenses

After an act or event creating a right to immediate performance of the principal obligation represented by a certificated security or that sets a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer if the act or event is one requiring the payment of money, the deliverer

(a) Except as provided in the case of certain unauthorized signatures, lack of genuineness of a certificated security or an initial transaction statement is a complete defense, even against a purchaser for value and without notice.

(b) All other defenses of the issuer of a certificated or uncertificated security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken without notice of the particular defense.

(c) Nothing in this section shall be construed to affect the right of a party to a "when, as and if issued" or a "when distributed" contract to cancel the contract in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement pursuant to which the security is to be issued or distributed.

24.39.040 A Staleness as Notice of Defects or Defenses

(a) After an act or event creating a right to immediate performance of the principal obligation represented by a certificated security or that sets a date on or after which the security is to be presented or surrendered for redemption or exchange, a purchaser is charged with notice of any defect in its issue or defense of the issuer if:

(1) the act or event is one requiring the payment of money, the delivery of certificated securities, the registration of transfer of uncertificated securities, or any of these on presentation or surrender of the certificated security, the funds or securities are available on the date set for payment or exchange, and he or she takes the security more than one year after that date; and

(2) the act or event is not covered by Paragraph (1) and he or she takes the security more than two (2) years after the date set for surrender or presentation or the date on which performance became due.

(b) A call that has been revoked is not within Subsection (a).

24.39.050 Effect of Issuer's Restrictions on Transfer

A restriction on transfer of a security imposed by the issuer, even though otherwise lawful, is ineffective against any person without actual knowledge of it unless:

(a) the security is certificated and the restriction is noted conspicuously thereon; or

(b) the security is uncertificated and a notation of the restriction is contained in the initial transaction statement sent to the person or, if his or her interest is transferred to him or her other than by registration of transfer, pledge, or release, the initial transaction statement sent to the registered owner or the registered pledgee.

24.39.060 Effect of Unauthorized Signature on Certificated Security or Initial Transaction Statement

An unauthorized signature placed on a certificated security prior to or in the course of issue or placed on an initial transaction statement is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security or a purchaser for value of an uncertificated security to whom such initial transaction statement has been sent, if the purchaser is without notice of the lack of authority and the signing has been done by:

(a) an authenticating trustee, registrar, transfer agent, or other person entrusted by the issuer with the signing of the security, of similar securities, or of initial transaction statements or the immediate preparation for signing of any of them; or

(b) an employee of the issuer, or of any of the foregoing, entrusted with responsible handling of the security or initial transaction statement.

24.39.070 Completion or Alteration of Certificated Security or Initial Transaction Statement

(a) If a certificated security contains the signatures necessary to its issue or transfer but is incomplete in any other respect:

(1) any person may complete it by filling in the blanks as authorized; and

(2) even though the blanks are incorrectly filled in, the security as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.

(b) A complete certificated security that has been improperly altered, even though fraudulently, remains enforceable, but only according to its original terms.

(c) If an initial transaction statement contains the signatures necessary to its validity, but is incomplete in any other respect:

(1) any person may complete it by filling in the blanks as authorized; and

(2) even though the blanks are incorrectly filled in, the statement as completed is effective in favor of the person to whom it is sent if he or she purchased the security referred to therein for value and without notice of the incorrectness.

(d) A complete initial transaction statement that has been improperly altered, even though fraudulently, is effective in favor of a purchaser to whom it has been sent, but only according to its original terms.

24.39.080 Rights and Duties of Issuer with Respect to Registered Owners and Registered Pledgees

(a) Prior to due presentment for registration of transfer of a certificated security in registered form, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner.

(b) Subject to the provisions of Subsections (c), (d), and (f), the issuer or indenture trustee may treat the registered owner of an uncertificated security as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner.

(c) The registered owner of an uncertificated security that is subject to a registered pledge is not entitled to registration of transfer prior to the due presentment to the issuer of a release instruction. The exercise of conversion rights with respect to a convertible uncertificated security is a transfer within the meaning of this section.

(d) Upon due presentment of a transfer instruction from the registered pledgee of an uncertificated security, the issuer shall:

(1) register the transfer of the security to the new owner free of pledge, if the instruction specifies a new owner (who may be the registered pledgee) and does not specify a pledgee;

(2) register the transfer of the security to the new owner subject to the interest of the existing pledgee, if the instruction specifies a new owner and the existing pledgee; or

(3) register the release of the security from the existing pledge and register the pledge of the security to the other pledgee, if the instruction specifies the existing owner and another pledgee.

(e) Continuity of perfection of a security interest is not broken by registration of transfer under Subsection (d)(2) or by registration of release and pledge under Subsection (d)(3), if the security interest is assigned.

(f) If an uncertificated security is subject to a registered pledge:

(1) any uncertificated securities issued in exchange for or distributed with respect to the pledged security shall be registered subject to the pledge;

(2) any certificated securities issued in exchange for or distributed with respect to the pledged security shall be delivered to the registered pledgee; and

(3) any money paid in exchange for or in redemption of part or all of the security shall be paid to the registered pledgee.

(g) Nothing in this article shall be construed to affect the liability of the registered owner of a security for calls, assessments, or the like.

24.39.090 Effect of Signature of Authenticating Trustee, Registrar or Transfer Agent

(a) A person placing his or her signature upon a certificated security or an initial transaction statement as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security or a purchaser for value of an uncertificated security to whom the initial transaction statement has been sent, if the purchaser is without notice of the particular defect, that:

(1) the certificated security or initial transaction statement is genuine;

(2) his own participation in the issue or registration of the transfer, pledge, or release of the security is within his or her capacity and within the scope of the authority received by him or her from the issuer; and

(3) he has reasonable grounds to believe that the security is in the form and within the amount the issuer is authorized to issue.

(b) Unless otherwise agreed, a person by so placing his or her signature does not assume responsibility for the validity of the security in other respects.

Chapter 24.40 Transfer

24.40.010 Rights Acquired by Purchaser

(a) Upon transfer of a security to a purchaser (Section 24.40.130), the purchaser acquires the rights in the security which his or her transferor had or had actual authority to convey unless the purchaser's rights are limited by Section 24.40.020(d).

(b) A transferee of a limited interest acquires rights only to the extent of the interest transferred. The creation or release of a security interest in a security is the transfer of a limited interest in that security.

24.40.020 "Bona Fide Purchaser"; "Adverse Claim"; Title Acquired by Bona Fide Purchaser

(a) A "bona fide purchaser" is a purchaser for value in good faith and without notice of any adverse claim:

(1) who takes delivery of a certificated security in bearer form or in registered form, issued or indorsed to him or her or in blank;

(2) to whom the transfer, pledge or release of an uncertificated security is registered on the books of the issuer; or

(3) to whom a security is transferred under the provisions of paragraph (3), (4), (i), or (g) of Section 24.41.030.

(b) "Adverse claim" includes a claim that a transfer was or would be wrongful or that a particular adverse person is the owner of or has an interest in the security.

(c) A bona fide purchaser in addition to acquiring the rights of a purchaser (Section 24.40.010) also acquires his or her interest in the security free of any adverse claim.

(d) Notwithstanding Section 24.40.010(a), the transferee of a particular certificated security who has been a party to any fraud or illegality affecting the security, or who as a prior holder of that certificated security had notice of an adverse claim, cannot improve his or her position by taking from a bona fide purchaser.

24.40.030 "Broker."

Broker" means a person engaged for all or part of his or her time in the business of buying and selling securities, who in the transaction concerned acts for, buys a security from, or sells a security to, a customer. Nothing in this article determines the capacity in which a person acts for purposes of any other statute or rule to which the person is subject.

24.40.040 Notice to Purchaser of Adverse Claims

(a) A purchaser (including a broker for the seller or buyer, but excluding an intermediary bank) of a certificated security is charged with notice of adverse claims if:

(1) the security, whether in bearer or registered form, has been endorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or

(2) the security is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor. The mere writing of a name on a security is not such a statement.

(b) A purchaser (including a broker for the seller or buyer, but excluding an intermediary bank) to whom the transfer, pledge, or release of an uncertificated security is registered is charged with notice of adverse claims as to which the issuer has a duty under Section 24.41.030(d) at the time of registration and which are noted in the initial transaction statement sent to the purchaser or, if his or her interest is transferred to him or her other than by registration of transfer, pledge, or release, the initial transaction statement sent to the registered owner or the registered pledgee.

(c) The fact that the purchaser (including a broker for the seller or buyer) of a certificated or uncertificated security has notice that the security is held for a third person or is registered in the name of or indorsed by a fiduciary does not create a duty of inquiry into the rightfulness of the transfer or constitute constructive notice of adverse claims. However, if the purchaser (excluding an intermediary bank) has knowledge that the proceeds are being used or the transaction is for the individual benefit of the fiduciary or otherwise in breach of duty, the purchaser is charged with notice of adverse claims.

24.40.050 Staleness as Notice of Adverse Claims

An act or event that creates a right to immediate performance of the principal obligation represented by a certificated security or sets a date on or after which a certificated security is to be presented or surrendered for redemption or exchange does not itself constitute any notice of adverse claims except in the case of a transfer:

(a) after one (1) year from any date set for presentment or surrender for redemption or exchange; or

(b) after six (6) months from any date set for payment of money against presentation or surrender of the security if funds are available for payment on that date.

24.40.060 Warranties on Presentment and Transfer of Certificated Securities; Warranties of Originators of Instructions

(a) A Person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that he or she is entitled to the registration, payment, or exchange. But, a purchaser for value and without notice of adverse claims who receives a new, reissued, or reregistered certificated security on registration of transfer or receives an initial transaction statement confirming the registration of transfer of an equivalent uncertificated security to him or her warrants only that he or she has no knowledge of any unauthorized signature (Section 24.40.110) in a necessary endorsement.

(b) A person by transferring a certificated security to a purchaser for value warrants only that:

(1) his transfer is effective and rightful;

(2) the security is genuine and has not been materially altered; and

(3) he knows of no fact which might impair the validity of the security.

(c) If a certificated security is delivered by an intermediary known to be entrusted with delivery of the security oft behalf of another or with collection of a draft or other claim against delivery, the intermediary by delivery warrants only his or her own good faith and authority, even though he or she has purchased or made advances against the claim to be collected against the delivery.

(d) A pledgee or other holder for security who redelivers a certificated security received, or after payment and on order of the debtor delivers that security to a third person, makes only the warranties of an intermediary under Subsection (c).

(e) A person who originates an instruction warrants to the issuer that:

(1) he is an appropriate person to originate the instruction; and

(2) at the time the instruction is presented to the issuer he or she will be entitled to the registration of transfer, pledge, or release.

(f) A person who originates an instruction warrants to any person specially guaranteeing his or her signature (Section 24.40.120(c) that:

(1) he is an appropriate person to originate the instruction; and

(2) at the time the instruction is presented to the issuer

(A) he will be entitled to the registration of transfer, pledge, or release; and

(B) the transfer, pledge, or release requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction.

(g) A person who originates an instruction warrants to a purchaser for value and to any person guaranteeing the instruction (Section 24.40.120(f) that:

(1) he is an appropriate person to originate the instruction;

(2) the uncertificated security referred to therein is valid; and

(3) at the time the instruction is presented to the issuer

(A) the transferor will be entitled to the registration of transfer, pledge, or release;

(h) If a secured party is the registered pledgee or the registered owner of an uncertificated security, a person who originates an instruction of release or transfer to the debtor or, after payment and on order of the debtor, a transfer instruction to a third person, warrants to the debtor or the third person only that he or she is an appropriate person to originate the instruction and at the time the instruction is presented to the issuer, the transferor will be entitled to the registration of release or transfer. If a transfer instruction to a third person who is a purchaser for value is originated on order of the debtor, the debtor makes to the purchaser the warranties of paragraphs (2),(3)(B) and (3)(C) of subsection (g).

(i) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants only that:

(1) his transfer is effective and rightful; and

(2) the uncertificated security is valid.

(j) A broker gives to his or her customer and to the issuer and a purchaser the applicable warranties provided in this section, and has the rights and privileges of a purchaser under this section. The warranties of and in favor of the broker acting as an agent are in addition to applicable warranties given by and in favor of his or her customer.

24.40.070 Effect of Delivery Without Endorsement - Right to Compel Endorsement

If a certificated security in registered form has been delivered to a purchaser without a necessary endorsement he or she may become a bona fide purchaser only as of the time the endorsement is supplied; but against the transferor, the transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary endorsement supplied.

24.40.080 Endorsements; Instructions

(a) An endorsement of a certificated security in registered form is made when an appropriate person signs on it or on a separate document an assignment or transfer of the security or a power to assign or transfer it or his or her signature is written without more upon the back of the security.

(b) An endorsement may be in blank or special. An endorsement in blank includes an endorsement to bearer. A special endorsement specifies to whom the security is to be transferred, or who has power to transfer it. A holder may convert a blank endorsement into a special endorsement.

(c) An endorsement purporting to be only of part of a certificated security representing units intended by the issuer to be separately transferable is effective to the extent of the endorsement.

(d) An "instruction" is an order to the issuer of an uncertificated security requesting that the transfer, pledge, or release from pledge of the uncertificated security specified therein be registered.

(e) An instruction originated by an appropriate person is:

(1) a writing signed by an appropriate person; or

(2) a communication to the issuer in any form agreed upon in a writing signed by the issuer and an appropriate person. If an instruction has been originated by an appropriate person but is incomplete in any other respect, any person may complete it as authorized and the issuer may rely on it as completed even though it has been completed incorrectly.

(f) "An appropriate person" in subsection (a) means the person specified by the certificated security or by special endorsement to be entitled to the security.

(g) "An appropriate person" in Subsection (e) means:

(1) for an instruction to transfer or pledge an uncertificated security which is then not subject to a registered pledge, the registered owner; or

(2) for an instruction to transfer or release an uncertificated security which is then subject to a registered pledge, the registered pledgee.

(h) In addition to the person designated in Subsections (f) and (g), "an appropriate person" in Subsections (a) and (e) includes:

(1) if the person designated is described as a fiduciary but is no longer serving in the described capacity, either that person or his or her successor;

(2) if the persons designated are described as more than one person as fiduciaries and one or more are no longer serving in the described capacity, the remaining

(3) fiduciary or fiduciaries, whether or not a successor has been appointed or qualified;

(4) if the person designated is an individual and is without capacity to act by virtue of death, incompetence, minority, or otherwise, his or her executor, administrator, conservator or like fiduciary;

(5) if the persons designated are described as more than one person as tenants by the entirety or with right of survivorship and by reason of death all cannot sign, the survivor or survivors;

(6) a person having power to sign under applicable law or controlling instrument; and

(7) to the extent that the person designated or any of the foregoing persons may act through an agent, his or her authorized agent.

(A) Unless otherwise agreed, the endorser of a certificated security by his or her endorsement or the originator of an instruction by his or her origination assumes no obligation that the security will be honored by the issuer but only the obligations provided in Section 24.40.060.

(B) Whether the person signing is appropriate is determined as of the date of signing and an endorsement made by or an instruction originated by him or her does not become unauthorized for the purposes of this article by virtue of any subsequent change of circumstances.

(C) Failure of a fiduciary to comply with a controlling instrument or with the law of the jurisdiction having jurisdiction of the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of the transfer, pledge, or release, does not render his or her endorsement or an instruction originated by him or her unauthorized for the purposes of this article.

24.40.090 Effect of Endorsement Without Delivery

An endorsement of a certificated security, whether special or in blank, does not constitute a transfer until livery of the certificated security on which it appears or, if the endorsement is on a separate document, until delivery of both the document and the certificated security.

24.40.100 Endorsement of Certificated Security in Bearer Form

An endorsement of a certificated security in bearer form may give notice of adverse claims (Section 24.41.030) but does not otherwise affect any right to. registration the holder possesses.

24.40.110 Effect of Unauthorized Endorsement or Instruction

Unless the owner or pledgee has ratified an unauthorized endorsement or instruction or is otherwise precluded from asserting its ineffectiveness:

(a) he may assert its ineffectiveness against the issuer or any purchaser, other than a purchaser for value and without notice of adverse claims, who has in good faith received a new, reissued, or reregistered certificated security on registration of transfer or received an initial transaction statement confirming the registration of transfer, pledge, or release of an equivalent uncertificated security to him; and

(b) an issuer who registers the transfer of a certificated security upon the unauthorized endorsement or who registers the transfer, pledge, or release of an uncertificated security upon the unauthorized instruction is subject to liability for improper registration (Section 24.41.040).

24.40.120 Effect of Guaranteeing Signature, Endorsement or Instruction

(a) Any person guaranteeing a signature of an endorser of a certificated security warrants that at the time of signing:

(1) the signature was genuine;

(2) the signer was an appropriate person to endorse (Section 24.40.080); and

(3) the signer had legal capacity to sign.

(b) Any person guaranteeing a signature of the originator of an instruction warrants that at the time of signing:

(1) the signature was genuine;

(2) the signer was an appropriate person to originate the instruction if the person specified in the instruction as the registered owner or registered pledgee of the uncertificated security was, in fact, the registered owner or registered pledgee of such security, as to which fact the signature guarantor makes no warranty;

(3) the signer had legal capacity to sign; and

(4) the taxpayer identification number, if any, appearing on the instruction as that of the registered owner or registered pledgee was the taxpayer identification number of the signer or of the owner or pledgee for whom the signer was acting.

(c) Any person specially guaranteeing the signature of the originator of an instruction makes not only the warranties of a signature guarantor (Subsection (b)) but also warrants that at the time the instruction is presented to the issuer:

(1) the person specified in the instruction as the registered owner or registered pledgee of the uncertificated security will be the registered owner or registered pledgee; and

(2) the transfer, pledge, or release of the uncertificated security requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions, and claims other than those specified in the instruction.

(d) The guarantor under Subsections (a) and (b) or the special guarantor under Subsection (c) does not otherwise warrant the rightfulness of the particular transfer, pledge, or release.

(e) Any person guaranteeing an endorsement of a certificated security makes not only the warranties of a signature guarantor under Subsection (a) but warrants the rightfulness of the particular transfer in all respects.

(f) Any person guaranteeing an instruction requesting the transfer, pledge, or release of an uncertificated security makes not only the warranties of a special signature guarantor under Subsection (c) but also warrants the rightfulness of the particular transfer, pledge, or release in all respects.

(g) No issuer may require a special guarantee of signature (subsection (c)), a guarantee of endorsement (subsection (e)), or a guarantee of instruction (subsection (f)) as a condition to registration of transfer, pledge or release.

(h) The foregoing warranties are made to any person taking or dealing with the security in reliance on the guarantee, and the guarantor is liable to the person for any loss resulting from breach of the warranties.

24.40.130 When Transfer to Purchaser Occurs; Financial Intermediary as Bona Fide Purchaser "Financial Intermediary."

(a) Transfer of a security or a limited interest (including a security interest) therein to a purchaser occurs only:

(1) at the time he or she or a person designated by him or her acquires possession of a certificated security;

(2) at the time the transfer, pledge, or release of an uncertificated security is registered to him or her or a person designated by him;

(3) at the time his or her financial intermediary acquires possession of a certificated security specially indorsed to or issued in the name of the purchaser;

(4) at the time a financial intermediary, not a clearing corporation, sends him or her confirmation of the purchase and also by book entry or otherwise identifies as belonging to the purchaser

(A) a specific certificated security in the financial intermediary's possession;

(B) a quantity of securities that constitute or are part of a fungible bulk of certificated securities in the financial intermediary's possession or of un certificated securities registered in the name of the financial intermediary; or

(C) a quantity of securities that constitute or are part of a fungible bulk of securities shown on the account of the financial intermediary on the books of another financial intermediary;

(5) with respect to an identified certificated security to be delivered while still in the possession of a third person, not a financial intermediary, at the time that person acknowledges that he or she holds for the purchaser;

(6) with respect to a specific uncertificated security the pledge or transfer of which has been registered to a third person, not a financial intermediary, at the time that person acknowledges that he or she holds for the purchaser;

(7) at the time appropriate entries to the account of the purchaser or a person designated by him or her on the books of a clearing corporation are made under Section 24.40.200;

(8) with respect to the transfer of a security interest where the debtor has signed a security agreement containing a description of the security, at the time a written notification, which, in the case of the creation of the security interest, is signed by the debtor (which may be a copy of the security agreement) or which, in the case of the release or assignment of the security interest created pursuant to this paragraph, is signed by the secured party, is received by

(A) a financial intermediary on whose books the interest of the transferor in the security appears;

(B) a third person, not a financial intermediary, in possession of the security, if it is certificated;

(C) a third person, not a financial intermediary, who is the registered owner of the security, if it is uncertificated and not subject to a registered pledge; or

(D) a third person, not a financial intermediary, who is the registered pledgee of the security, if it is uncertificated and subject to a registered pledge;

(9) with respect to the transfer of a security interest where the transferor has signed a security agreement containing a description of the security, at the time new value is given by the secured party; or

(10) with respect to the transfer of a security interest where the secured party is a financial intermediary and the security has already been transferred to the financial intermediary under paragraphs (a)(1), (a)(2), (a)(3), (a)(4), or (a)(7), at the time the transferor has signed a security agreement containing a description of the security and value is given by the secured party.

(11) The purchaser is the owner of a security held for him or her by a financial intermediary, but cannot be a bona fide purchaser of a security so held except in the circumstances specified in paragraph (7) of Subsection (a). If a security so held is part of a fungible bulk, as in the circumstances specified in Subsections (4) (B) and (4)(C) of Subsection (a), the purchaser is the owner of a proportionate property interest in the fungible bulk.

(12) Notice of an adverse claim received by the financial intermediary or by the purchaser after the financial intermediary takes delivery of a certificated security as a holder for value or after the transfer, pledge, or release of an uncertificated security has been registered free of the claim to a financial intermediary who has given value is not effective either as to the financial intermediary or as to the purchaser. However, as between the financial intermediary and the purchaser the purchaser may demand transfer of an equivalent security as to which no notice of adverse claim has been received.

(b) A "financial intermediary" is a bank, broker, clearing corporation or other person (or the nominee of any of them) which in the ordinary course of its business maintains security accounts for its customers and is acting in that capacity. A financial intermediary may have a security interest in securities held in account for its customer.

24.40.140 Duty to Transfer; When Completed

(a) Unless otherwise agreed, if a sale of a security is made on an exchange or otherwise through brokers:

(1) the selling customer fulfills his or her duty to transfer at the time he:

(A) places a certificated security in the possession of the selling broker or of a person designated by the broker;

(B) causes an uncertificated security to be registered in the name of the selling broker or a person designated by the broker;

(C) if requested, causes an acknowledgment to be made to the selling broker that a certificated or uncertificated security is held for the broker; or

(D) places in the possession of the selling broker or of a person designated by the broker a transfer instruction for an uncertificated security, providing the issuer does not refuse to register the requested transfer if the instruction is presented to the issuer for registration within thirty days thereafter; and

(2) the selling broker, including a correspondent broker acting for a selling customer, fulfills his or her duty to transfer at the time he:

(A) places a certificated security in the possession of the buying broker or a person designated by the buying broker;

(B) causes an uncertificated security to be registered in the name of the buying broker or a person designated by the buying broker;

(C) places in the possession of the buying broker or of a person designated by the buying broker a transfer instruction for an uncertificated security, providing the issuer does not refuse to register the requested transfer if the instruction is presented to the issuer for registration within thirty days thereafter; or

(D) effects clearance of the sale in accordance with the rules of the exchange on which the transaction took place.

(b) Except as provided in this section and unless otherwise agreed, a transferor's duty to transfer a security under a contract of purchase is not fulfilled until he:

(1) places a certificated security in form to be negotiated by the purchaser in the possession of the purchaser or of a person designated by the purchaser;

(2) causes an uncertificated security to be registered in the name of the purchaser or a person designated by the purchaser;

(3) if the purchaser requests, causes an acknowledgment to be made to the purchaser that a certificated or uncertificated security is held for the purchaser.

(c) Unless made on an exchange, a sale to a broker purchasing for his or her own account is within Subsection (b) and not within Subsection (a).

24.40.150 Action Against Transferee Based upon Wrongful Transfer

(a) Any person against whom the transfer of a security is wrongful for any reason, including his or her incapacity, as against anyone except a bona fide purchaser, may:

(1) reclaim possession of the certificated security wrongfully transferred;

(2) obtain possession of any new certificated security representing all or part of the same rights;

(3) compel the origination of an instruction to transfer to him or her or a person designated by him or her an uncertificated security constituting all or part of the same rights; or

(4) have damages.

(b) If the transfer is wrongful because of an unauthorized endorsement of a certificated security, the owner may also reclaim or obtain possession of the security or a new certificated security, even from a bona fide purchaser, if the ineffectiveness of the purported endorsement can be asserted against him or her under the provisions of this article on unauthorized endorsements.

(c) The right to obtain or reclaim possession of a certificated security or to compel the origination of a transfer instruction may be specifically enforced and the transfer of a certificated or uncertificated security enjoined and a certificated security impounded pending the litigation.

24.40.160 Purchaser's Right to Requisites for Registration of Transfer, Pledge, or Release on Books

Unless otherwise agreed, the transferor of a certificated security or the transferor, pledgor, or pledgee of an uncertificated security on due demand must supply his or her purchaser with any proof of his or her authority to transfer, pledge, or release or with any other requisite necessary to obtain registration of the transfer, pledge, or lease of the security; but if the transfer, pledge, or release is not for value, a transferor, pledgor, or pledgee need not do so unless the purchaser furnishes the necessary expenses. Failure within a reasonable time to comply with a demand made gives the purchaser the right to reject or rescind the transfer, pledge, or release.

24.40.170 Creditors' Rights

(a) Subject to the exceptions in Subsection (c) and (d), no attachment or levy upon a certificated security or any share or other interest represented thereby which is outstanding is valid until the security is actually seized by the officer making the attachment or levy, but a certificated security which has been surrendered to the issuer may be reached by a creditor by legal process at the issuer's chief executive office in the United States.

(b) An uncertificated security registered in the name of the debtor may not be reached by a creditor except by legal process at the issuer's chief executive office in the United States.

(c) The interest of a debtor in a certificated security that is in the possession of a secured party not a financial intermediary or in an uncertificated security registered in the name of a secured party not a financial intermediary (or in the name of a nominee of the secured party) may be reached by a creditor by legal process upon the secured party.

(d) The interest of a debtor in a certificated security that is in the possession of or registered in the name of a financial intermediary or in an uncertificated security registered in the name of a financial intermediary may be reached by a creditor by legal process upon the financial intermediary on whose books the interest of the debtor appears.

(e) Unless otherwise provided by law, a creditor's lien upon the interest of a debtor in a security obtained pursuant to Subsection (c) or (d) is not a restraint on the transfer of the security, free of the lien, to a third party for new value; but in the event of a transfer, the lien applies to the proceeds of the transfer in the hands of the secured party or financial intermediary, subject to any claims having priority.

(f) A creditor whose debtor is the owner of a security is entitled to aid from courts of appropriate jurisdiction, by injunction or otherwise, in reaching the security or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by ordinary legal process.

24.40.180 No Conversion by Good Faith Conduct

An agent or bailee who in good faith (including observance of reasonable commercial standards if he or she is in the business of buying, selling, or otherwise dealing with securities) has received certificated securities and sold, pledged, or delivered them or has sold or caused the transfer or pledge of un certificated securities over which he or she had control according to the instructions of his or her principal, is not liable for conversion or for participation in breach of fiduciary duty although the principal had no right so to deal with the securities.

24.40.190 Statute of Frauds

A contract for the sale of securities is not enforceable by way of action or defense unless:

(a) there is some writing signed by the party against whom enforcement is sought or by his or her authorized agent or broker, sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price;

(b) delivery of a certificated security or transfer instruction has been accepted, or transfer of an uncertificated security has been registered and the transferee has failed to send written objection to the issuer within ten days after receipt of the initial transaction statement confirming the registration, or payment has been made, but the contract is enforceable under this provision only to the extent of the delivery, registration, or payment;

(c) within a reasonable time a writing in confirmation of the sale or purchase and sufficient against the sender under paragraph (a) has been received by the party against whom enforcement is sought and he or she has failed to send written objection to its contents within ten days after its receipt; or

(d) the party against whom enforcement is sought admits in his or her pleading, testimony, or otherwise in court that a contract was made for the sale of a stated quantity of described securities at a defined or stated price.

24.40.200 Transfer or Pledge Within Central Depository System

(a) In addition to other methods, a transfer, pledge, or release of a security or any interest therein may be effected by the making of appropriate entries on the books of a clearing corporation reducing the account of the transferor, pledgor, or pledgee and increasing the account of the transferee, pledgee, or pledgor by the amount of the obligation, or the number of shares or rights transferred, pledged, or released, if the security is shown on the account of a transferor, pledgor, or pledgee on the books of the clearing corporation; is subject to the control of the clearing corporation; and

(1) if certificated,

(A) is in the custody of the clearing corporation, another clearing corporation, a custodian bank or a nominee of any of them; and

(B) is in bearer form or indorsed in blank by an appropriate person or registered in the name of the clearing corporation, a custodian bank, or a nominee of any of them; or

(2) if uncertificated, is registered in the name of the clearing corporation, another clearing corporation, a custodian bank, or a nominee of any of them.

(b) Under this section entries may be made with respect to like securities or interests therein as a part of a fungible bulk and may refer merely to a quantity of a particular security without reference to the name of the registered owner, certificate or bond number, or the like, and, in appropriate cases, may be on a net basis taking into account other transfers, pledges, or releases of the same security.

(c) A transfer under this section is effective (Section 24.40.130) and the purchaser acquires the rights of the transferor (Section 24.40.010). A pledge or release under this section is the transfer of a limited interest. If a pledge or the creation of a security interest is intended, the security interest is perfected at the time when both value is given by the pledgee and the appropriate entries are made (Section 24.40.220). A transferee or pledgee under this section may be a bona fide purchaser (Section 24.40.020).

(d) A transfer or pledge under this section is not a registration of transfer under Chapter 24.41.

(e) That entries made on the books of the clearing corporation as provided in Subsection (a) are not appropriate does not affect the validity or effect of the entries or the liabilities or obligations of the clearing corporation to any person adversely affected thereby.

24.40.210 List of Depositors with Clearing Corporation Furnished to Issuer on Request; Fee

Pursuant to Section 24.40.200 a clearing corporation shall, upon written request, furnish to any issuer within a reasonable time a list disclosing the names of all persons who have securities of the issuer in their account with a depository and including a statement of the principal amount or number of units of each such security of the issuer on deposit. The clearing corporation may charge the issuer a fee for such written list. Such fee shall bear a reasonable relation to the cost of furnishing such list.

24.40.220 Enforceability, Attachment, Perfection and Termination of Security Interests

(a) A security interest in a security is enforceable and can attach only if it is transferred to the secured party or a person designated by him or her pursuant to a provision of Section 24.40.130(a).

(b) A security interest so transferred pursuant to agreement by a transferor who has rights in the security to a transferee who has given value is a perfected security interest, but a security interest that has been transferred solely under paragraph (9) of Section 24.40.130(a) becomes unperfected after twenty-one (21) days unless, within that time, the requirements for transfer under any other provision of Section 24.40.130(a) are satisfied.

A security interest in a security is subject to the provisions of Section 24.42.090, but:

(1) no filing is required to perfect the security interest; and

(2) no written security agreement signed by the debtor is necessary to make the security interest enforceable, except as otherwise provided in paragraph (8), subsections (A) or (B) of Section 24.40.130(a).

(3) The secured party has the rights and duties provided under Section 24.49.070, to the extent they are applicable, whether or not the security is certificated, and, if certificated, whether or not it is in his or her possession.

(c) Unless otherwise agreed, a security interest in a security is terminated by transfer to the debtor or a person designated by him or her pursuant to a provision of Section 24.40.130(a). If a security is thus transferred, the security interest, if not terminated, becomes unperfected unless the security is certificated and is delivered to the debtor for the purpose of ultimate sale or exchange or presentation, collection, renewal, or registration of transfer. In that case, the security interest becomes unperfected after twenty-one (21) days unless, within that time, the security (or securities for which it has been exchanged) is transferred to the secured party or a person designated by him or her pursuant to a provision of Section 24.40.130(a).

Chapter 24.41 Registration

24.41.010 Duty of Issuer to Register Transfer, Pledge, or Release

(a) If a certificated security in registered form is presented to the issuer with a request to register transfer or an instruction is presented to the issuer with a request to register transfer, pledge, or release, the issuer shall register the transfer, pledge, or release as requested if:

(1) the security is indorsed or the instruction was originated by the appropriate person or persons (Section 24.40.080);

(2) reasonable assurance is given that those endorsements or instructions are genuine and effective (Section 24.41.020);

(3) the issuer has no duty as to adverse claims or has discharged the duty (Section 24.41.030);

(4) any applicable law relating to the collection of taxes has been complied with. However, if spouses own stock as joint tenants with rights of survivorship and a joint tenant spouse dies, the stock ownership may be transferred to the surviving spouse without a department of revenue waiver to transfer pursuant to Chapter 24.10, by mailing to the department of revenue and the issuer of the stock a certified copy of the death certificate; and

(5) the transfer, pledge, or release is in fact rightful or is to a bona fide purchaser.

(b) If an issuer is under a duty to register a transfer, pledge, or release of a security, the issuer is also liable to the person presenting a certificated security or an instruction for registration or his or her principal for loss resulting from any unreasonable delay in registration or from failure or refusal to register the transfer, pledge, or release.

24.41.020 Assurance That Endorsements and Instructions Are Effective

(a) The issuer may require the following assurance that each necessary endorsement of a certificated security or each instruction (Section 24.40.080) is genuine and effective:

(1) in all cases, a guarantee of the signature (Section 24.40.120(a) or Section 24.40.120(b)) of the person indorsing a certificated security or originating an instruction including, in the case of an instruction, a warranty of the taxpayer identification number or, in the absence thereof, other reasonable assurance of identity;

(2) if the endorsement is made or the instruction is originated by an agent, appropriate assurance of authority to sign;

(3) if the endorsement is made or the instruction is originated by a fiduciary, appropriate evidence of appointment or incumbency;

(4) if there is more than one fiduciary, reasonable assurance that all who are required to sign have done so; and

(5) if the endorsement is made or the instruction is originated by a person not covered by any of the foregoing, assurance appropriate to the case corresponding as nearly as may be to the foregoing.

(b) A "guarantee of the signature" in Subsection (a) means a guarantee signed by or on behalf of a person reasonably believed by the issuer to be responsible. The issuer may adopt standards with respect to responsibility if they are not manifestly unreasonable.

(1) in the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of that court or an officer thereof and dated within sixty (60) days before the date of presentation for transfer, pledge, or release; or

(2) in any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by the issuer to be responsible or, in the absence of that document or certificate, other evidence reasonably deemed by the issuer to be appropriate. The issuer may adopt standards with respect to the evidence if they are not manifestly unreasonable. The issuer is not charged with notice of the contents of any document obtained pursuant to this Subsection (b) except to the extent that the contents relate directly to the appointment or incumbency.

(d) The issuer may elect to require reasonable assurance beyond that specified in this section, but if it does so and, for a purpose other than that specified in Subsection (c)(2), both requires and obtains a copy of a will, trust, indenture, articles of co partnership, bylaws, or other controlling instrument, it is charged with notice of all matters contained therein affecting the transfer, pledge, or release.

24.41.030 Issuer's Duty as to Adverse Claims

(a) An issuer to whom a certificated security is presented for registration shall inquire into adverse claims if:

(1) a written notification of an adverse claim is received at a time and in a manner affording the issuer a reasonable opportunity to act on it prior to the issuance of a new, reissued, or reregistered certificated security, and the notification identifies the claimant, the registered owner, and the issue of which the security is a part, and provides an address for communications directed to the claimant; or

(2) the issuer is charged with notice of an adverse claim from a controlling instrument it has elected to require under Section 24.41.020(d).

(b) The issuer may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or certified mail at the address furnished by him or her or, if there be no such address, at his or her residence or regular place of business that the certificated security has been presented for registration of transfer by a named person, and that the transfer will be registered unless within thirty (30) days from the date of mailing the notification, either:

(1) an appropriate restraining order, injunction, or other process issues from a court of competent jurisdiction; or

(2) there is filed with the issuer an indemnity bond, sufficient in the issuer's judgment to protect the issuer and any transfer agent, registrar, or other agent of the issuer involved from any loss it or they may suffer by complying with the adverse claim.

(c) Unless an issuer is charged with notice of an adverse claim from a controlling instrument which it has elected to require under Section 24.41.020(d) or receives notification of an adverse claim under Subsection (a), if a certificated security presented for registration is indorsed by the appropriate person or persons the issuer is under no duty to inquire into adverse claims. In particular:

(1) an issuer registering a certificated security in the name of a person who is a fiduciary or who is described as a fiduciary is not bound to inquire into the existence, extent, or correct description of the fiduciary relationship; and thereafter the issuer may assume without inquiry that the newly registered owner continues to be the fiduciary until the issuer receives written notice that the fiduciary is no longer acting as such with respect to the particular security;

(2) an issuer registering transfer on an endorsement by a fiduciary is not bound to inquire whether the transfer is made in compliance with a controlling instrument or with the law of the jurisdiction having jurisdiction of the fiduciary relationship, including any law requiring the fiduciary to obtain court approval of the transfer; and

(3) the issuer is not charged with notice of the contents of any court record or file or other recorded or unrecorded document even though the document is in its possession and even though the transfer is made on the endorsement of a fiduciary to the fiduciary himself or to his or her nominee.

(d) An issuer is under no duty as to adverse claims with respect to an uncertificated security except:

(1) claims embodied in a restraining order, injunction, or other legal process served upon the issuer if the process was served at a time and in a manner affording the issuer a reasonable opportunity to act on it in accordance with the requirements of Subsection (e);

(2) claims of which the issuer has received a written notification from the registered owner or the registered pledgee if the notification was received at a time and in a manner affording the issuer a reasonable opportunity to act on it in accordance with the requirements of Subsection (e);

(3) claims (including restrictions on transfer not imposed by the issuer) to which the registration of transfer to the present registered owner was subject and were so noted in the initial transaction statement sent to him; and

(4) claims as to which an issuer is charged with notice from a controlling instrument it has elected to require under Section 24.41.020(d).

(e) If the issuer of an uncertificated security is under a duty as to an adverse claim, he or she discharges that duty by:

(1) including a notation of the claim in any statements sent with respect to the security under Subsections (c), (f), and (g) of Section 24.41.080; and

(2) refusing to register the transfer or pledge of the security unless the nature of the claim does not preclude transfer or pledge subject thereto.

(f) If the transfer or pledge of the security is registered subject to an adverse claim, a notation of the claim must be included in the initial transaction statement and all subsequent statements sent to the transferee and pledgee under Section 24.41.080.

(g) Notwithstanding Subsections (d) and (e), if an uncertificated security was subject to a registered pledge at the time the issuer first came under a duty as to a particular adverse claim, the issuer has no duty as to that claim if transfer of the security is requested by the registered pledgee or an appropriate person acting for the registered pledgee unless:

(1) the claim was embodied in legal process which expressly provides otherwise;

(2) the claim was asserted in a written notification from the registered pledgee;

(3) the claim was one as to which the issuer was charged with notice from a controlling instrument it required under Section 24.41.020(d) in connection with the pledgee's request for transfer; or

(4) the transfer requested is to the registered owner.

24.41.040 Liability and Non-Liability for Registration

(a) Except as provided in any law relating to the collection of taxes, the issuer is not liable to the owner, pledgee, or any other person suffering loss as a result of the registration of a transfer, pledge, or release of a security if:

(1) there were on or with a certificated security the necessary endorsements or the issuer had received an instruction originated by an appropriate person (Section 24.40.080); and

(2) the issuer had no duty as to adverse claims or has discharged the duty (Section 24.41.030).

(b) If an issuer has registered a transfer of a certificated security to a person not entitled to it, the issuer on demand shall deliver a like security to the true owner unless:

(1) the registration was pursuant to Subsection (a);

(2) the owner is precluded from asserting any claim for registering the transfer under Section 24.41.050(a); or

(3) the delivery would result in over issue, in which case the issuer's liability is governed by Section 24.38.040.

(c) If an issuer has improperly registered a transfer, pledge, or release of an uncertificated security, the issuer on demand from the injured party shall restore the records as to the injured party to the condition that would have obtained if the improper registration had not been made unless:

(1) the registration was pursuant to Subsection (a); or

(2) the registration would result in over issue, in which case the issuer's liability is governed by Section 24.38.040.

24.41.050 Lost, Destroyed, and Stolen Certificated Securities

(a) If a certificated security has been lost, apparently destroyed, or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after he or she has notice of it and the issuer registers a transfer of the security before receiving notification, the owner is precluded from asserting against the issuer any claim for registering the transfer under Section 24.42.040 or any claim to a new security under this section.

(b) If the owner of a certificated security claims that the security has been lost, destroyed, or wrongfully taken, the issuer shall issue a new certificated security or, at the option of the issuer, an equivalent uncertificated security in place of the original security if the owner:

(1) so requests before the issuer has notice that the security has been acquired by a bona fide purchaser;

(2) files with the issuer a sufficient indemnity bond; and

(3) satisfies any other reasonable requirements imposed by the issuer.

(c) If, after the issue of a new certificated or uncertificated security, a bona fide purchaser of the original certificated security presents it for registration of transfer, the issuer shall register the transfer unless registration would result in over issue, in which event the issuer's liability is governed by Section 24.38.040. In addition to any rights on the indemnity bond, the issuer may recover the new certificated security from the person to whom it was issued or any person taking under him or her except a bona fide purchaser or may cancel the uncertificated security unless a bona fide purchaser or any person taking under a bona fide purchaser is then the registered owner or registered pledgee thereof.

24.41.060 Duty of Authenticating Trustee, Transfer Agent or Registrar

(a) If a person acts as authenticating trustee, transfer agent, registrar, or other agent for an issuer in the registration of transfers of its certificated securities or in the registration of transfers, pledges, and releases of its uncertificated securities, in the issue of new securities, or in the cancellation of surrendered securities:

(1) he is under a duty to the issuer to exercise good faith and due diligence in performing his or her functions; and

(2) with regard to the particular functions he or she performs, he or she has the same obligation to the holder or owner of a certificated security or to the owner or pledgee of an uncertificated security and has the same rights and privileges as the issuer has in regard to those functions.

(b) Notice to an authenticating trustee, transfer agent, registrar or other agent is notice to the issuer with respect to the functions performed by the agent.

24.41.070 Exchangeability of Securities

(a) No issuer is subject to the requirements of this section unless it regularly maintains a system for issuing the class of securities involved under which both certificated and uncertificated securities are regularly issued to the category of owners, which includes the person in whose name the new security is to be registered.

(b) Upon surrender of a certificated security with all necessary endorsements and presentation of a written request by the person surrendering the security, the issuer, if he or she has no duty as to adverse claims or has discharged the duty (Section 24.41.030), shall issue to the person or a person designated by him or her an equivalent uncertificated security subject to all liens, restrictions, and claims that were noted on the certificated security.

(c) Upon receipt of a transfer instruction originated by an appropriate person who so requests, the issuer of an uncertificated security shall cancel the uncertificated security and issue an equivalent certificated security on which must be noted conspicuously any liens and restrictions of the issuer and any adverse claims (as to which the issuer has a duty under Section 24.41.030(d) to which the uncertificated security was subject. The certificated security shall be registered in the name of and delivered to:

(1) the registered owner, if the uncertificated security was not subject to a registered pledge; or

(2) the registered pledgee, if the uncertificated security was subject to a registered pledge.

24.41.080 Statements of Uncertificated Securities

(a) Within two business days after the transfer of an uncertificated security has been registered, the issuer shall send to the new registered owner and, if the security has been transferred subject to a registered pledge, to the registered pledgee a written statement containing:

(1) a description of the issue of which the uncertificated security is a part;

(2) the number of shares or units transferred;

(3) the name and address and any taxpayer identification number of the new registered owner and, if the security has been transferred subject to a registered pledge, the name and address and any taxpayer identification number of the registered pledgee;

(4) a notation of any liens and restrictions of the issuer and any adverse claims (as to which the issuer has a duty under Section 24.41.030(d) to which the uncertificated security is or may be subject at the time of registration or a statement that there are none of those liens, restrictions, or adverse claims; and

(5) the date the transfer was registered.

(b) Within two (2) business days after the pledge of an uncertificated security has been registered, the issuer shall send to the registered owner and the registered pledgee a written statement containing:

(1) a description of the issue of which the uncertificated security is a part;

(2) the number of shares or units pledged;

(3) the name and address and any taxpayer identification number of the registered owner and the registered pledgee;

(4) a notation of any liens and restrictions of the issuer and any adverse claims (as to which the issuer has a duty under Section 24.4205(l) to which the uncertificated security is or may be subject at the time of registration or a statement that there are none of those liens, restrictions, or adverse claims; and

(5) the date the pledge was registered.

(c) Within two business days after the release from pledge of an uncertificated security has been registered, the issuer shall send to the registered owner and the pledgee whose interest was released a written statement containing:

(1) a description of the issue of which the uncertificated security is a part;

(2) the number of shares or units released from pledge;

(3) the name and address and any taxpayer identification number of the registered owner and the pledgee whose interest was released;

(5) the date the release was registered.

(d) An "initial transaction statement" is the statement sent to:

(1) the new registered owner and, if applicable, to the registered pledgee pursuant to Subsection (a);

(2) the registered pledgee pursuant to Subsection (b); or

(3) the registered owner pursuant to Subsection (c).

(4) which initial transaction statement shall be signed by or on behalf of the issuer and must be identified as "Initial Transaction Statement."

(e) Within two (2) business days after the transfer of an uncertificated security has been registered, the issuer shall send to the former registered owner and the former registered pledgee, if any, a written statement containing:

(1) a description of the issue of which the uncertificated security is a part;

(2) the number of shares or units transferred;

(3) the name and address and any taxpayer identification number of the former registered owner and of any former registered pledgee; and

(4) the date the transfer was registered.

(f) At periodic intervals no less frequent than annually and at any time upon the reasonable written request of the registered owner, the issuer shall send to the registered owner of each uncertificated security a dated written statement containing:

(1) a description of the issue of which the uncertificated security is a part;

(2) the name and address and any taxpayer identification number of the registered owner;

(3) the number of shares or units of the uncertificated security registered in the name of the registered owner on the date of the statement;

(4) the name and address and any taxpayer identification number of any registered pledgee and the number of shares or units subject to the pledge; and

(5) a notation of any liens and restrictions of the issuer and any adverse claims (as to which the issuer has a duty under Section 24.41.030(d) to which the uncertificated security is or may be subject or a statement that there are none of those liens, restrictions, or adverse claims.

(g) At periodic intervals no less frequent than annually and at any time upon the reasonable written request of the registered pledgee, the issuer shall send to the registered pledgee of each uncertificated security a dated written statement containing:

(1) a description of the issue of which the uncertificated security is a part;

(2) the name and address and any taxpayer identification number of the registered owner;

(3) the name and address and any taxpayer identification number of the registered pledgee;

(4) the number of shares or units subject to the pledge; and

(h) If the issuer sends the statements described in Subsections (f) and (g) at periodic intervals no less frequent than quarterly, the issuer is not obliged to send additional statements upon request unless the owner or pledgee requesting them pays to the issuer the reasonable cost of furnishing them.

(i) Each statement sent pursuant to this section must bear a conspicuous legend reading substantially as follows: "This statement is merely a record of the rights of the addressee as of the time of its issuance. Delivery of this statement, of itself, confers no rights on the recipient. This statement is neither a negotiable instrument nor a security."

Chapter 24.42 Secured Transactions

24.42.010 Short Title

Chapters 24.42 through 24.48 may be cited as Uniform Commercial Code - Secured Transactions.

24.42.020 Definitions and Index of Definitions

(a) In Chapters 24.42 through 24.48:

(1) "Accession" means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.

(2) "Account", except as used in "account for", means:

(A) A right to payment of a monetary obligation, regardless of whether earned by performance:

(i) For property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;

(ii) For services rendered or to be rendered;

(iii) For a policy of insurance issued or to be issued;

(iv) For a secondary obligation incurred or to be incurred;

(v) For energy provided or to be provided;

(vi) For the use or hire of a vessel under a charter or other contract;

(vii) Arising out of the use of a credit or charge card or information contained on or for use with the card; or

(viii) As winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state.

(B) The term includes a health care insurance receivable. The term does not include:

(i) Right to payment evidenced by chattel paper or an instrument;

(ii) Commercial tort claim;

(iii) Deposit account;

(iv) Investment property;

(v) Letter-of-credit right or letters of credit;

(vi) Right to payment for any money or fund advanced or sold, other than a right arising out of the use of a credit or charge card or information contained on or for use with the card; or

(vii) Certificate of deposit.

(3) "Account debtor" means a person obligated on an account, chattel paper, or general intangible. The term does not include a person obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.

(4) "Accounting", except as used in "accounting for", means a record:

(A) Authenticated by a secured party;

(B) Indicating the aggregate unpaid secured obligations as of a date not more than thirty-five days earlier or thirty-five days later than the date of the record; and

(5) "Agricultural lien" means an interest in farm products:

(A) That secures payment or performance of an obligation for:

(i) Goods or services furnished in connection with a debtor's farming operation or in connection with processing, production, or entrustment of the farm products; or

(ii) Rent on real property leased by a debtor in connection with the debtor's farming operation;

(B) That is created by statute in favor of a person that:

(i) Furnished goods or services in connection with processing, production, or entrustment of the farm product or in the ordinary course of that person's business furnished goods or services to a debtor in connection with a debtor's farming operation; or

(ii) Leased real property to a debtor in connection with the debtor's farming operation; and

(6) "As-extracted collateral" means:

(A) Oil, gas, or other mineral that is subject to a security interest that:

(i) Is created by a debtor having an interest in the mineral before extraction; and

(ii) Attaches to the mineral as extracted; or

(B) Accounts arising out of the sale at the wellhead or minehead of oil, gas, or other mineral in which the debtor had an interest before extraction.

(7) "Authenticate" means:

(A) To sign; or

(B) With present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.

(8) "Bank" means an organization engaged in the business of banking. The term includes a savings bank, savings and loan association, credit union, and trust company.

(9) "Cash proceeds" means proceeds that are money, checks, deposit accounts, certificates of deposit, or the like.

(10) "Certificate of deposit" means a bank record of a sum of money which has been received by the bank and a promise made by the bank to repay the sum of money. The term does not include a deposit account. A certificate of deposit may be negotiable, non-negotiable, nontransferable, certificated, or uncertificated.

(11) "Certificate of title" 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's obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral.

(12) "Certificated certificate of deposit" means a certificate of deposit that is represented by a certificate.

(13) "Chattel paper" 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 subdivision, "monetary obligation" means a monetary obligation secured by the goods or owed under a lease of the 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 or records 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. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.

(14) "Collateral" means the property subject to a security interest or agricultural lien. The term includes:

(A) Proceeds to which a security interest attaches;

(B) Accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and

(15) "Commercial tort claim" means a claim arising in tort with respect to which the claimant is an organization; or

(A) The claimant is an organization; or

(B) The claimant is an individual and the claim:

(i) Arose in the course of the claimant's business or profession; and

(ii) Does not include damages arising out of personal injury to or the death of an individual.

(16) "Commodity account" means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.

(17) "Commodity contract" means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is:

(A) 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

(B) 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.

(18) "Commodity customer" means a person for which a commodity intermediary carries a commodity contract on the intermediary's books.

(19) "Commodity intermediary" means a person that:

(A) Is registered as a futures commission merchant under federal commodities law; or

(B) In the ordinary course of the person's business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.

(20) "Communicate" means:

(A) To send a written or other tangible record;

(B) To transmit a record by any means agreed upon by the persons sending and receiving the record; or

(C) 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.

(21) "Consignee" means a merchant to which goods are delivered in a consignment.

(22) "Consignment" means a transaction, regardless of form, in which a person delivers goods to a merchant for the purpose of sale and:

(A) The merchant:

(i) Deals in goods of that kind under a name other than the name of the person making delivery;

(ii) Is not an auctioneer; and

(iii) Is not generally known by its creditors to be substantially engaged in selling the goods of others;

(B) With respect to each delivery, the aggregate value of the goods is one thousand dollars or more at the time of delivery;

(D) The transaction does not create a security interest that secures an obligation.

(23) "Consignor" means a person that delivers goods to a consignee in a consignment.

(24) "Consumer debtor" means a debtor in a consumer transaction.

(25) "Consumer goods" means goods that are used or bought for use primarily for personal, family, or household purposes.

(26) "Consumer-goods transaction" means a consumer transaction in which:

(A) An individual incurs an obligation primarily for personal, family, or household purposes; and

(B) A security interest in consumer goods secures the obligation.

(27) "Consumer obligor" 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.

(28) "Consumer transaction" means a transaction in which:

(A) An individual incurs an obligation primarily for personal, family, or household purposes;

(B) A security interest secures the obligation; and

(C) The collateral is held or acquired primarily for personal, family, or household purposes. The term includes consumer-goods transactions.

(29) "Continuation statement" means an amendment of a financing statement which:

(A) Identifies, by its file number, the initial financing statement to which it relates; and

(B) Indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.

(30) "Debtor" means:

(A) A person having an interest, other than a security interest or other lien, in the collateral, regardless of whether the person is an obligor;

(B) A seller of accounts, chattel paper, payment intangibles, or promissory notes; or

(31) "Deposit account" means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or an account evidenced by a certificate of deposit or an instrument.

(32) "Document" means a document of title or a receipt of the type described in subsection (b) of Section 24.33.010.

(33) "Electronic chattel paper" means chattel paper evidenced by a record consisting of information stored in an electronic medium.

(34) "Encumbrance" means a right, other than an ownership interest, in real property.

The term includes mortgages and other liens on real property.

(35) "Equipment" means goods other than inventory, farm products, or consumer goods.

(36) "Farm products" means goods, other than standing timber, subject to a lien created under chapter 35.17, chapter 35.30, or chapter 35.31, or with respect to which the debtor is engaged in a farming operation and which are:

(A) Crops grown, growing, or to be grown, including:

(i) Crops produced on trees, vines, and bushes; and

(ii) Aquatic goods produced in aquacultural operations;

(B) Livestock, born or unborn, including aquatic goods produced in aquacultural operations;

(D) Products of crops or livestock in their unmanufactured states.

(37) "Farming operation" means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.

(38) "File number" means the number assigned to an initial financing statement pursuant to subsection (a) of Section 24.46.180.

(39) "Filing office" means an office designated in section 24.4272 as the place to file a financing statement.

(40) "Filing-office rule" means a rule adopted under Section 24.46.250.

(41) "Financing statement" means a record composed of an initial financing statement and any filed record relating to the initial financing statement.

(42) "Fixture filing" means the filing of a financing statement covering goods that are or are to become fixtures and satisfying subsections (a) and (b) of Section 24.46.010. The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.

(43) "Fixtures" means goods that have become so related to particular real property that an interest in them arises under real property law.

(44) "General intangible" means any personal property, including things in action, other than accounts, certificates of deposit, 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.

(45) Reserved.

(46) "Goods" means all things that are movable when a security interest attaches.

(A) The term includes:

(i) Fixtures;

(ii) Standing timber that is to be cut and removed under a conveyance or contract for sale;

(iii) The unborn young of animals;

(iv) Crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes; and

(v) Manufactured homes.

(B) 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:

(i) The program is associated with the goods in such a manner that the program is customarily considered part of the goods; or

(ii) By becoming the owner of the goods, a person acquires a right to use the program in connection with the goods.

(C) The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, certificates of deposit, 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.

(47) "Governmental unit" 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.

(48) "Health care insurance receivable" 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.

(49) "Instrument" 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 indorsement or assignment. The term does not include:

(A) Certificates of deposit;

(B) Investment property;

(D) 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.

(50) "Inventory" means goods, other than farm products, that:

(A) Are leased by a person as lessor;

(B) Are held by a person for sale or lease or to be furnished under a contract of service;

(D) Consist of raw materials, work in process, or materials used or consumed in a business.

(51) "Investment property" means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.

(52) "Jurisdiction of organization", with respect to a registered organization, means the jurisdiction under whose law the organization is organized.

(53) "Letter-of-credit right" means a right to payment or performance under a letter of credit, regardless of whether 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.

(54) "Lien creditor" means:

(A) A creditor that has acquired a lien on the property involved by attachment, levy, or the like;

(B) An assignee for benefit of creditors from the time of assignment;

(D) A receiver in equity from the time of appointment.

(55) "Manufactured home" means a structure, transportable in one or more sections, that, in the traveling mode, is eight body feet [2.44 meters] or more in width or forty body feet [12.19 meters] or more in length, or, when erected on site, is three hundred twenty square feet [29.73 square meters] or more, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. The term includes any structure that meets all of the requirements of this subdivision 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.

(56) "Manufactured-home transaction" means a secured transaction:

(A) Which creates a purchase-money security interest in a manufactured home, other than a manufactured home held as inventory; or

(B) In which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.

(57) "Mortgage" means a consensual interest in real property, including fixtures, that secures payment or performance of an obligation.

(58) "New debtor" means a person that becomes bound as debtor under subsection (d) of Section 24.43.030 by a security agreement previously entered into by another person.

(59) "New value" means:

(A) Money;

(B) Money's worth in property, services, or new credit; or

The term does not include an obligation substituted for another obligation.

(60) "Noncash proceeds" means proceeds other than cash proceeds.

(61) "Non-negotiable certificate of deposit" means a bank record that contains an acknowledgment that a sum of money has been received by the issuer and a promise by the issuer to repay the sum of money other than a deposit account or negotiable instrument.

(62) "Nontransferable certificate of deposit" means a non-negotiable certificate of deposit which may be transferred only on the books of the issuer, with the consent of the issuer, or subject to other restrictions or considerations of the issuer on transfer. The term does not include a deposit account.

(63) "Obligor" means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral:

(A) Owes payment or other performance of the obligation;

(B) Has provided property other than the collateral to secure payment or other performance of the obligation; or

The term does not include issuers or nominated persons under a letter of credit.

(64) "Original debtor", except as used in subsection (c) of Section 24.44.100, means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under subsection (d) of Section 24.43.030.

(65) "Payment intangible" means a general intangible under which the account debtor's principal obligation is a monetary obligation.

(66) "Person related to", with respect to an individual, means:

(A) The spouse of the individual;

(B) A brother, brother-in-law, sister, or sister-in-law of the individual;

(D) Any other relative, by blood or marriage, of the individual or the individual's spouse who shares the same home with the individual.

(67) "Person related to", with respect to an organization, means:

(A) A person directly or indirectly controlling, controlled by, or under common control with the organization;

(B) An officer or director of, or a person performing similar functions with respect to, the organization;

(C) An officer or director of, or a person performing similar functions with respect to, a person described in paragraph (A);

(D) The spouse of an individual described in paragraph (A), (B), or (C); or

(E) An individual who is related by blood or marriage to an individual described in paragraph (A), (B), (C), or (D) and shares the same home with the individual.

(68) "Proceeds", except as used in subsection (b) of Section 24.47.090, means the following property:

(A) Whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;

(B) Whatever is collected on, or distributed on account of, collateral;

(D) 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

(E) 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.

(69) "Promissory note" 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.

(70) "Proposal" 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 under Section 24.47.180 through Section 24.47.200.

(71) "Public organic record" means a record that is available to the public for inspection and which is:

(A) A record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which amends or restates the initial record;

(B) An organic record of a business trust consisting of the record initially filed with a state and any record filed with the state which amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state; or

(C) A record consisting of legislation enacted by the legislature of a state or the Congress of the United States which forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or United States which amends or restates the name of the organization.

(72) "Pursuant to commitment", with respect to an advance made or other value given by a secured party, means pursuant to the secured party's obligation, regardless of whether a subsequent event of default or other event not within the secured party's control has relieved or may relieve the secured party from the secured party's obligation.

(73) "Record", except as used in "for record", "of record", "record or legal title", and "record owner", 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.

(74) "Registered organization" means an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust's organic record be filed with the state.

(75) "Secondary obligor" means an obligor to the extent that:

(A) The obligor's obligation is secondary; or

(B) The obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.

(76) "Secured party" means:

(A) A person in whose favor a security interest is created or provided for under a security agreement, regardless of whether any obligation to be secured is outstanding;

(B) A person that holds an agricultural lien;

(D) A person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;

(E) 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

(F) A person that holds a security interest arising under Section 24.05.010, Section 24.06.050, subsection (c) of Section 24.08.110, subsection (e) of Section 24.13.080, Section 24.21.100, or Section 24.30.180.

(77) "Security agreement" means an agreement that creates or provides for a security interest.

(78) "Send", in connection with a record or notification, means:

(A) 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

(B) To cause the record or notification to be received within the time that it would have been received if properly sent under paragraph (A).

(79) "Software" 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.

(80) "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(81) "Supporting obligation" 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.

(82) "Tangible chattel paper" means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.

(83) "Termination statement" means an amendment of a financing statement which:

(A) Identifies, by the amendment's file number, the initial financing statement to which it relates; and

(B) Indicates either that the amendment is a termination statement or that the identified financing statement is no longer effective.

(84) "Transmitting utility" means a person primarily engaged in the business of:

(A) Operating a railroad, subway, street railway, or trolley bus;

(B) Transmitting communications electrically, electromagnetically, or by light;

(D) Transmitting or producing and transmitting electricity, steam, gas, or water.

(85) "Uncertificated certificate of deposit" means an obligation of a bank to repay a sum of money that it has received which is not represented by a certificate, but only by an entry on the books of the bank and any documentation given to the customer by the bank. The term does not include a deposit account.

(b) "Control" as provided under section 24.3207 and the following definitions in other chapters apply to Chapters 24.42 through 24.48:

(1) "Applicant". Section 24.30.020,

(2) "Beneficiary". Section 24.30.020.

(3) "Broker". Section 24.38.020.

(4) "Certificated security". Section 24.38.020.

(5) "Check". Section 24.14.040.

(6) "Clearing corporation". Section 24.38.020.

(7) "Contract for sale". Section 24.02.060.

(8) "Customer". Section 24.20.040.

(9) "Entitlement holder". Section 24.38.020.

(10) "Financial asset". Section 24.38.020.

(11) "Holder in due course". Section 24.21.110.

(12) "Issuer" (with respect to a letter of credit or letter-of-credit right). Section 24.30.020

(13) "Issuer" (with respect to a security). Section 24.38.020.

(14) "Issuer" (with respect to documents of title). Section 24.32.020.

(15) "Lease". Section 24.09.030.

(16) "Lease agreement". Section 24.09.030.

(17) "Lease contract". Section 24.09.030.

(18) "Leasehold interest". Section 24.09.030.

(19) "Lessee". Section 24.09.030.

(20) "Lessee in ordinary course of business". Section 24.09.030.

(21) "Lessor". Section 24.09.030.

(22) "Lessor's residual interest". Section 24.09.030.

(23) "Letter of credit". Section 24.30.020.

(24) "Merchant". Section 24.02.040.

(25) "Negotiable instrument". Section 24.14.040.

(26) "Nominated person". Section 24.30.020.

(27) "Note". Section 24.14.030.

(28) "Proceeds of a letter of credit". Section 24.30.140.

(29) "Prove". Section 24.14.030.

(30) "Sale". Section 24.02.060.

(31) "Securities account". Section 24.38.020.

(32) "Securities intermediary". Section 24.38.020.

(33) "Security". Section 24.38.020.

(34) "Security certificate". Section 24.38.020.

(35) "Security entitlement". Section 24.38.020.

(36) "Uncertificated security". Section 24.38.020.

(c) Chapter 24.01 contains general definitions and principles of construction and interpretation applicable throughout Chapters 24.42 through 24.48.

24.42.030 Purchase-Money Security Interest - Application of Payments - Burden of Establishing

(a) In this section:

(1) "Purchase-money collateral" means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and

(2) "Purchase-money obligation" 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.

(b) A security interest in goods is a purchase-money security interest:

(1) To the extent that the goods are purchase-money collateral with respect to that security interest;

(2) If the security interest is in inventory that is or was purchase-money collateral, also 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

(3) Also 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.

(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:

(1) The debtor acquired its interest in the software in an integrated transaction in which the debtor acquired an interest in the goods; and

(2) The debtor acquired its interest in the software for the principal purpose of using the software in the goods.

(d) The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.

(e) 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:

(1) In accordance with any reasonable method of application to which the parties agree;

(2) In the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or

(3) In the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:

(A) To obligations that are not secured; and

(B) If more than one obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.

(f) A purchase-money security interest does not lose its status as such, even if:

(1) The purchase-money collateral also secures an obligation that is not a purchase-money obligation;

(2) Collateral that is not purchase-money collateral also secures the purchase-money obligation; or

(3) The purchase-money obligation has been renewed, refinanced, consolidated, or restructured.

(g) 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.

24.42.040 Control of Deposit Account or Uncertified Certificate of Deposit

(a) A secured party has control of a deposit account or uncertificated certificate of deposit if:

(1) The secured party is the bank with which the deposit account or uncertificated certificate of deposit is maintained;

(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 or uncertificated certificate of deposit without further consent by the debtor; or

(3) The secured party becomes the bank's customer with respect to the deposit account or uncertificated certificate of deposit.

(b) A secured party that has satisfied subsection (a) has control, even if the debtor retains the right to direct the disposition of funds from the deposit account or uncertificated certificate of deposit.

24.42.050 Control of Electronic Chattel Paper

(a) A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.

(b) A system satisfies subsection (a), and 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:

(1) A single authoritative copy of the record or records exists which is unique, identifiable, and, except as otherwise provided in subdivisions (4), (5), and (6), unalterable;

(2) The authoritative copy identifies the secured party as the assignee of the record or records;

(3) The authoritative copy is communicated to and maintained by the secured party or the secured party's designated custodian;

(4) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party;

(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

(6) Any amendment of the authoritative copy is readily identifiable as an authorized or unauthorized revision

24.42.060 Control of Investment Property

(a) A person has control of a certificated security, uncertificated security, or security entitlement as provided in Section 24.38.060.

(b) A secured party has control of a commodity contract if:

(1) The secured party is the commodity intermediary with which the commodity contract is carried; or

(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.

(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.

24.42.070 Control of Letter-of-Credit Right

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 24.30.140 or otherwise applicable law or practice

24.42.080 Sufficiency of Description

(a) Except as otherwise provided in subsections (c) through (e), a description of personal or real property is sufficient, regardless of whether the description is specific, if the description reasonably identifies what is described.

(b) Except as otherwise provided in subsection (d), a description of collateral reasonably identifies the collateral if it identifies the collateral by:

(1) Specific listing;

(2) Category;

(3) Except as otherwise provided in subsection (e), a type of collateral defined in the Uniform Commercial Code;

(4) Quantity;

(5) Computational or allocational formula or procedure; or

(6) Except as otherwise provided in subsection (c), any other method, if the identity of the collateral is objectively determinable.

(c) A description of collateral as "all the debtor's assets" or "all the debtor's personal property" or using words of similar import does not reasonably identify the collateral.

(d) Except as otherwise provided in subsection (e), a description of a security entitlement, securities account, or commodity account is sufficient if the description describes:

(1) The collateral by those terms or as investment property; or

(2) The underlying financial asset or commodity contract.

(e) A description only by type of collateral defined in the Uniform Commercial Code is an insufficient description of:

(1) A commercial tort claim; or

(2) A security entitlement, a securities account, or a commodity account.

24.42.090 Scope

(a) Except as otherwise provided in subsections (c) and (d), Chapters 24.42 through 24.48 apply to:

(1) A transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;

(2) A sale of accounts, chattel paper, payment intangibles, or promissory notes;

(3) A consignment;

(4) A security interest arising under Section 24.05.010, Section 24.06.050, subsection (c) of Section 24.08.110, or subsection € of Section 24.13.080, as provided in Section 24.42.100; and

(5) A security interest arising under Section 24.21.100 or Section 24.30.180.

(b) Except as provided in subsection (a), the application of Chapters 24.42 through 24.48 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 Chapters 24.42 through 24.48 do not apply.

(1) An unrecorded conveyance of real estate is void as against any subsequent purchaser in good faith, and for a valuable consideration, of the same real estate or any part of the same real estate, regardless of whether recorded in the form of a warranty deed or deed of quitclaim and release or the form in common use first is recorded or as against an attachment on the property or judgment, against the owner of record, before the recording of the conveyance. The fact that the first recorded conveyance is a quitclaim deed does not affect the question of good faith of the subsequent purchaser, or be of itself notice of any unrecorded conveyance of the same real estate or any part of the same real estate. This subsection is notice to all who claim under unrecorded instruments that prior recording of later instruments may nullify their title to or lien on affected real property. An action affecting any title to or lien on real property may not be commenced or defense or counterclaim asserted on the ground that a recorded instrument was not entitled to be recorded. The record of all instruments whether or not entitled to be recorded is deemed valid and sufficient as the legal record of the instruments. (NOTE: this is ND Cen Code 47-19-41, which was directly referenced in Chapter 9 of the ND UCC)

(1) An applicable statute, regulation, or treaty of the United States preempts Chapters 24.42 through 24.48;

(2) A statute of another Tribe, 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

(3) The rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under Section 24.30.140.

(d) Chapters 24.42 through 24.48 do not apply to:

(1) A landlord's lien, other than an agricultural lien;

(2) A lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but Section 24.44.330 applies with respect to priority of the lien;

(3) An assignment of a claim for wages, salary, or other compensation of an employee;

(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;

(5) An assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only;

(6) An assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;

(7) An assignment of a single account, payment intangible, or promissory note to an assignee in full or partial satisfaction of a pre-existing indebtedness;

(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 Section 24.44.150 and Section 24.44.220 apply with respect to proceeds and priorities in proceeds;

(9) An assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;

(10) A right of recoupment or setoff, but:

(A) Section 24.44.400 applies with respect to the effectiveness of rights of recoupment or setoff against deposit accounts or certificates of deposit; and

(B) Section 24.45.040 applies with respect to defenses or claims of an account debtor;

(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:

(A) Liens on real property in Section 24.43.030 and Section 24.44.080;

(B) Fixtures in Section 24.44.340;

(D) Security agreements covering personal and real property in Section 24.47.040;

(12) An assignment of a claim arising in tort, other than a commercial tort claim, but Section 24.44.150 and Section 24.44.220 apply with respect to proceeds and priorities in proceeds; or

(13) A transfer by this state or a governmental unit of this state.

24.42.100 Security Interests Arising Under Chapter 24.02-24.08 or 24.09-24.13

A security interest arising under Section 24.05.010, Section 24.06.050, subsection (c) of Section 24.08.110, or subsection (e) of Section 24.13.080 is subject to Chapters 24.42 through 24.48. However, until the debtor obtains possession of the goods:

(a) The security interest is enforceable, even if subdivision (3) of subsection (b) of Section 24.43.030 has not been satisfied;

(b) Filing is not required to perfect the security interest;

(c) The rights of the secured party after default by the debtor are governed by section 24.02 – section 24.08 or 41-02.1; and section 24.09 – section 24.13

(d) The security interest has priority over a conflicting security interest created by the debtor.

Chapter 24.43 Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement

24.43.010 General Effectiveness of Security Agreement

A security agreement is effective according to the security agreement's terms between the parties, against purchasers of the collateral, and against creditors.

24.43.020 Title to Collateral Immaterial

Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of Chapters 24.42 through 24.48 with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.

24.43.030 Attachment and Enforceability of Security Interest – Proceeds – Supporting Obligation – Formal Requisites

(a) A security interest attaches to collateral when the security interest becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.

(b) Except as otherwise provided in subsections (c) through (i), a security interest is enforceable against the debtor and third parties with respect to the collateral only if:

(1) Value has been given;

(2) The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and

(3) One of the following conditions is met:

(A) 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;

(B) The collateral is not a certificated security and is in the possession of the secured party under Section 24.44.130 pursuant to the debtor's security agreement;

(C) The collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under Section 24.40.030 pursuant to the debtor's security agreement; or

(D) The collateral is deposit accounts, electronic chattel paper, investment property, letter-of-credit rights, electronic documents, or uncertificated certificates of deposit, and the secured party has control under section 24.3207, Section 24.42.040, Section 24.42.050, Section 24.42.060, or Section 24.42.070 pursuant to the debtor's security agreement.

(c) Subsection (b) is subject to section 24.4110 on the security interest of a collecting bank, Section 24.30.180 (as amended) on the security interest of a letter-of-credit issuer or nominated person, Section 24.42.100 on a security interest arising under Chapter 24.02 – Chapter 24.08 or Chapter 24.09 – Chapter 24.13, and Section 24.43.060 on security interests in investment property.

(d) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than Chapters 24.42 through 24.48 or by contract:

(1) The security agreement becomes effective to create a security interest in the person's property; or

(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.

(e) If a new debtor becomes bound as debtor by a security agreement entered into by another person:

(1) The agreement satisfies subdivision (3) of subsection (b) with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and

(2) Another agreement is not necessary to make a security interest in the property enforceable.

(f) The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by Section 24.44.150 and is also attachment of a security interest in a supporting obligation for the collateral.

(g) Except as provided in subsection (j), 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.

(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.

(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.

(j) An unrecorded conveyance of real estate is void as against any subsequent purchaser in good faith, and for a valuable consideration, of the same real estate or any part of the same real estate, regardless of whether recorded in the form of a warranty deed or deed of quitclaim and release or the form in common use first is recorded or as against an attachment on the property or judgment, against the owner of record, before the recording of the conveyance. The fact that the first recorded conveyance is a quitclaim deed does not affect the question of good faith of the subsequent purchaser, or be of itself notice of any unrecorded conveyance of the same real estate or any part of the same real estate. This section is notice to all who claim under unrecorded instruments that prior recording of later instruments may nullify their title to or lien on affected real property. An action affecting any title to or lien on real property may not be commenced or defense or counterclaim asserted on the ground that a recorded instrument was not entitled to be recorded. The record of all instruments whether or not entitled to be recorded is deemed valid and sufficient as the legal record of the instruments.

24.43.040 After-Acquired Property – Future Advances

(a) Except as otherwise provided in subsection (b), a security agreement may create or provide for a security interest in after-acquired collateral.

(b) A security interest does not attach under a term constituting an after-acquired property clause to:

(1) Consumer goods, other than an accession if given as additional security, unless the debtor acquires rights in the consumer goods within ten days after the secured party gives value; or

(2) A commercial tort claim.

(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, regardless of whether the advances or value is given pursuant to commitment.

24.43.050 Use or Disposition of Collateral Permissible

(a) A security interest is not invalid or fraudulent against creditors solely because:

(1) The debtor has the right or ability to:

(A) Use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;

(B) Collect, compromise, enforce, or otherwise deal with collateral;

(D) Use, commingle, or dispose of proceeds; or

(2) The secured party fails to require the debtor to account for proceeds or replace collateral.

(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.

24.43.060 Security Interest Arising in Purchase or Delivery of Financial Asset

(a) A security interest in favor of a securities intermediary attaches to a person's security entitlement if:

(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

(2) The securities intermediary credits the financial asset to the buyer's securities account before the buyer pays the securities intermediary.

(b) The security interest described in subsection (a) secures the person's obligation to pay for the financial asset.

(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:

(1) The security or other financial asset:

(A) In the ordinary course of business is transferred by delivery with any necessary indorsement or assignment; and

(B) Is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and

(2) The agreement calls for delivery against payment.

(d) The security interest described in subsection (c) secures the obligation to make payment for the delivery.

24.43.070 Rights and Duties of Secured Party Having Possession or Control of Collateral

(a) Except as otherwise provided in subsection (d), a secured party shall use reasonable care in the custody and preservation of collateral in the secured party'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.

(b) Except as otherwise provided in subsection (d), if a secured party has possession of collateral:

(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;

(2) The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;

(3) The secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and

(4) The secured party may use or operate the collateral:

(A) For the purpose of preserving the collateral or the collateral's value;

(B) As permitted by an order of a court having competent jurisdiction; or

(c) Except as otherwise provided in subsection (d), a secured party having possession of collateral or control of collateral under section 24.3207, Section 24.42.040, Section 24.42.050, Section 24.42.060, or Section 24.42.070:

(1) May hold as additional security any proceeds, except money or funds, received from the collateral;

(2) Shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and

(3) May create a security interest in the collateral.

(d) If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:

(1) Subsection (a) does not apply unless the secured party is entitled under an agreement:

(A) To charge back uncollected collateral; or

(B) 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

(2) Subsections (b) and (c) do not apply.

24.43.080 Additional Duties of Secured Party Having Control of Collateral

(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.

(b) Within ten days after receiving an authenticated demand by the debtor:

(1) A secured party having control of a deposit account or an uncertificated certificate of deposit under subdivision (2) of subsection (a) of Section 24.42.040 shall send to the bank with which the deposit account or uncertificated certificate of deposit is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;

(2) A secured party having control of a deposit account or an uncertificated certificate of deposit under subdivision (3) of subsection (a) of Section 24.42.040 shall:

(A) Pay the debtor the balance on deposit in the deposit account or uncertificated certificate of deposit; or

(B) Transfer the balance on deposit into a deposit account or an uncertificated certificate of deposit in the debtor's name;

(3) A secured party, other than a buyer, having control of electronic chattel paper under Section 24.42.050 shall:

(A) Communicate the authoritative copy of the electronic chattel paper to the debtor or the electronic chattel paper's designated custodian;

(B) 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

(C) Take appropriate action to enable the debtor or the debtor's 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;

(4) A secured party having control of investment property under subdivision (2) of subsection (d) of Section 24.38.040 or subsection (b) of Section 24.42.060 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;

(5) A secured party having control of a letter-of-credit right under Section 24.42.070 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

(6) A secured party having control of an electronic document shall:

(A) Give control of the electronic document to the debtor or its designated custodian;

(B) 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

(C) 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.

24.43.090 Duties of Secured Party If Account Debtor Has Been Notified of the Assignment

(a) Except as otherwise provided in subsection (c), this section applies if:

(1) There is no outstanding secured obligation; and

(2) The secured party is not committed to make advances, incur obligations, or otherwise give value.

(b) Within ten 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 24.45.060 an authenticated record that releases the account debtor from any further obligation to the secured party.

(c) This section does not apply to an assignment constituting the sale of an account, chattel paper, or payment intangible

24.43.100 Request for Accounting – Request Regarding List of Collateral or Statement of Account

(a) In this section:

(1) "Request" means a record of a type described in subdivision (2), (3), or (4).

(2) "Request for an accounting" 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.

(3) "Request regarding a list of collateral" 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.

(4) "Request regarding a statement of account" 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.

(b) Subject to subsections (c) through (f), 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 days after receipt:

(1) In the case of a request for an accounting, by authenticating and sending to the debtor an accounting; and

(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.

(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 days after receipt.

(d) A person that receives a request regarding a list of collateral, claims no interest in the collateral when that person receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within fourteen days after receipt by sending to the debtor an authenticated record:

(1) Disclaiming any interest in the collateral; and

(2) If known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient's interest in the collateral.

(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 days after receipt by sending to the debtor an authenticated record:

(1) Disclaiming any interest in the obligations; and

(2) If known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient's interest in the obligations.

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 for each additional response

Chapter 24.44 Perfection and Priority

24.44.010 Law Governing Perfection and Priority of Security Interests

Except as otherwise provided in Section 24.44.030 through Section 24.44.060, the following rules determine the law governing perfection, the effect of perfection or non-perfection, and the priority of a security interest in collateral:

(a) 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 non-perfection, and the priority of a security interest in collateral.

(b) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or non-perfection, and the priority of a possessory security interest in that collateral.

(c) Except as otherwise provided in subsection (d), while tangible negotiable documents, goods, instruments, money, or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:

(1) Perfection of a security interest in the goods by filing a fixture filing;

(2) Perfection of a security interest in timber to be cut; and

(3) The effect of perfection or non-perfection and the priority of a nonpossessory security interest in the collateral.

The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in as-extracted collateral.

24.44.020 Law Governing Perfection and Priority of Agricultural Law

While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or non-perfection, and the priority of an agricultural lien on the farm products.

24.44.030 Law Governing Perfection and Priority of Security Interests in Good Covered by a Certificate of Title

(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.

(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.

(c) The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or non-perfection, 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.

24.44.040 Law Governing Perfection and Priority of Security Interests in Deposit Accounts or Certificates of Deposit

(a) The local law of a bank's jurisdiction governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in a deposit account or certificate of deposit maintained with that bank.

(b) The following rules determine a bank's jurisdiction for purposes of this part:

(1) If an agreement between the bank and its customer governing the deposit account or certificate of deposit expressly provides that a particular jurisdiction is the bank's jurisdiction for purposes of this part, Chapters 24.42 through 24.48, or this title, that jurisdiction is the bank's jurisdiction.

(2) If subdivision (1) does not apply and an agreement between the bank and its customer governing the deposit account or certificate of deposit expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank's jurisdiction.

(3) If neither subdivision (1) nor (2) applies and an agreement between the bank and the bank's customer governing the deposit account or certificate of deposit expressly provides that the deposit account or certificate of deposit is maintained at an office in a particular jurisdiction, that jurisdiction is the bank's jurisdiction.

(4) If none of the preceding subdivisions applies, the bank's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer's account is located.

(5) If none of the preceding subdivisions applies, the bank's jurisdiction is the jurisdiction in which the chief executive office of the bank is located.

24.44.050 Law Governing Perfection and Priority of Security Interests in Investment Property

(a) Except as otherwise provided in subsection (c), the following rules apply:

(1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in the certificated security represented thereby.

(2) The local law of the issuer's jurisdiction as specified in subsection (d) of section 24.3810 governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in an uncertificated security.

(3) The local law of the securities intermediary's jurisdiction as specified in subsection (d) of section 24.3810 governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in a security entitlement or securities account.

(4) The local law of the commodity intermediary's jurisdiction governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in a commodity contract or commodity account.

(b) The following rules determine a commodity intermediary's jurisdiction for purposes of Section 24.44.010 through Section 24.44.420:

(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's jurisdiction for purposes of Section 24.44.010 through Section 24.44.420, Chapters 24.42 through 24.48, or this title, that jurisdiction is the commodity intermediary's jurisdiction.

(2) If subdivision (1) 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's jurisdiction.

(3) If neither subdivision (1) nor (2) 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's jurisdiction.

(4) If none of the preceding subdivisions applies, the commodity intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer's account is located.

(5) If none of the preceding subdivisions applies, the commodity intermediary's jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.

(1) Perfection of a security interest in investment property by filing;

(2) Automatic perfection of a security interest in investment property created by a broker or securities intermediary; and

(3) Automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.

24.44.060 Law Governing Perfection and Priority of Security Interests in Letter-of-Credit Rights

(a) Subject to subsection (c), the local law of the issuer's jurisdiction or a nominated person's jurisdiction governs perfection, the effect of perfection or non-perfection, and the priority of a security interest in a letter-of-credit right if the issuer's jurisdiction or nominated person's jurisdiction is a state.

(b) For purposes of this part, an issuer's jurisdiction or nominated person'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 24.3026.

24.44.070 Located of Debtor

(a) In this section, "place of business" means a place where a debtor conducts its affairs.

(b) Except as otherwise provided in this section, the following rules determine a debtor's location:

(1) A debtor who is an individual is located at the individual's principal residence.

(2) A debtor that is an organization and has only one place of business is located at its place of business.

(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.

(c) Subsection (b) applies only if a debtor'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's obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) does not apply, the debtor is located in the District of Columbia.

(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).

(e) A registered organization that is organized under the law of a state or Tribe is located in that state or Tribe's jurisdiction.

(f) Except as otherwise provided in subsection (i), 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 or Tribe are located:

(1) In the state or Tribe that the law of the United States designates, if the law designates a location;

(2) In the state or Tribe 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 location, including by designation its main office, home office, or other comparable office; or

(3) In the District of Columbia, if neither subdivision (1)nor (2) applies.

(g) A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) notwithstanding:

(1) The suspension, revocation, forfeiture, or lapse of the registered organization's status as such in its jurisdiction of organization; or

(2) The dissolution, winding up, or cancellation of the existence of the registered organization.

(h) The United States is located in the District of Columbia.

(i) A branch or agency of a bank that is not organized under the law of the United States or a state or Tribe is located in the state or Tribe in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one state or Tribe.

(j) A foreign air carrier under the Federal Aviation Act of 1958, as amended, [Pub. L. 85-726; 72 Stat. 731] is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.

(k) This section applies only for purposes of this part.

24.44.080 When Security Interest or Agricultural Lien Is Perfected – Continuity of Perfection

(a) Except as otherwise provided in this section and Section 24.44.090, a security interest is perfected if it has attached and all of the applicable requirements for perfection in Section 24.44.100 through Section 24.44.160 have been satisfied. A security interest is perfected when it attaches if the applicable requirements are satisfied before the security interest attaches.

(b) An agricultural lien is perfected if it has become effective and all of the applicable requirements for perfection in Section 24.44.100 have been satisfied. An agricultural lien is perfected when it becomes effective if the applicable requirements are satisfied before the agricultural lien becomes effective.

(c) A security interest or agricultural lien is perfected continuously if it is originally perfected by one method under Chapters 24.42 through 24.48 and is later perfected by another method under Chapters 24.42 through 24.48, without an intermediate period when it was unperfected.

(d) Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.

(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.

(f) Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account.

(g) Perfection of a security interest in a commodity account also perfects a security interest in the commodity contracts carried in the commodity account.

24.44.090 Security Interest Perfected upon Attachment

The following security interests are perfected when they attach:

(a) A purchase-money security interest in consumer goods, except as otherwise provided in subsection (b) of Section 24.44.110 with respect to consumer goods that are subject to a statute or treaty described in subsection 1 of Section 24.44.110;

(b) 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's outstanding accounts or payment intangibles;

(d) A sale of a promissory note;

(e) A security interest created by the assignment of a health care insurance receivable to the provider of the health care goods or services;

(f) A security interest arising under Section 24.05.010, Section 24.06.050, subsection (c) of Section 24.46.180, or subsection (e) of Section 24.13.080, until the debtor obtains possession of the collateral;

(g) A security interest of a collecting bank arising under Section 24.21.100;

(h) A security interest of an issuer or nominated person arising under Section 24.30.180;

(i) A security interest arising in the delivery of a financial asset under subsection (c) of Section 24.43.060;

(j) A security interest in investment property created by a broker or securities intermediary;

(k) A security interest in a commodity contract or a commodity account created by a commodity intermediary;

(l) An assignment for the benefit of all creditors of the transferor and subsequent transfers by the assignee thereunder;

(m) A security interest created by an assignment of a beneficial interest in a decedent's estate; and

(n) A sale by an individual of an account that is a right to payment of winnings in a lottery or other game of chance.

24.44.100 When Filing Required to Perfect Security Interest or Agricultural Lien – Security Interests and Agricultural Liens to Which Filing Provisions Do Not Apply

(a) Except as otherwise provided in subsection (b) and subsection (b) of section 24,4232, a financing statement must be filed to perfect all security interests and agricultural liens.

(b) The filing of a financing statement is not necessary to perfect a security interest:

(1) That is perfected under subsection (d), (e), (f), or (g) of Section 24.44.080;

(2) That is perfected under Section 24.44.090 when it attaches;

(3) In property subject to a statute, regulation, or treaty described in subsection (a) of Section 24.44.110;

(4) In goods in possession of a bailee which is perfected under subdivision (1) or (2) of subsection (d) of Section 24.44.120;

(5) In certificated securities, documents, goods, or instruments which is perfected without filing, control, or possession under subsection (e), (f), or (g) of Section 24.44.120;

(6) In collateral in the secured party's possession under Section 24.44.130;

(7) In a certificated security which is perfected by delivery of the security certificate to the secured party under Section 24.44.130;

(8) In deposit accounts, electronic chattel paper, electronic documents, investment property, letter-of-credit rights, or uncertificated certificates of deposit, which is perfected by control under Section 24.44.140;

(9) In proceeds which is perfected under Section 24.44.150;

(10) That is perfected under Section 24.44.160; or

(c) If a secured party assigns a perfected security interest or agricultural lien, a filing under Chapters 24.42 through 24.48 is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.

24.44.110 Perfection of Security Interests in Property Subject to Certain Statutes, Regulations, and Treaties

(a) Except as otherwise provided in subsection (d), the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:

(1) A statute, regulation, or treaty of the United States whose requirements for a security interest's obtaining priority over the rights of a lien creditor with respect to the property preempt subsection (a) of Section 24.44.100; or

(2) A statute of another jurisdiction which provides for a security interest to be indicated on a certificate of title as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the property.

(b) Compliance with the requirements of a statute, regulation, or treaty described in subsection (a) for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under Chapters 24.42 through 24.48. Except as otherwise provided in subsection 4 and Section 24.44.130 and subsections (d) and € of Section 24.44.160 for goods covered by a certificate of title, a security interest in property subject to a statute, regulation, or treaty described in subsection 1 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.

(c) Except as otherwise provided in subsection (d) and subsections (d) and (e) of Section 24.44.160, 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 1 are governed by the statute, regulation, or treaty. In other respects, the security interest is subject to Chapters 24.42 through 24.48.

(d) During any period in which collateral subject to a statute specified in subdivision (2) of subsection (a) 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.

24.44.120 Perfection of Security Interests in Chattel Paper, Deposit Accounts, Documents, Goods Covered by Documents, Instruments, Investment Property, Letter-of-Credit Rights, Temporary Perfection Without Filing or Transfer of Possession

(a) A security interest in chattel paper, negotiable documents, instruments, or investment property may be perfected by filing.

(b) Except as otherwise provided in subsections (c) and (d) of Section 24.44.150 for proceeds:

(1) A security interest in a deposit account or an uncertificated certificate of deposit may be perfected only by control under Section 24.44.140;

(2) Except as otherwise provided in subsection (d) of Section 24.44.080, a security interest in a letter-of-credit right may be perfected only by control under Section 24.44.140; and

(3) A security interest in money or a certificated certificate of deposit may be perfected only by the secured party's taking possession under Section 24.44.130.

(1) A security interest in the goods may be perfected by perfecting a security interest in the document; and

(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.

(d) While goods are in the possession of a bailee that has issued a non-negotiable document covering the goods, a security interest in the goods may be perfected by:

(1) Issuance of a document in the name of the secured party;

(2) The bailee's receipt of notification of the secured party's interest; or

(3) Filing as to the goods.

(e) A security interest in certificated certificates of deposit, certificated securities, negotiable documents, or instruments is perfected without filing or the taking of possession or control for a period of twenty days from the time it attaches to the extent that it arises for new value given under an authenticated security agreement.

(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 days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of:

(1) Ultimate sale or exchange; or

(2) Loading, unloading, storing, shipping, trans-shipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary to their sale or exchange.

(g) A perfected security interest in a certificated certificate of deposit, certificated security, or instrument remains perfected for twenty days without filing if the secured party delivers the security certificate, certificated certificate of deposit, or instrument to the debtor for the purpose of:

(1) Ultimate sale or exchange; or

(2) Presentation, collection, enforcement, renewal, or registration of transfer.

(h) After the twenty-day period specified in subsection (e), (f), or (g) expires, perfection depends upon compliance with Chapters 24.42 through 24.48.

24.44.130 When Possessions by or Delivery to Second Party Perfects Security Interest Without Filing

(a) Except as otherwise provided in subsection (b), a secured party may perfect a security interest in tangible certificated certificates of deposit, 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 24.40.030.

(b) With respect to goods covered by a certificate of title issued by the Tribe, 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 24.44.160.

(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's business, when:

(1) The person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party's benefit; or

(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's benefit.

(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.

(e) A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under Section 24.40.030 and remains perfected by delivery until the debtor obtains possession of the security certificate.

(f) A person in possession of collateral is not required to acknowledge that it holds possession for a secured party's benefit.

(g) If a person acknowledges that it holds possession for the secured party's benefit:

(1) The acknowledgment is effective under subsection (c) or subsection (a) of Section 24.44.010, even if the acknowledgment violates the rights of a debtor; and

(2) Unless the person otherwise agrees or law other than Chapters 24.42 through 24.48 otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.

(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's business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:

(1) To hold possession of the collateral for the secured party's benefit; or

(2) To redeliver the collateral to the secured party.

(i) A secured party does not relinquish possession, even if a delivery under subsection (h) violates the rights of a debtor. A person to which collateral is delivered under subsection (h) 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 Chapters 24.42 through 24.48 otherwise provides.

24.44.140 Perfection by Control

(a) A security interest in investment property, deposit accounts, uncertificated certificates of deposit, letter-of-credit rights, electronic chattel paper, or electronic documents may be perfected by control of the collateral under section 24.3207, section 24,4204, Section 24.42.050, Section 24.42.060, or Section 24.42.070.

(b) A security interest in deposit accounts, electronic chattel paper, letter-of-credit rights, electronic documents, or uncertificated certificates of deposit is perfected by control under section 24.3207, Section 24.42.040, Section 24.42.050, or Section 24.42.070 when the secured party obtains control and remains perfected by control only while the secured party retains control.

(c) A security interest in investment property is perfected by control under Section 24.42.060 from the time the secured party obtains control and remains perfected by control until:

(1) The secured party does not have control; and

(2) One of the following occurs:

(A) If the collateral is a certificated security, the debtor has or acquires possession of the security certificate;

(B) If the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; or

If the collateral is a security entitlement, the debtor is or becomes the entitlement holder

24.44.150 Secured Party's Rights on Disposition of Collateral and in Proceeds

(a) Except as otherwise provided in Chapters 24.42 through 24.48 and in subsection (b) of Section 24.05.030:

(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

(2) A security interest attaches to any identifiable proceeds of collateral.

(b) Proceeds that are commingled with other property are identifiable proceeds:

(1) If the proceeds are goods, to the extent provided by Section 24.44.360; and

(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 Chapters 24.42 through 24.48 with respect to commingled property of the type involved.

(c) A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.

(d) A perfected security interest in proceeds becomes unperfected on the twenty-first day after the security interest attaches to the proceeds unless:

(1) The following conditions are satisfied:

(A) A filed financing statement covers the original collateral;

(B) 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

(2) The proceeds are identifiable cash proceeds; or

(3) The security interest in the proceeds is perfected other than under subsection (c) when the security interest attaches to the proceeds or within twenty days thereafter.

(e) If a filed financing statement covers the original collateral, a security interest in proceeds which remains perfected under subdivision (1) of subsection (d) becomes unperfected at the later of:

(1) When the effectiveness of the filed financing statement lapses under Section 24.46.140 or is terminated under Section 24.46.120; or

(2) The twenty-first day after the security interest attaches to the proceeds.

24.44.160 Effect of Change in Governing Law

(a) A security interest perfected pursuant to the law of the jurisdiction designated in subsection (a) of Section 24.44.010 or subsection (c) of Section 24.44.050 remains perfected until the earliest of:

(1) The time perfection would have ceased under the law of that jurisdiction;

(2) The expiration of four months after a change of the debtor's location to another jurisdiction; or

(3) The expiration of one year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.

(b) If a security interest described in subsection (a) 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.

(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:

(1) The collateral is located in one jurisdiction and subject to a security interest perfected under the law of that jurisdiction;

(2) Thereafter the collateral is brought into another jurisdiction; and

(3) Upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.

(d) Except as otherwise provided in subsection (e), 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 the Tribe remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.

(e) A security interest described in subsection (d) 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 24.44.110 or Section 24.44.130 are not satisfied before the earlier of:

(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 the Tribe; or

(2) The expiration of four months after the goods had become so covered.

(f) A security interest in deposit accounts, certificates of deposit, letter-of-credit rights, or investment property which is perfected under the law of the bank's jurisdiction, the issuer's jurisdiction, a nominated person's jurisdiction, the securities intermediary's jurisdiction, or the commodity intermediary's jurisdiction, as applicable, remains perfected until the earlier of:

(1) The time the security interest would have become unperfected under the law of that jurisdiction; or

(2) The expiration of four months after a change of the applicable jurisdiction to another jurisdiction.

(g) If a security interest described in subsection (f) 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.

(h) The following rules apply to collateral to which a security interest attaches within four months after the debtor changes its location to another jurisdiction:

(1) A financing statement filed before the change pursuant to the law of the jurisdiction designated in subsection (a) of Section 24.44.010 or subsection (c) of Section 24.44.050 is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral if the debtor had not changed its location.

(2) If a security interest that is perfected by a financing statement that is effective under subdivision (1) becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in subsection (a) of Section 24.44.010 or subsection (c) of Section 24.44.050 or the expiration of the four-month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(i) If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in subsection (a) of Section 24.44.010 or subsection (c) of Section 24.44.050 and the new debtor is located in another jurisdiction, the following rules apply:

(1) The financing statement is effective to perfect a security interest in collateral in which the new debtor has or acquires rights before or within four months after the new debtor becomes bound under subsection (d) of Section 24.43.030, if the financing statement would have been effective to perfect a security interest in the collateral if the collateral had been acquired by the original debtor.

(2) A security interest that is perfected by the financing statement and which becomes perfected under the law of the other jurisdiction before the earlier of the expiration of the four-month period or the time the financing statement would have become ineffective under the law of the jurisdiction designated in subsection (a) of section 24.2421 or subsection (c) of section 24.42425 remains perfected thereafter. A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

24.44.170 Interests That Take Priority over or Take Free of Security Interest or Agricultural Lien

(a) A security interest or an agricultural lien is subordinate to the rights of:

(1) A person entitled to priority under Section 24.44.220; and

(2) Except as otherwise provided in subsection (e), a person that becomes a lien creditor before the earlier of the time:

(A) The security interest or agricultural lien is perfected; or

(B) One of the conditions specified in subdivision (3) of subsection (b) of Section 24.43.030 is met and a financing statement covering the collateral is filed.

(b) Except as otherwise provided in subsection (e), a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a certificated security 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.

(c) Except as otherwise provided in subsection (e), 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.

(d) A licensee of a general intangible or a buyer, other than a secured party, of collateral other than tangible chattel paper, tangible documents, goods, instruments, or 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.

(e) Except as otherwise provided in Section 24.44.200 and Section 24.44.210, if a person files a financing statement with respect to a purchase-money security interest before or within twenty 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.

24.44.180 No Interest Retained in Right to Payment That Is Sold – Rights and Title of Seller of Account or Chattel Paper with Respect to Creditors and Purchasers

(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.

(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'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.

24.44.190 Rights and Title of Consignee with Respect to Creditors and Purchasers

(a) Except as otherwise provided in subsection (b), 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.

(b) For purposes of determining the rights of a creditor of a consignee, law other than Chapters 24.42 through 24.48 determines the rights and title of a consignee while goods are in the consignee's possession if, under this part, a perfected security interest held by the consignor would have priority over the rights of the creditor.

24.44.200 Buyer of Goods

(a) Except as otherwise provided in subsection (e), 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's seller, even if the security interest is perfected and the buyer knows of its existence. A crop or livestock buyer is a buyer in the ordinary course of business as to security interests and agricultural liens if the buyer qualifies under subsection 9. As used in this section, a crop or livestock buyer is a person who buys crops or livestock from, or who sells crops or livestock on a fee or commission for, a person engaged in farming operations.

(b) Except as otherwise provided in subsection (e), 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:

(1) Without knowledge of the security interest;

(2) For value;

(3) Primarily for the buyer's personal, family, or household purposes; and

(4) Before the filing of a financing statement covering the goods.

(c) To the extent that it affects the priority of a security interest over a buyer of goods under subsection (b), 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 24.44.160.

(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.

(e) Subsections (a) and (b) do not affect a security interest in goods in the possession of the secured party under Section 24.44.130.

(f) If a secured party who has perfected a security interest in crops or livestock, or if a lienholder who has created a lien by statute or otherwise, which includes agricultural liens, intends to impose liability for the security interest or lien against a crop or livestock buyer, the name of the secured party or lienholder must appear on the most current list distributed by the secretary of state pursuant to section 54-09-10. In order to appear on the list, secured parties or lienholders must file with the secretary of state or in the office of the recorder in any county in this state a form prescribed by the secretary of state which contains the information prescribed by the secretary of state under Section 24.46.200 or contained on a form prescribed by the secretary of state under section 35-17-04, 35-30-02, or 35-31-02.

(g) When a crop or livestock buyer issues a check or draft to a person engaged in farming operations in payment for crops or livestock in order to take free of security interests or liens against such crops or livestock, the crop or livestock buyer must issue the check or draft for payment jointly to the person engaged in farming operations and those secured parties or lienholders who have a security interest or lien in the crops or livestock sold. A claim for relief may not be commenced by a secured party or lienholder against a crop or livestock buyer for a loss incurred as a result of issuing a check or draft after January 1, 1986, which does not include the name of a secured party or lienholder under this section more than eighteen months after the date of the check or draft unless within the eighteen-month period the secured party or lienholder sends a notice as provided under this section, but in no event can the action be commenced more than five years after the date of the check or draft. The notice must:

(1) Be sent by certified mail to, or personally served upon, the crop or livestock buyer;

(2) Name the person engaged in farming operations and the date of the check or draft that gives rise to the claim;

(3) State the intention of the secured party or lienholder to make a claim;

(4) State the amount the secured party or lienholder is claiming;

(5) Give a description of and the amount of crops or livestock upon which the claim is based; and

(6) State that the secured party or lienholder has commenced an action seeking judgment against the person engaged in farming operations or such person has filed or has been placed in bankruptcy or receivership proceedings.

(h) A complaint by a secured party or lienholder may not be filed or served against a crop or livestock buyer for collection of any loss sustained by the secured party or lienholder through any transaction filed pursuant to subsection (f) until:

(1) A judgment has been obtained and a good-faith effort made to collect that judgment against the person engaged in farming operations, or that proceedings against the person engaged in farming operations were stayed by federal bankruptcy proceedings, or that receivership proceedings have been commenced;

(2) Within eighteen months following the date of the check or draft, the notice required to be sent pursuant to subsection (g) was served upon the crop or livestock buyer and reciting or incorporating by reference all the information contained in that notice; and

(3) A list is made of any other collateral taken by the secured party or lienholder as security on the same debt from the person engaged in farming operations, including a statement of value, status, and plans for application of such collateral to the indebtedness of the person engaged in farming operations.

(i) A crop or livestock buyer takes free of any security interest created by, or any lien against crops or livestock of, the person engaged in farming operations if:

(1) The crop or livestock buyer has complied with the requirements of subsection (g);

24.44.210 Licensee of General Intangible and Lessee of Goods Ordinary Course of Business

(a) In this section, "licensee in ordinary course of business" 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's own usual or customary practices.

(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.

(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.

24.44.220 Priorities Among Conflicting Security Interests in Agricultural Liens on Same Collateral

(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:

(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.

(2) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.

(3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.

(b) For the purposes of subdivision (1) of subsection (a):

(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

(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.

(c) Except as otherwise provided in subsection (f), a security interest in collateral which qualifies for priority over a conflicting security interest under Section 24.44.270, Section 24.44.280, Section 24.44.290, Section 24.44.300, or Section 24.44.310 also has priority over a conflicting security interest in:

(1) Any supporting obligation for the collateral; and

(2) Proceeds of the collateral if:

(A) The security interest in proceeds is perfected;

(B) The proceeds are cash proceeds or of the same type as the collateral; and

(C) 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.

(d) Subject to subsection (e) and except as otherwise provided in subsection 6, 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.

(e) Subsection (d) applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property, or letter-of-credit rights.

(f) Subsections (a) through (e) are subject to:

(1) Subsection (g) and the other provisions of this part;

(2) Section 24.21.100 with respect to a security interest of a collecting bank;

(3) Section 24.30.180 with respect to a security interest of an issuer or nominated person; and

(4) Section 24.42.100 with respect to a security interest arising under Chapter 24.02 – Chapter 24.08 or Chapter 24.09 – Chapter 24.14.

(g) A perfected agricultural lien on collateral has priority over the conflicting rights of a lien creditor and over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.

24.44.230 Future Advances

(a) Except as otherwise provided in subsection (c), for purposes of determining the priority of a perfected security interest under subdivision (1) of subsection (a) of Section 24.44.220, perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:

(1) Is made while the security interest is perfected only:

(A) Under Section 24.44.090 when it attaches; or

(B) Temporarily under subsection (e), (f), or (g) of Section 24.44.120; and

(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 24.44.090 or subsection (e), (f), or (g) of section 24,4232.

(b) Except as otherwise provided in subsection (c), 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 days after the person becomes a lien creditor unless the advance is made:

(1) Without knowledge of the lien; or

(2) Pursuant to a commitment entered into without knowledge of the lien.

(c) Subsections (a) and (b) 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.

(d) Except as otherwise provided in subsection (e), 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:

(1) The time the secured party acquires knowledge of the buyer's purchase; or

(2) Forty-five days after the purchase.

(e) Subsection (d) does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer's purchase and before the expiration of the forty-five-day period.

(f) Except as otherwise provided in subsection (g), 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:

(1) The time the secured party acquires knowledge of the lease; or

(2) Forty-five days after the lease contract becomes enforceable.

(g) Subsection (f) 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-five-day period.

24.44.240 Priority of Purchase-Money Security Interests

(a) Except as otherwise provided in subsection (g), 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 24.44.270, 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 days thereafter.

(b) Subject to subsection (c) and except as otherwise provided in subsection (g), 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 24.44.300, and, except as otherwise provided in Section 24.44.270, 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:

(1) The purchase-money security interest is perfected when the debtor receives possession of the inventory;

(2) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;

(3) The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and

(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.

(c) Subdivisions (2) through (4) of subsection (b) apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:

(1) If the purchase-money security interest is perfected by filing, before the date of the filing; or

(2) If the purchase-money security interest is temporarily perfected without filing or possession under subsection (f) of Section 24.44.120, before the beginning of the twenty-day period thereunder.

(d) Subject to subsection (e) and except as otherwise provided in subsection (g), 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 24.44.270, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:

(1) The purchase-money security interest is perfected when the debtor receives possession of the livestock;

(2) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;

(3) The holder of the conflicting security interest receives the notification within six months before the debtor receives possession of the livestock; and

(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.

(e) Subdivisions (2) through (4) of subsection (d) apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:

(1) If the purchase-money security interest is perfected by filing, before the date of the filing; or

(2) If the purchase-money security interest is temporarily perfected without filing or possession under subsection (f) of Section 24.44.120, before the beginning of the twenty-day period thereunder.

(f) Except as otherwise provided in subsection (g), 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 24.44.270, 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.

(g) If more than one security interest qualifies for priority in the same collateral under subsection (a), (b), (c), or (d):

(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

(2) In all other cases, subsection (a) of Section 24.44.220 applies to the qualifying security interests.

24.44.250 Priority of Security Interests in Transferred Collateral

(a) Except as otherwise provided in subsection (b), a security interest created by a debtor is subordinate to a security interest in the same collateral created by another person if:

(1) The debtor acquired the collateral subject to the security interest created by the other person;

(2) The security interest created by the other person was perfected when the debtor acquired the collateral; and

(3) There is no period thereafter when the security interest is unperfected.

(b) Subsection (a) subordinates a security interest only if the security interest:

(1) Otherwise would have priority solely under subsection (a) of Section 24.44.220 or section 24,4244; or

(2) Arose solely under subsection (c) of Section 24.46.180 or subsection (e) of Section 24.13.080.

24.44.260 Priority of Security Interests Created by New Debtor

(a) Subject to subsection (b), a security interest that is created by a new debtor in collateral in which the new debtor has or acquired rights and perfected by a filed financing statement that would be ineffective to perfect the security interest but for the application of Section 24.46.070 or of Section 24.46.070 and subdivision (1) of subsection (i) of Section 24.44.160 is subordinate to a security interest in the same collateral which is perfected other than by such a filed financing statement.

(b) The other provisions of this part determine the priority among conflicting security interests in the same collateral perfected by filed financing statements described in subsection (a). 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's having become bound

24.44.270 Priority of Security Interests in Deposit Account Uncertificated Certificate of Deposit

The following rules govern priority among conflicting security interests in the same deposit account or uncertificated certificate of deposit:

(a) A security interest held by a secured party having control of the deposit account or uncertificated certificate of deposit under Section 24.42.040 has priority over a conflicting security interest held by a secured party that does not have control.

(b) Except as otherwise provided in subsections (c) and (d), security interests perfected by control under Section 24.44.140 rank according to priority in time of obtaining control.

(c) Except as otherwise provided in subsection (d), a security interest held by the bank with which the deposit account or uncertificated certificate of deposit is maintained has priority over a conflicting security interest held by another secured party.

(d) A security interest perfected by control under subdivision (3) of subsection (a) of Section 24.42.040 has priority over a security interest held by the bank with which the deposit account or uncertificated certificate of deposit is maintained.

24.44.280 Priority of Security Interests in Investment Property

The following rules govern priority among conflicting security interests in the same investment property:

(a) A security interest held by a secured party having control of investment property under Section 24.42.060 has priority over a security interest held by a secured party that does not have control of the investment property.

(b) Except as otherwise provided in subsections (c) and (d), conflicting security interests held by secured parties each of which has control under Section 24.42.060 rank according to priority in time of:

(1) If the collateral is a security, obtaining control;

(2) If the collateral is a security entitlement carried in a securities account and:

(A) If the secured party obtained control under subdivision (1) of subsection (d) of section 24,3806, the secured party's becoming the person for which the securities account is maintained;

(B) If the secured party obtained control under subdivision (2) of subsection (d) of Section 24.38.060, the securities intermediary's agreement to comply with the secured party's entitlement orders with respect to security entitlements carried or to be carried in the securities account; or

(C) If the secured party obtained control through another person under subdivision (3) of subsection (d) of Section 24.38.060, the time on which priority would be based under this subsection if the other person were the secured party; or

(3) If the collateral is a commodity contract carried with a commodity intermediary, the satisfaction of the requirement for control specified in subdivision (2) of subsection (b) of Section 24.42.060 with respect to commodity contracts carried or to be carried with the commodity intermediary.

(c) 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.

(d) 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.

(e) A security interest in a certificated security in registered form which is perfected by taking delivery under subsection 1 of Section 24.44.130 and not by control under Section 24.44.140 has priority over a conflicting security interest perfected by a method other than control.

(f) Conflicting security interests created by a broker, securities intermediary, or commodity intermediary which are perfected without control under section 41-09-06 rank equally.

(g) In all other cases, priority among conflicting security interests in investment property is governed by sections 41-09-42 and 41-09-43.

24.44.290 Priority of Security Interests in Letter-of-Credit Right

The following rules govern priority among conflicting security interests in the same letter-of-credit right:

(a) A security interest held by a secured party having control of the letter-of-credit right under Section 24.42.070 has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control.

(b) Security interests perfected by control under Section 24.44.140 rank according to priority in time of obtaining control.

24.44.300 Priority of Purchaser of Chattel Paper Instrument

(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:

(1) In good faith and in the ordinary course of the purchaser's business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under Section 24.42.050; and

(2) The chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.

(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 24.42.050 in good faith, in the ordinary course of the purchaser's business, and without knowledge that the purchase violates the rights of the secured party.

(c) Except as otherwise provided in Section 24.44.270, a purchaser having priority in chattel paper under subsection (a) or (b) also has priority in proceeds of the chattel paper to the extent that:

(1) Section 24.44.220 provides for priority in the proceeds; or

(2) The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser's security interest in the proceeds is unperfected.

(d) Except as otherwise provided in subsection (a) of Section 24.44.310, 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.

(e) For purposes of subsections (a) and (b), the holder of a purchase-money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.

(f) For purposes of subsections (b) and (d), 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.

24.44.310 Priority of Rights of Purchasers of Instruments, Documents, and Securities Under Other Articles - Priority of Interests in Financial Assets and Security Entitlements Under Section 24.38-24.41

(a) Chapters 24.42 through 24.48 do 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-19, 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 Chapter 24.14 – Chapter 24.19, Chapter 24.32 – Chapter 24.37, and Chapter 24.38 – Chapter 24.41.

(b) Chapters 24.42 through 24.48 do 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 chapter 41-08.

(c) Filing under Chapters 24.42 through 24.48 does not constitute notice of a claim or defense to the holders, purchasers, or persons described in subsections (a) and (b).

24.44.320 Transfer of Money - Transfer of Funds from Deposit Account

(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.

(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.

24.44.330 Priority of Certain Liens Arising by Operation of Law

(a) In this section, "possessory lien" means an interest, other than a security interest or an agricultural lien:

(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's business;

(2) Which is created by statute or rule of law in favor of the person; and

(3) Whose effectiveness depends on the person's possession of the goods.

(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.

24.44.340 Priority of Security Interests in Fixtures and Crops

(a) A security interest under Chapters 24.42 through 24.48 may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under Chapters 24.42 through 24.48 in ordinary building materials incorporated into an improvement on land.

(b) Chapters 24.42 through 24.48 do not prevent creation of an encumbrance upon fixtures under real-property law.

(c) In cases not governed by subsections (d) through (h), 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.

(d) Except as otherwise provided in subsection (h), 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:

(1) The security interest is a purchase-money security interest;

(2) The interest of the encumbrancer or owner arises before the goods become fixtures; and

(3) The security interest is perfected by a fixture filing before the goods become fixtures or within twenty days thereafter.

(e) A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:

(1) The debtor has an interest of record in the real property or is in possession of the real property and the security interest:

(A) Is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and

(B) Has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;

(2) Before the goods become fixtures, the security interest is perfected by any method permitted by Chapters 24.42 through 24.48 and the fixtures are readily removable:

(A) Factory or office machines;

(B) Equipment that is not primarily used or leased for use in the operation of the real property; or

(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 Chapters 24.42 through 24.48; or

(4) The security interest is:

(A) Created in a manufactured home in a manufactured-home transaction; and

(B) Perfected pursuant to a statute described in subdivision (2) of subsection (a) of Section 24.44.110.

(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:

(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

(2) The debtor has a right to remove the goods as against the encumbrancer or owner.

(g) The priority of the security interest under subdivision (2) of subsection (f) continues for a reasonable time if the debtor's right to remove the goods as against the encumbrancer or owner terminates.

(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), 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.

(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.

24.44.350 Accessions

(a) A security interest may be created in an accession and continues in collateral that becomes an accession.

(b) If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.

(c) Except as otherwise provided in subsection (d), the other provisions of this part determine the priority of a security interest in an accession.

(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 24.44.310.

(e) After default, subject to Section 24.47.010 through Section 24.47.260, 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.

(f) A secured party that removes an accession from other goods under subsection (e) 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.

24.44.360 (9-336) Commingled Goods

(a) In this section, "commingled goods" means goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.

(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.

(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) is perfected.

(e) Except as otherwise provided in subsection (f), the other provisions of this part determine the priority of a security interest that attaches to the product or mass under subsection (c).

(f) If more than one security interest attaches to the product or mass under subsection (c), the following rules determine priority:

(1) A security interest that is perfected under subsection (d) has priority over a security interest that is unperfected at the time the collateral becomes commingled goods.

(2) If more than one security interest is perfected under subsection (d), the security interests rank equally in proportion to the value of the collateral at the time it became commingled goods.

24.44.370 Priority of Security Interests in Goods Covered by Certificate of Title

If, while a security interest in goods is perfected by any method under the law of another jurisdiction, the Tribe issues a certificate of title that does not show that the goods are subject to the security interest or contain a statement that they may be subject to security interests not shown on the certificate:

(a) 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

(b) The security interest is subordinate to a conflicting security interest in the goods that attaches, and is perfected under subsection (b) of Section 24.44.110, after issuance of the certificate and without the conflicting secured party's knowledge of the security interest.

24.44.380 Priority of Security Interest Perfected by Filed Financing Statement Providing Certain Incorrect Information

If a security interest is perfected by a filed financing statement providing information described in subdivision (5) of subsection (b) of Section 24.46.150 which is incorrect at the time the financing statement is filed:

(a) The security interest 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

(b) A purchaser, other than a secured party, of the collateral takes free of the security interest 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.

24.44.390 Priority Subject to Subordination

Chapters 24.42 through 24.48 do not preclude subordination by agreement by a person entitled to priority.

24.44.400 Effectiveness of Right of Recoupment or Setoff Against Deposit Account or Certificate of Deposit

(a) Except as otherwise provided in subsection (c), a bank with which a deposit account or certificate of deposit is maintained may exercise any right of recoupment or setoff against a secured party that holds a security interest in the deposit account or certificate of deposit.

(b) Except as otherwise provided in subsection (c), the application of Chapters 24.42 through 24.48 to a security interest in a deposit account or certificate of deposit does not affect a right of recoupment or setoff of the secured party as to a deposit account or certificate of deposit maintained with the secured party.

(c) The exercise by a bank of a setoff against a deposit account or certificate of deposit is ineffective against a secured party that holds a security interest in the deposit account or certificate of deposit which is perfected by control under subdivision (3) of subsection (a) of Section 24.42.040, if the setoff is based on a claim against the debtor.

24.44.410 Bank's Rights and Duties with Respect to Deposit Account or Certificate of Deposit

Except as otherwise provided in subsection (c) of Section 24.44.400, and unless the bank otherwise agrees in an authenticated record, a bank's rights and duties with respect to a deposit account or certificate of deposit maintained with the bank are not terminated, suspended, or modified by:

(a) The creation, attachment, or perfection of a security interest in the deposit account or certificate of deposit;

(b) The bank's knowledge of the security interest; or

24.44.420 Bank's Right to Refuse to Enter into or Disclose Existence of Control Agreement

Chapters 24.42 through 24.48 do not require a bank to enter into an agreement of the kind described in subdivision (2) of subsection (a) of Section 24.42.040, 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.

Chapter 24.45 Rights of Third Parties

24.45.010 Alienability of Debtor's Rights

(a) Except as otherwise provided in subsection (b) and Section 24.45.060 through Section 24.45.090, whether a debtor's rights in collateral may be voluntarily or involuntarily transferred is governed by law other than Chapters 24.42 through 24.48.

(b) An agreement between the debtor and secured party which prohibits a transfer of the debtor's rights in collateral or makes the transfer a default does not prevent the transfer from taking effect.

24.45.020 Secured Party Not Obligated on Contract of Debtor or in Tort

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's acts or omissions.

24.45.030 Agreement Not to Assert Defenses Against Assignee

(a) In this section, "value" has the meaning provided in subsection (a) of Section 24.16.030.

(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:

(1) For value;

(2) In good faith;

(3) Without notice of a claim of a property or possessory right to the property assigned; and

(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) of Section 24.16.050.

24.45.040 Rights Acquired by Assignee - Claims and Defenses Against Assignee

(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) through (e), the rights of an assignee are subject to:

(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

(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.

(b) Subject to subsection (c) and except as otherwise provided in subsection (d), the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) only to reduce the amount the account debtor owes.

(c) This section is subject to law other than Chapters 24.42 through 24.48 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.

(d) In a consumer transaction, if a record evidences the account debtor's obligation, law other than Chapters 24.42 through 24.48 requires that the record include a statement to the effect that the account debtor'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.

(e) This section does not apply to an assignment of a health care insurance receivable.

24.45.050 Modification of Assigned Contract

(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).

(b) Subsection (a) applies to the extent that:

(1) The right to payment or a part thereof under an assigned contract has not been fully earned by performance; or

(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 24.45.060.

(c) This section is subject to law other than Chapters 24.42 through 24.48 which establish a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

(d) This section does not apply to an assignment of a health care insurance receivable.

24.45.060 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

(a) Subject to subsections (b) through (i), 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.

(b) Subject to subsection (h), notification is ineffective under subsection (a):

(1) If it does not reasonably identify the rights assigned;

(2) To the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than Chapters 24.42 through 24.48; or

(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:

(A) Only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee;

(B) A portion has been assigned to another assignee; or

(c) Subject to subsection (h), 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).

(d) Except as otherwise provided in subsection (e) and Section 24.50.110 and Section 24.45.070, and subject to subsection (h), a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:

(1) 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

(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, chattel paper, payment intangible, or promissory note.

(e) Subsection (d) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under Section 24.47.100 or an acceptance of collateral under section 24,42115.

(f) Except as otherwise provided in Section 24.50.110 and Section 24.45.070 and subject to subsections (h) and (i), 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:

(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

(2) Provides that the assignment, transfer, 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.

(g) Subject to subsection (h), an account debtor may not waive or vary its option under subdivision (3) of subsection (b).

(h) This section is subject to law other than Chapters 24.42 through 24.48 which establish a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

(i) This section does not apply to an assignment of a health care insurance receivable.

24.45.070 Restrictions on Creation or Enforcement of Security Interest in Leasehold Interest or in Lessor's Residual Interest

(a) Except as otherwise provided in subsection (b), a term in a lease agreement is ineffective to the extent that the term:

(1) Prohibits, restricts, or requires the consent of a party to the lease to the assignment, transfer, creation, attachment, perfection, or enforcement of a security interest in an interest of a party under the lease contract or in the lessor's residual interest in the goods; or

(b) Except as otherwise provided in subsection (f) of Section 24.50.110, a term described in subdivision (2) of subsection (a) is effective to the extent that there is:

(1) A transfer by the lessee of the lessee's right of possession or use of the goods in violation of the term; or

(2) A delegation of a material performance of either party to the lease contract in violation of the term.

(c) The creation, attachment, perfection, or enforcement of a security interest in the lessor's interest under the lease contract or the lessor's residual interest in the goods is not a transfer that materially impairs the lessee'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 subsection (d) of Section 24.50.110 unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the lessor.

24.45.080 Restrictions on Assignment of Promissory Notes, Health Care Insurance Receivables, and Certain General Intangibles Ineffective

(a) Except as otherwise provided in subsection (b), 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:

(1) Would impair the creation, attachment, or perfection of a security interest; or

(2) Provides that the assignment, transfer, 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.

(b) Subsection (a) 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, other than a sale pursuant to a disposition under Section 24.47.100 or an acceptance of collateral under Section 24.47.180.

(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:

(1) Would impair the creation, attachment, or perfection of a security interest; or

(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) would be effective under law other than Chapters 24.42 through 24.48 but is ineffective under subsection (a) or (c), the creation, attachment, or perfection of a security interest in the promissory note, health care insurance receivable, or general intangible:

(1) Is not enforceable against the person obligated on the promissory note or the account debtor;

(2) Does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;

(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;

(4) Does not entitle the secured party to use or assign the debtor'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;

(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

(6) Does not entitle the secured party to enforce the security interest in the promissory note, health care insurance receivable, or general intangible.

24.45.090 Restrictions on Assignment of Letter-of-Credit Rights Ineffective

(a) A term in a letter of credit or a rule of law, statute, regulation, custom, or practice applicable to the letter of credit which prohibits, restricts, or requires the consent of an applicant, issuer, or nominated person to a beneficiary's assignment of or creation of a security interest in a letter-of-credit right is ineffective to the extent that the term or rule of law, statute, regulation, custom, or practice:

(1) Would impair the creation, attachment, or perfection of a security interest in the letter-of-credit right; or

(2) Provides that the assignment, 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 letter-of-credit right.

(b) To the extent that a term in a letter of credit is ineffective under subsection (a) but would be effective under law other than Chapters 24.42 through 24.48 or a custom or practice applicable to the letter of credit, to the transfer of a right to draw or otherwise demand performance under the letter of credit, or to the assignment of a right to proceeds of the letter of credit, the creation, attachment, or perfection of a security interest in the letter-of-credit right:

(1) Is not enforceable against the applicant, issuer, nominated person, or transferee beneficiary;

(2) Imposes no duties or obligations on the applicant, issuer, nominated person, or transferee beneficiary; and does not require the applicant, issuer, nominated person, or transferee beneficiary to recognize the security interest, pay or render performance to the secured party, or accept payment or other performance from the secured party.

Chapter 24.46 Filing

24.46.010 Contents of Financing Statement - Record of Mortgage as Financing Statement - Time of Filing Financing Statement - Amending Financing Statement

(a) Subject to subsection (b), a financing statement is sufficient only if the statement:

(1) Provides the name of the debtor;

(2) Provides the name of the secured party or a representative of the secured party;

(3) Indicates the collateral covered by the financing statement; and

(4) If it is a financing statement that is to be filed to gain protection under the central notice system, the filing statement must include a reasonable description of the property, including the location of the property within the Tribal jurisdiction, and any other information required by the Tribe under any applicable law, resolution, ordinance, regulation, or other action.

(5) To be sufficient a financing statement must include the name and address of the secured party and, unless electronically filed, the signatures of the debtor and secured parties.

(b) Except as otherwise provided in subsection (b) of section 24.4272, 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) and also:

(1) Indicate that it covers this type of collateral;

(2) Indicate that it is to be filed for record in the real property records;

(3) Provide a description of the real property to which the collateral is related sufficient to give constructive notice of a mortgage under the law of the Tribe if the description were contained in a record of the mortgage of the real property; and

(4) If the debtor does not have an interest of record in the real property, provide the name of a record owner.

(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:

(1) The record indicates the goods or accounts that it covers;

(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;

(3) The record satisfies the requirements for a financing statement in this section, but:

(A) The record need not indicate that it is to be filed in the real property records;

(B) The record sufficiently provides the name of a debtor who is an individual if the record provides the individual name of the debtor or the surname and first personal name of the debtor, even if the debtor is an individual to whom subdivision (4) of subsection (a) of Section 24.46.020 applies; and

(C) The mortgage may not include a social security number or internal revenue service taxpayer identification number; and

(4) The record is duly recorded.

(d) A financing statement may be filed before a security agreement is made or a security interest otherwise attaches.

(e) A financing statement filed to gain protection under the central notice system must be amended within three months of a material change to reflect that change. The amended financing statement must be signed by both the debtor and secured party and filed in the same manner as the original financing statement. An electronically filed amendment does not need to be signed.

(f) Any social security number or internal revenue service taxpayer identification number submitted on a financing statement filed pursuant to Chapters 24.42 through 24.48 as a central indexing filing is an exempt record as defined by subsection c below and may not be disclosed as part of any search under Section 24.46.220 or Section 24.46.240 or as part of a copy of the record. A filing office or an officer or employee of the filing office may not be held civilly or criminally liable for the inadvertent disclosure of a social security or internal revenue service taxpayer identification number if the filer has placed the number in an improper field on the form prescribed by the secretary of state or the filer submitted a filing other than on the form prescribed by the secretary of state.

24.46.020 Name of Debtor and Secured Party

(a) A financing statement sufficiently provides the name of the debtor:

(1) Except as otherwise provided in subdivision (3), if the debtor is a registered organization, or the collateral is held in a trust that is a registered organization, only if the financing statement provides the name that is stated to be the registered organization's name on the public organic record most recently filed with or issued or enacted by the registered organization's jurisdiction of organization which purports to state, amend, or restate the registered organization's name;

(2) Subject to subsection (f), if the collateral is being administered by the personal representative of a decedent, only if the financing statement provides, as the name of the debtor, the name of the decedent and, in a separate part of the financing statement, indicates that the collateral is being administered by a personal representative;

(3) If the collateral is held in a trust that is not a registered organization, only if the financing statement:

(A) Provides, as the name of the debtor:

(i) If the organic record of the trust specifies a name for the trust, the name so specified; or

(ii) If the organic record of the trust does not specify a name for the trust, the name of the settlor or testator; and

(B) In a separate part of the financing statement:

(i) If the name is provided in accordance with subparagraph (i) of paragraph (A), indicates that the collateral is held in a trust; or

(ii) If the name is provided in accordance with subparagraph (ii) of paragraph (A), provides additional information sufficient to distinguish the trust from other trusts having one or more of the same settlors or the same testator and indicates that the collateral is held in a trust, unless the additional information so indicates;

(4) Subject to subsection (g), if the debtor is an individual to whom the Tribe or State of North Dakota has issued a driver's license or identity card that has not expired, only if the financing statement provides the name of the individual which is indicated on the driver's license or identity card;

(5) If the debtor is an individual to whom subdivision (4) does not apply, only if the financing statement provides the individual name of the debtor or the surname and first personal name of the debtor; and

(6) In other cases:

(A) If the debtor has a name, only if the financing statement provides the organizational name of the debtor; and

(B) If the debtor does not have a name, only if the financing statement provides the names of the partners, members, associates, or other persons comprising the debtor, in a manner that each name provided would be sufficient if the person named were the debtor.

(b) A financing statement that provides the name of the debtor in accordance with subsection (a) is not rendered ineffective by the absence of:

(1) A trade name or other name of the debtor; or

(2) Unless required under paragraph (B) of subdivision (6) of subsection (a), names of partners, members, associates, or other persons comprising the debtor.

(c) A financing statement that provides only the debtor's trade name does not sufficiently provide the name of the debtor.

(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.

(e) A financing statement may provide the name of more than one debtor and the name of more than one secured party.

(f) The name of the decedent indicated on the order appointing the personal representative of the decedent issued by the court having jurisdiction over the collateral is sufficient as the "name of the decedent" under subdivision (2) of subsection (a).

(g) If the Tribe or State of North Dakota has issued to an individual more than one driver's license or identity card of a kind described in subdivision (4) of subsection (a), the one that was issued most recently is the one to which subdivision (4) of subsection (a) refers.

(h) The "name of the settlor or testator" means:

(1) If the settlor is a registered organization, the name of the registered organization indicated on the public organic record filed with or issued or enacted by the registered organization's jurisdiction of organization; or

(2) In other cases, the name of the settlor or testator indicated in the trust's organic record.

24.46.030 Indication of Collateral

A financing statement sufficiently indicates the collateral that it covers if the financing statement provides:

(a) A description of the collateral pursuant to Section 24.42.080; or

(b) An indication that the financing statement covers all assets or all personal property.

24.46.040 Filing and Compliance with Other Statutes and Treaties for Consignments, Leases, Other Bailments, and Other Transactions

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 24.44.110, using the terms "consignor", "consignee", "lessor", "lessee", "bailor", "bailee", "licensor", "licensee", "owner", "registered owner", "buyer", "seller", or words of similar import, instead of the terms "secured party" and "debtor".

(a) This part applies to the filing of a financing statement under subsection (a) and, as appropriate, to compliance that is equivalent to filing a financing statement under subsection (b) of Section 24.44.110, 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.

24.46.050 Effect of Errors or Omissions

(a) A financing statement substantially satisfying the requirements of this part is effective, even if the financing statement has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.

(b) Except as otherwise provided in subsection (c), a financing statement that fails sufficiently to provide the name of the debtor in accordance with subsection (a) of Section 24.46.020 is seriously misleading.

(c) If a search of the records of the filing office under the debtor's correct name, using the filing office'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 1 of Section 24.46.020, the name provided does not make the financing statement seriously misleading.

(d) For purposes of subsection (b) of Section 24.46.070, the "debtor's correct name" in subsection (c) means the correct name of the new debtor.

24.46.060 Effect of Certain Events on Effectiveness of Financing Statement

(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.

(b) Except as otherwise provided in subsection (c) and Section 24.46.070, 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 24.46.050.

(c) If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under subsection (a) of Section 24.46.020 so that the financing statement becomes seriously misleading under Section 24.46.050:

(1) The financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four months after, the filed financing statement becomes seriously misleading; and

(2) The financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after that event.

24.46.070 Effectiveness of Financing Statement If New Debtor Becomes Bound by Security Agreement

(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.

(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) to be seriously misleading under Section 24.46.050:

(1) The financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound under subsection (d) of Section 24.43.030; and

(2) The financing statement is not effective to perfect a security interest in collateral acquired by the new debtor more than four months after the new debtor becomes bound under subsection (d) of Section 24.43.030 unless an initial financing statement providing the name of the new debtor is filed before the expiration of that time.

(c) This section does not apply to collateral as to which a filed financing statement remains effective against the new debtor under subsection (a) of Section 24.46.060.

24.46.080 Persons Entitled to File a Record

(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:

(1) The debtor authorizes the filing in an authenticated record or pursuant to subsection (b) or (c); or

(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.

(b) By authenticating or becoming bound as debtor by a security agreement, a debtor or new debtor authorizes the filing of an initial financing statement, and an amendment, covering:

(1) The collateral described in the security agreement; and

(2) Property that becomes collateral under subdivision (2) of subsection (a) of Section 24.44.150, regardless of whether the security agreement expressly covers proceeds.

(c) By acquiring collateral in which a security interest or agricultural lien continues under subdivision (1) of subsection (a) of Section 24.44.150, a debtor authorizes the filing of an initial financing statement, and an amendment, covering the collateral and property that becomes collateral under subdivision (2) of subsection (a) of Section 24.44.150.

(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:

(1) The secured party of record authorizes the filing; or

(2) The amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required under Section 24.46.120, the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed. The filing office shall notify the secured party of a filing under this subsection.

(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).

24.46.090 Effectiveness of Filed Record

(a) A filed record is effective only to the extent that it was filed by a person that may file it under Section 24.46.080.

(b) A record authorized by one secured party of record does not affect the financing statement with respect to another secured party of record.

(c) A continuation statement that is not filed within the six-month period prescribed by subsection (d) of Section 24.46.140 is ineffective.

24.46.100 Secured Party of Record

(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 24.46.130, the assignee named in the initial financing statement is the secured party of record with respect to the financing statement.

(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 24.46.130, the assignee named in the amendment is a secured party of record.

(c) A person remains a secured party of record until the filing of an amendment of the financing statement which deletes the person.

24.46.110 Amendment of Financing Statement

(a) Subject to Section 24.46.080, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or, subject to subsection (e), otherwise amend the information provided in, a financing statement by filing an amendment that:

(1) Identifies, by its file number, the initial financing statement to which the amendment relates; and

(2) If the amendment relates to an initial financing statement filed or recorded in a filing office described in subdivision (1) of subsection (a) of section 24.4272, provides the information specified in subsection (b) of Section 24.46.010.

(b) Except as otherwise provided in Section 24.46.140, the filing of an amendment does not extend the period of effectiveness of the financing statement.

(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.

(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.

(e) An amendment is ineffective to the extent it:

(1) Purports to delete all debtors and fails to provide the name of a debtor to be covered by the financing statement; or

(2) Purports to delete all secured parties of record and fails to provide the name of a new secured party of record.

24.46.120 Termination Statement - Remedies - Fees

(a) If a financing statement covering consumer goods is filed after December 31, 1973, then within one month or within ten days following written demand by the debtor after there is no outstanding secured obligation and no commitment to make advances, incur obligations, or otherwise give value, the secured party shall file electronically in the central indexing system, a termination statement to the effect that the secured party no longer claims a security interest under the financing statement, which must be identified by file number. In other cases when there is no outstanding secured obligation and no written commitment between the secured party and the debtor to make advances, incur obligations, or otherwise give value, the secured party, unless requested by the debtor in writing to continue the filing, shall file electronically a termination statement to the effect that the secured party no longer claims a security interest under the financing statement nor under the central notice system, which shall be identified by file number. If the affected secured party fails to file a termination statement as required by this subsection within sixty days of when the secured obligation is fully satisfied, and the debtor has not requested in writing that the filing be continued, then under Section 24.47.230 the secured party is liable to the debtor for one hundred dollars and for any loss caused to the debtor by such failure. The debtor's written request for a filing to be continued may be made at any time and be effective under this section. If the affected secured party fails to file a termination statement within ten days after proper written demand by the debtor, then under Section 24.47.230 the secured party is liable to the debtor for one hundred dollars and for any loss caused to the debtor by such failure.

(b) Except as otherwise provided in Section 24.46.090, upon the filing of a termination statement, the financing statement to which the termination statement relates ceases to be effective. Except as provided in Section 24.46.090, for purposes of subsection (g) of Section 24.46.180, subsection (a) of Section 24.46.210, and subsection (b) of Section 24.46.220, the electronic filing 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.

24.46.130 Assignment of Powers of Secured Party of Record

(a) Except as otherwise provided in subsection (c), an initial financing statement may reflect an assignment of all of the secured party'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.

(b) Except as otherwise provided in subsection (c), 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:

(1) Identifies, by its file number, the initial financing statement to which it relates;

(2) Provides the name of the assignor; and

(3) Provides the name and mailing address of the assignee.

(c) An assignment of record of a security interest in a fixture covered by a record of a mortgage which is effective as a financing statement filed as a fixture filing under subsection (c) of Section 24.46.010 may be made only by an assignment of record of the mortgage in the manner provided by law of this state other than this title.

24.46.140 Duration and Effectiveness of Financing Statement - Effect of Lapsed Financing Statement

(a) Except as otherwise provided in subsections (e), (f), and (g), a financing statement filed in the personal property records or recorded in real property records is effective for a period of five years after the date of filing.

(b) Except as otherwise provided in subsections (e), (f), and (g), a financing statement recorded as a fixture filing against real property is effective for a period of five years after the date of recording.

(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). 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.

(d) A continuation statement may be filed only within six months before the expiration of the five-year period specified in subsection (a).

(e) Except as otherwise provided in Section 24.46.090, upon timely filing of a continuation statement, the effectiveness of the initial financing statement continues for a period of five 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), unless, before the lapse, another continuation statement is filed pursuant to subsection (d). Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the initial financing statement.

(f) If a debtor is a transmitting utility and a filed initial financing statement so indicates, the financing statement is effective until a termination statement is filed.

24.46.150 What Constitutes Filing - Effectiveness of Filing

(a) Except as otherwise provided in subsection (b), 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.

(b) Filing does not occur with respect to a record that a filing office refuses to accept because:

(1) The record is not communicated by a method or medium of communication authorized by the filing office;

(2) An amount equal to or greater than the applicable filing fee is not tendered;

(3) The filing office is unable to index the record because:

(A) In the case of an initial financing statement, the record does not provide a name for the debtor;

(B) In the case of an amendment or information statement, the record:

(i) Does not identify the initial financing statement as required by Section 24.46.110 or 24.4289, as applicable; or

(ii) Identifies an initial financing statement whose effectiveness has lapsed under Section 24.46.140;

(C) 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's surname; or

(D) In the case of a record filed or recorded in the filing office described in subdivision (1) of subsection (a) of section 24.4272, the record does not provide a sufficient description of the real property to which it relates;

(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;

(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:

(A) Provide a mailing address for the debtor; or

(B) Indicate whether the name provided as the name of the debtor is an individual or an organization;

(6) In the case of an assignment reflected in an initial financing statement under subsection (a) of Section 24.46.130 or an amendment filed under subsection (b) of Section 24.46.130, the record does not provide a name and mailing address for the assignee;

(7) In the case of a continuation statement, the record is not filed within the six-month period prescribed by subsection (d) of Section 24.46.140; or

(8) In the case of filings entered in the secretary of state's online filing system, the record does not contain the social security number or the internal revenue service taxpayer identification number of the debtor.

(1) A record does not provide information if the filing office is unable to read or decipher the information; and

(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 24.46.110, Section 24.46.130, or Section 24.46.170, is an initial financing statement.

(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), 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.

24.46.160 Effect of Indexing Errors

The failure of the filing office to index a record correctly does not affect the effectiveness of the filed record.

24.46.170 Claim Concerning Inaccurate or Wrongfully Filed Record

(a) A person may file in the filing office an information statement with respect to a record indexed there under the person's name if the person believes that the record is inaccurate or was wrongfully filed.

(b) An information statement under subsection (a) must:

(1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;

(2) Indicate that it is an information statement; and

(3) Provide the basis for the person'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's belief that the record was wrongfully filed.

(c) A person may file in the filing office an information statement with respect to a record filed there if the person is a secured party of record with respect to the financing statement to which the record relates and believes that the person that filed the record was not entitled to do so under subsection (d) of Section 24.46.080.

(d) An information statement under subsection (c) must:

(1) Identify the record to which the information statement relates by the file number assigned to the initial financing statement to which the record relates;

(2) Indicate that it is an information statement; and

(3) Provide the basis for the person's belief that the person that filed the record was not entitled to do so under subsection (d) of Section 24.46.080.

(e) The filing of an information statement does not affect the effectiveness of an initial financing statement or other filed record.

24.46.180 Numbering, Maintaining, and Indexing Records - Communicating Information Provided in Records

(a) For each record filed in a filing office, the filing office shall:

(1) Assign a unique number to the filed record;

(2) Create a record that bears the number assigned to the filed record and the date and time of filing;

(3) Maintain the filed record for public inspection; and

(4) Index the filed record in accordance with subsections (c) through (e).

(b) A file number assigned after January 1, 2002, must include a digit that:

(1) Is mathematically derived from or related to the other digits of the file number; and

(2) Aids the filing office in determining whether a number communicated as the file number includes a single-digit or transpositional error.

(1) Index an initial financing statement according to the name of the debtor and 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

(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.

(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:

(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

(2) To the extent that the law of this Tribe 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.

(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 24.46.130 or an amendment filed under subsection (b) of Section 24.46.130:

(1) Under the name of the assignor as grantor; and

(2) To the extent that the law of this Tribe provides for indexing a record of the assignment of a mortgage under the name of the assignee, under the name of the assignee.

(f) The filing office shall maintain a capability:

(1) To retrieve a record by the name of the debtor and by the file number assigned to the initial financing statement to which the record relates; and

(2) To associate and retrieve with one another an initial financing statement and each filed record relating to the initial financing statement.

(g) The filing office may not remove a debtor's name from the index until one year after the effectiveness of a financing statement naming the debtor lapses under Section 24.46.140 with respect to all secured parties of record.

(h) The filing office shall perform the acts required by subsections (a) through (e) at the time and in the manner prescribed by filing-office rule, but not later than two business days after the filing office receives the record in question.

24.46.190 Acceptance and Refusal to Accept Record

(a) A filing office shall refuse to accept a record for filing for a reason set forth in subsection (b) of Section 24.46.150 and may refuse to accept a record for filing only for a reason set forth in subsection (b) of Section 24.46.150.

(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 no event more than two business days after the filing office receives the record.

(c) A filed financing statement satisfying subsections (a) and (b) of Section 24.46.010 is effective, even if the filing office is required to refuse to accept it for filing under subsection (a). However, Section 24.46.060 applies to a filed financing statement providing information described in subdivision (5) of subsection (b) of Section 24.46.150 which is incorrect at the time the financing statement is filed.

(d) If a record communicated to a filing office provides information that relates to more than one debtor, this part applies as to each debtor separately.

24.46.200 Uniform Form of Written Financing Statement and Amendment

(a) A filing office that accepts written records may not refuse to accept a written initial financing statement in the form and format established by the secretary of state, except for a reason set forth in subsection (b) of Section 24.46.150.

(b) A filing office that accepts written records may not refuse to accept a written record in the form and format established by the secretary of state, except for a reason set forth in subsection (b) of Section 24.46.150.

24.46.210 Maintenance and Destruction of Records

(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 24.46.140 with respect to all secured parties of record. The record must be retrievable by using the name of the debtor and by using the file number assigned to the initial financing statement to which the record relates.

(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).

24.46.220 Information from Filing Office - Sale or License of Records

(a) Any person may request electronically an acknowledgment of a filing. The central indexing system shall provide to the person detailed information and an image of the record, if not filed electronically, showing the number assigned to the record pursuant to subdivision (1) of subsection (a) of Section 24.46.180 and the date and time of the filing of the record.

(b) The central indexing system shall communicate electronically the following information to any person that requests it:

(1) Whether there is on file on a date and time specified by the central indexing system any financing statement that:

(A) Designates a particular debtor or, if the request so states, designates a particular debtor at the address specified in the request;

(B) Has not lapsed under Section 24.46.140 with respect to all secured parties of record; and

(C) Effective January 1, 2002, if the request so states, has lapsed under Section 24.46.140 and a record of which is maintained by the central indexing system under subsection (a) of Section 24.46.210;

(2) The date and time of filing of each statement and each financing statement; and

(3) The information provided in each statement and each financing statement.

24.46.230 Delay by Filing Office

Delay by the filing office beyond a time limit prescribed by this part is excused if:

(a) 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

(b) The filing office exercises reasonable diligence under the circumstances.

24.46.240 Fees

(a) The fee for filing and indexing an original statement under this title with the secretary of state of North Dakota shall be set by North Dakota law.

(b) (REPEALED AND RESERVED FOR FUTURE USE)

24.46.250 Rules

The Tribe shall adopt and publish rules to implement Chapters 24.42 through 24.48. The rules must be:

(a) Consistent with Chapters 24.42 through 24.48; and

(b) Adopted and published in accordance with Title 22.

Chapter 24.47 Default

24.47.010 Rights After Default - Judicial Enforcement - Consignor or Buyer of Accounts, Chattel Paper, Payment Intangibles, or Promissory Notes

(a) After default, a secured party has the rights provided in this part and, except as otherwise provided in Section 24.47.020, those provided by agreement of the parties. A secured party:

(1) May reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure; and

(2) If the collateral is documents, may proceed either as to the documents or as to the goods they cover.

(b) A secured party in possession of collateral or control of collateral under section 24.3207, Section 24.42.040, Section 24.42.050, Section 24.42.060, or Section 24.42.070 has the rights and duties provided in Section 24.43.070.

(d) Except as otherwise provided in subsection (g) and section 24.42.102, after default, a debtor and an obligor have the rights provided in this part and by agreement of the parties.

(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:

(1) The date of perfection of the security interest or agricultural lien in the collateral;

(2) The date of filing a financing statement covering the collateral; or

(3) Any date specified in a statute under which the agricultural lien was created.

(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 Chapters 24.42 through 24.48.

(g) Except as otherwise provided in subsection (c) of Section 24.47.070, this section through Section 24.47.260 impose no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.

24.47.020 Waiver and Variance of Rights and Duties

Except as otherwise provided in Section 24.47.220, 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:

(a) Paragraph (C) of subdivision (4) of subsection (b) of Section 24.43.070, which deals with use and operation of the collateral by the secured party;

(b) Section 24.43.100, which deals with requests for an accounting and requests concerning a list of collateral and statement of account;

(d) Subsection (c) of Section 24.47.070, which deals with collection and enforcement of collateral;

(e) Subsection (a) of Section 24.47.080 and subsection (c) of Section 24.47.140 to the extent that they deal with application or payment of noncash proceeds of collection, enforcement, or disposition;

(f) Subsection (a) of Section 24.47.080 and subsection (d) of Section 24.47.140 to the extent that they require accounting for or payment of surplus proceeds of collateral;

(g) Section 24.47.090 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;

(h) Subsection (b) of Section 24.47.100, Section 24.47.110, and Section 24.47.130, which deal with disposition of collateral;

(i) Subsection (f) of Section 24.47.140, 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;

(j) Section 24.47.180 through Section 24.47.200, which deal with acceptance of collateral in satisfaction of obligation;

(k) Section 24.47.210, which deals with redemption of collateral;

(l) Section 24.47.220, which deals with permissible waivers; and

(m) Section 24.47.230 and Section 24.47.240, which deal with the secured party's liability for failure to comply with Chapters 24.42 through 24.48.

24.47.030 Agreement on Standards Concerning Rights and Duties

(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 24.47.020 if the standards are not manifestly unreasonable.

(b) Subsection (a) does not apply to the duty under Section 24.47.090 to refrain from breaching the peace.

24.47.040 Procedure If Security Agreement Covers Real Property or Fixtures

(a) If a security agreement covers both personal and real property, a secured party may proceed:

(1) Under this part as to the personal property without prejudicing any rights with respect to the real property; or

(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.

(b) Subject to subsection (c), if a security agreement covers goods that are or become fixtures, a secured party may proceed.

(1) Under this part; or

(2) In accordance with the rights with respect to real property, in which case the other provisions of this part do not apply.

(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 encumbrancers of the real property, the secured party, after default, may remove the collateral from the real property.

(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.

24.47.050 Unknown Debtor or Secondary Obligor

A secured party does not owe a duty based on its status as secured party:

(a) To a person that is a debtor or obligor, unless the secured party knows:

(1) That the person is a debtor or obligor;

(2) The identity of the person; and

(3) How to communicate with the person; or

(b) To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:

(1) That the person is a debtor; and

(2) The identity of the person.

24.47.060 Time of Default for Agricultural Lien

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.

24.47.070 Collection and Enforcement by Secured Party

(a) If so agreed, and in any event after default, a secured party:

(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;

(2) May take any proceeds to which the secured party is entitled under Section 24.44.150;

(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;

(4) If it holds a security interest in a deposit account or an uncertificated certificate of deposit perfected by control under subdivision (1) of subsection (a) of Section 24.42.040, or in a certificated certificate of deposit perfected by possession under Section 24.44.130, may apply the balance of the deposit account or certificate of deposit to the obligation secured by the deposit account or certificate of deposit; and

(5) If it holds a security interest in a deposit account or an uncertificated certificate of deposit perfected by control under subdivision (2) or (3) of subsection (a) of Section 24.42.040, or in a certificated certificate of deposit perfected by possession under Section 24.44.130, may instruct the bank to pay the balance of the deposit account or certificate of deposit to or for the benefit of the secured party.

(b) If necessary to enable a secured party to exercise under subdivision (3) of subsection (a) 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:

(1) A copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and

(2) The secured party's sworn affidavit in recordable form stating that:

(A) A default has occurred with respect to the obligation secured by the mortgage; and

(B) The secured party is entitled to enforce the mortgage nonjudicially.

(1) Undertakes to collect from or enforce an obligation of an account debtor or other person obligated on collateral; and

(d) Is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor or a secondary obligor. A secured party may deduct from the collections made pursuant to subsection (c) reasonable expenses of collection and enforcement, including reasonable attorney's fees and legal expenses incurred by the secured party.

(e) This section does not determine whether an account debtor, bank, or other person obligated on collateral owes a duty to a secured party.

24.47.080 Application of Proceeds of Collection or Enforcement - Liability for Deficiency and Right to Surplus

(a) If a security interest or agricultural lien secures payment or performance of an obligation, the following rules apply:

(1) A secured party shall apply or pay over for application the cash proceeds of collection or enforcement under Section 24.47.070 in the following order to:

(A) The reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney's fees and legal expenses incurred by the secured party;

(B) The satisfaction of obligations secured by the security interest or agricultural lien under which the collection or enforcement is made; and

(C) 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.

(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's demand under subdivision (3).

(3) A secured party need not apply or pay over for application noncash proceeds of collection and enforcement under Section 24.47.070 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.

(4) A secured party shall account to and pay a debtor for any surplus, and the obligor is liable for any deficiency.

(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.

24.47.090 Secured Party's Right to Take Possession After Default

(a) After default, a secured party:

(1) May take possession of the collateral; and

(2) Without removal, may render equipment unusable and dispose of collateral on a debtor's premises under Section 24.47.100.

(b) A secured party may proceed under subsection (a):

(1) Pursuant to judicial process; or

(2) Without judicial process, if it proceeds without breach of the peace.

(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.

24.47.100 Disposition of Collateral After Default

(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.

(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.

(1) At a public disposition; or

(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.

(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.

(e) A secured party may disclaim or modify warranties under subsection (d):

(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

(2) By communicating to the purchaser a record evidencing the contract for disposition and including an express disclaimer or modification of the warranties.

(f) A record is sufficient to disclaim warranties under subsection (e) if it indicates "there is no warranty relating to title, possession, quiet enjoyment, or the like in this disposition" or uses words of similar import.

24.47.110 Notification Before Disposition of Collateral

(a) In this section, "notification date" means the earlier of the date on which:

(1) A secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or

(2) The debtor and any secondary obligor waive the right to notification.

(b) Except as otherwise provided in subsection (d), a secured party that disposes of collateral under Section 24.47.100 shall send to the persons specified in subsection (c) a reasonable authenticated notification of disposition.

(1) The debtor;

(2) Any secondary obligor;

(3) 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;

(4) Any other secured party or lienholder that, ten 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:

(A) Identified the collateral;

(B) Was indexed under the debtor's name as of that date; and

(C) Was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date; and

(5) Any other secured party that, ten 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 24.44.110.

(d) Subsection 2 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.

(e) A secured party complies with the requirements for notification prescribed by paragraph (B) of subdivision (3) of subsection (c) if:

(1) Not later than twenty days or earlier than thirty days before the notification date, the secured party requests, in a commercially reasonable manner, information concerning financing statements indexed under the debtor's name in the office indicated in paragraph (B) of subdivision (3) of subsection (c); and

(2) Before the notification date, the secured party:

(A) Did not receive a response to the request for information; or

(B) 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.

24.47.120 Timeliness of Notification Before Disposition of Collateral

(a) Except as otherwise provided in subsection (b), whether a notification is sent within a reasonable time is a question of fact.

(b) A notification of disposition sent after default and ten days before the earliest time of disposition set forth in the notification is sent within a reasonable time before the disposition.

24.47.130 Contents and Form of Notification Before Disposition of Collateral - General

(a) The contents of a notification of disposition are sufficient if the notification:

(1) Describes the debtor and the secured party;

(2) Describes the collateral that is the subject of the intended disposition;

(3) States the method of intended disposition;

(4) States that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting; and

(5) States the time and place of a public disposition or the time after which any other disposition is to be made.

(b) Whether the contents of a notification that lacks any of the information specified in subsection (a) are nevertheless sufficient is a question of fact.

(c) The contents of a notification providing substantially the information specified in subsection (a) are sufficient, even if the notification includes:

(1) Information not specified by that subsection; or

(2) Minor errors that are not seriously misleading.

(d) A particular phrasing of the notification is not required.

24.47.140 Application of Proceeds of Disposition - Liability for Deficiency and Right to Surplus

(a) A secured party shall apply or pay over for application the cash proceeds of disposition under Section 24.47.100 in the following order to:

(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's fees and legal expenses incurred by the secured party;

(2) The satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;

(3) The satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:

(A) 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

(B) 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

(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.

(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's demand under subdivision (3) of subsection (a).

(c) A secured party need not apply or pay over for application noncash proceeds of disposition under Section 24.47.100 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.

(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) and permitted by subsection (c):

(1) Unless subdivision (4) of subsection (a) 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

(2) The obligor is liable for any deficiency.

(e) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles, or promissory notes:

(1) The debtor is not entitled to any surplus; and

(2) The obligor is not liable for any deficiency.

(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:

(1) The transferee in the disposition is the secured party, a person related to the secured party, or a secondary obligor; and

(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.

(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:

(1) Takes the cash proceeds free of the security interest or other lien;

(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

(3) Is not obligated to account to or pay the holder of the security interest or other lien for any surplus.

24.47.150 Rights of Transferee of Collateral

(a) A secured party's disposition of collateral after default:

(1) Transfers to a transferee for value all of the debtor's rights in the collateral;

(2) Discharges the security interest under which the disposition is made; and

(3) Discharges any subordinate security interest or other subordinate lien.

(b) A transferee that acts in good faith takes free of the rights and interests described in subsection (a), even if the secured party fails to comply with Chapters 24.42 through 24.48 or the requirements of any judicial proceeding.

(c) If a transferee does not take free of the rights and interests described in subsection (a), the transferee takes the collateral subject to:

(1) The debtor's rights in the collateral;

(2) The security interest or agricultural lien under which the disposition is made; and

(3) Any other security interest or other lien.

24.47.160 Rights and Duties of Certain Secondary Obligors

(a) A secondary obligor acquires the rights and becomes obligated to perform the duties of the secured party after the secondary obligor:

(1) Receives an assignment of a secured obligation from the secured party;

(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

(3) Is subrogated to the rights of a secured party with respect to collateral.

(b) An assignment, transfer, or subrogation described in subsection (a):

(1) Is not a disposition of collateral under Section 24.47.100; and

(2) Relieves the secured party of further duties under Chapters 24.42 through 24.48.

24.47.170 Transfer of Record or Legal Title

(a) In this section, "transfer statement" means a record authenticated by a secured party stating:

(1) That the debtor has defaulted in connection with an obligation secured by specified collateral;

(2) That the secured party has exercised its post default remedies with respect to the collateral;

(3) That, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral; and

(4) The name and mailing address of the secured party, debtor, and transferee.

(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:

(1) Accept the transfer statement;

(2) Promptly amend its records to reflect the transfer; and

(3) If applicable, issue a new appropriate certificate of title in the name of the transferee.

(c) A transfer of the record or legal title to collateral to a secured party under subsection (b) or otherwise is not of itself a disposition of collateral under Chapters 24.42 through 24.48 and does not of itself relieve the secured party of its duties under Chapters 24.42 through 24.48.

24.47.180 Acceptance of Collateral in Full or Partial Satisfaction of Obligation - Compulsory Disposition of Collateral

(a) A secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:

(1) The debtor consents to the acceptance under subsection (c);

(2) The secured party does not receive, within the time set forth in subsection (d), a notification of objection to the proposal authenticated by:

(A) A person to which the secured party was required to send a proposal under Section 24.47.190; or

(B) 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.

(b) A purported or apparent acceptance of collateral under this section is ineffective unless:

(1) The secured party consents to the acceptance in an authenticated record or sends a proposal to the debtor; and

(2) The conditions of subsection (a) are met.

(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

(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:

(A) 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;

(B) In the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and

(C) Does not receive a notification of objection authenticated by the debtor within twenty days after the proposal is sent.

(d) To be effective under subdivision (3) of subsection (a), a notification of objection must be received by the secured party:

(1) In the case of a person to which the proposal was sent pursuant to Section 24.47.190, within twenty days after notification was sent to that person; and

(2) In other cases:

(A) Within twenty days after the last notification was sent pursuant to Section 24.47.190; or

(B) If a notification was not sent, before the debtor consents to the acceptance under subsection (c).

24.47.190 Notification of Proposal to Accept Collateral

(a) A secured party that desires to accept collateral in full or partial satisfaction of the obligation it secures shall send its proposal to:

(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;

(2) Any other secured party or lienholder that, ten 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:

(A) Identified the collateral;

(B) Was indexed under the debtor's name as of that date; and

(C) Was filed in the office or offices in which to file a financing statement against the debtor covering the collateral as of that date; and

(3) Any other secured party that, ten 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 24.44.110.

(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).

24.47.200 Effect of Acceptance of Collateral

(a) A secured party's acceptance of collateral in full or partial satisfaction of the obligation it secures:

(1) Discharges the obligation to the extent consented to by the debtor;

(2) Transfers to the secured party all of a debtor's rights in the collateral;

(3) Discharges the security interest or agricultural lien that is the subject of the debtor's consent and any subordinate security interest or other subordinate lien; and

(4) Terminates any other subordinate interest.

(b) A subordinate interest is discharged or terminated under subsection (a), even if the secured party fails to comply with Chapters 24.42 through 24.48.

24.47.210 Right to Redeem Collateral

(a) A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral.

(b) To redeem collateral, a person shall tender:

(1) Fulfillment of all obligations secured by the collateral; and

(2) The reasonable expenses and attorney's fees described in subdivision (1) of subsection (a) of Section 24.47.140.

(1) Has collected collateral under Section 24.47.070;

(2) Has disposed of collateral or entered into a contract for its disposition under Section 24.47.100; or

(3) Has accepted collateral in full or partial satisfaction of the obligation it secures under Section 24.47.200.

24.47.220 Waiver

(a) A debtor or secondary obligor may waive the right to notification of disposition of collateral under Section 24.47.110 only by an agreement to that effect entered into and authenticated after default.

(b) A debtor or secondary obligor may waive the right to redeem collateral under Section 24.47.210 only by an agreement to that effect entered into and authenticated after default.

24.47.230 Remedies for Secured Party's Failure to Comply with Chapter

(a) If it is established that a secured party is not proceeding in accordance with Chapters 24.42 through 24.48, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.

(b) Subject to subsections (c), (d), and (f), a person is liable for damages in the amount of any loss caused by a failure to comply with Chapters 24.42 through 24.48. Loss caused by a failure to comply with a request under Section 24.43.100 may include loss resulting from the debtor's inability to obtain, or increase costs of, alternative financing.

(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 in an individual action damages under subsection (b) for its loss; and

(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 in an individual action for that failure in any event an amount not less than the credit service charge plus ten percent of the principal amount of the obligation or the time-price differential plus ten percent of the cash price.

(d) A debtor whose deficiency is eliminated under Section 24.47.240 may recover in an individual action damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under Section 24.47.240 may not otherwise recover under subsection (b) for noncompliance with the provisions of Section 24.47.010 through Section 24.47.260 relating to collection, enforcement, disposition, or acceptance.

(e) In addition to any damages recoverable under subsection (b), the debtor or person named as a debtor in a filed record, as applicable, may recover in an individual action one hundred dollars in each case from a person that:

(1) Fails to comply with Section 24.43.080;

(2) Fails to comply with Section 24.43.090;

(3) Files a record that the person is not entitled to file under subsection (a) of Section 24.46.080; or

(4) Fails to comply with Section 24.46.120.

(f) A debtor or consumer obligor may recover in an individual action damages under subsection (b) and, in addition, one hundred dollars in each case from a person that, without reasonable cause, fails to comply with a request under Section 24.43.100. A recipient of a request under Section 24.43.100 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.

(g) If a secured party fails to comply with a request regarding a list of collateral or a statement of account under Section 24.43.100, 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.

24.47.240 Action in Which Deficiency or Surplus Is in Issue

In an action arising from a transaction in which the amount of a deficiency or surplus is in issue, the following rules apply:

(a) 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's compliance in issue.

(b) If the secured party'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.

(c) Except as otherwise provided in Section 24.47.260, 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's fees exceeds the greater of:

(1) The proceeds of the collection, enforcement, disposition, or acceptance; or

(2) 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.

(d) For purposes of subdivision (2) of subsection (c), the amount of proceeds that would have been realized is equal to the sum of the secured obligation, expenses, and attorney's fees unless the secured party proves that the amount is less than that sum.

(e) If a deficiency or surplus is calculated under subsection (f) of Section 24.47.140, 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.

24.47.250 Determination of Whether Conduct Was Commercially Reasonable

(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.

(b) A disposition of collateral is made in a commercially reasonable manner if the disposition is made:

(1) In the usual manner on any recognized market;

(2) At the price current in any recognized market at the time of the disposition; or

(3) Otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.

(1) In a judicial proceeding;

(2) By a bona fide creditors' committee;

(3) By a representative of creditors; or

(4) By an assignee for the benefit of creditors.

(d) Approval under subsection (c) need not be obtained, and lack of approval does not mean that the collection, enforcement, disposition, or acceptance is not commercially reasonable.

24.47.260 Nonliability and Limitation on Liability of Secured Party - Liability of Secondary Obligor

(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:

(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 Chapters 24.42 through 24.48; and

(2) The secured party's failure to comply with Chapters 24.42 through 24.48 does not affect the liability of the person for a deficiency.

(b) A secured party is not liable because of its status as secured party:

(1) To a person that is a debtor or obligor, unless the secured party knows:

(A) That the person is a debtor or obligor;

(B) The identity of the person; and

(2) To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:

(A) That the person is a debtor; and

(B) The identity of the person.

(c) A secured party is not liable to any person, and a person's liability for a deficiency is not affected, because of any act or omission arising out of the secured party'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's belief is based on its reasonable reliance on:

(1) A debtor's representation concerning the purpose for which collateral was to be used, acquired, or held; or

(2) An obligor's representation concerning the purpose for which a secured obligation was incurred.

(d) A secured party is not liable under subdivision (2) of subsection (c) of Section 24.47.230 more than once with respect to any one secured obligation.

Chapter 24.48 Transition

24.48.010 Savings Clause

(a) Except as otherwise provided in this part, Chapters 24.42 through 24.48 apply to a transaction or lien within its scope, even if the transaction or lien was entered into or created before [the effective date of Chapters 24.42 through 24.48].

(b) Except as otherwise provided in subsection (c) and Section 24.48.020 through Section 24.48.080:

(1) Transactions and liens that were not governed by the former chapter 24 and were validly entered in to or created before [the effective date of Chapters 24.42 through 24.48] and would be subject to Chapters 24.42 through 24.48 if they had been entered into or created after the Tribe adopted this amended this title, and the rights, duties, and interests flowing from those transactions and liens remain valid after [the effective date of Chapters 24.42 through 24.48]; and

(2) The transactions and liens may be terminated, completed, consummated, and enforced as required or permitted by Chapters 24.42 through 24.48 or by the law that otherwise would apply if Chapters 24.42 through 24.48 had not taken effect.

(c) Chapters 24.42 through 24.48 do not affect an action, case, or proceeding commenced before [the effective date of Chapters 24.42 through 24.48].

24.48.020 Security Interest Perfected Before Effective Date

(a) A security interest that is enforceable immediately before [the effective date of Chapters 24.42 through 24.48], and would have priority over the rights of a person that becomes a lien creditor at that time is a perfected security interest under Chapters 24.42 through 24.48 if, the applicable requirements for enforceability and perfection under Chapters 24.42 through 24.48 are satisfied without further action on [the effective date of Chapters 24.42 through 24.48].

(b) Except as otherwise provided in Section 24.48.040, if, immediately before [the effective date of Chapters 24.42 through 24.48], 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 Chapters 24.42 through 24.48 are not satisfied on [the effective date of Chapters 24.42 through 24.48], the security interest:

(1) Is a perfected security interest for one year after Chapters 24.42 through 24.48 take effect;

(2) Remains enforceable thereafter only if the security interest becomes enforceable under Section 24.43.030 before the year expires; and

(3) Remains perfected thereafter only if the applicable requirements for perfection under Chapters 24.42 through 24.48 are satisfied before the year expires.

24.48.030 Security Interest Unperfected Before Effective Date

A security interest that is enforceable immediately before [the effective date of Chapters 24.42 through 24.48], but which would be subordinate to the rights of a person that becomes a lien creditor at that time:

(a) Remains an enforceable security interest until [the effective date of Chapters 24.42 through 24.48];

(b) Remains enforceable thereafter if the security interest becomes enforceable under Section 24.43.030 on [the effective date of Chapters 24.42 through 24.48], or within one year thereafter; and

(1) Without further action, on the effective date of Chapters 24.42 through 24.48, if the applicable requirements for perfection under Chapters 24.42 through 24.48 are satisfied before or at that time; or

(2) When the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.

24.48.040 Effectiveness of Action Taken Before Effective Date

(a) If action, other than the filing of a financing statement, is taken before [the effective date of Chapters 24.42 through 24.48], 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 [the effective date of Chapters 24.42 through 24.48], the action is effective to perfect a security interest that attaches under Chapters 24.42 through 24.48 by [the effective date of Chapters 24.42 through 24.48]. An attached security interest becomes unperfected on [the effective date of Chapters 24.42 through 24.48], unless the security interest becomes a perfected security interest under Chapters 24.42 through 24.48 before the expiration of that period.

(b) The filing of a financing statement before [the effective date of Chapters 24.42 through 24.48], is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under Chapters 24.42 through 24.48.

(c) Chapters 24.42 through 24.48 do not render ineffective an effective financing statement that, before [the effective date of Chapters 24.42 through 24.48], is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in the former Section 24.42.030. However, except as otherwise provided in subsections (c) and (d) and Section 24.48.050, the financing statement ceases to be effective at the time the financing statement would have ceased to be effective under the law of the jurisdiction in which it is filed.

(d) The filing of a continuation statement after this amended chapter 24 takes effect does not continue the effectiveness of the financing statement filed before. However, upon the timely filing of a continuation statement after [the effective date of Chapters 24.42 through 24.48], and in accordance with the law of the jurisdiction governing perfection as provided in part 3, the effectiveness of a financing statement filed in the same office in that jurisdiction before [the effective date of Chapters 24.42 through 24.48], continues for the period provided by the law of that jurisdiction.

(e) Subdivision (2) of subsection (c) applies to a financing statement that, before [the effective date of Chapters 24.42 through 24.48], is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in the former Section 24.42.030 only to the extent that part 3 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.

(f) A financing statement that includes a financing statement filed before [the effective date of Chapters 24.42 through 24.48], takes effect and a continuation statement filed after [the effective date of Chapters 24.42 through 24.48], is effective only to the extent that it satisfies the requirements of part 5 for an initial financing statement.

24.48.050 When Initial Financing Statement Suffices to Continue Effectiveness of Financing Statement

(a) The filing of an initial financing statement in the office specified in section 24.4272 continues the effectiveness of a financing statement filed before [the effective date of Chapters 24.42 through 24.48], if:

(1) The filing of an initial financing statement in that office would be effective to perfect a security interest under Chapters 24.42 through 24.48;

(2) The pre-effective-date financing statement was filed in an office in another state or another office in the Tribe's jurisdiction or another jurisdiction with which the Tribe has entered in to an agreement; and

(3) The initial financing statement satisfies subsection (c).

(b) The filing of an initial financing statement under subsection (a) continues the effectiveness of the pre-effective-date financing statement:

(1) If the initial financing statement is filed before [the effective date of Chapters 24.42 through 24.48], for the period provided in the former Section 24.44.220 with respect to a financing statement; and

(2) If the initial financing statement is filed after [the effective date of Chapters 24.42 through 24.48], for the period provided in Section 24.46.140 with respect to an initial financing statement.

(1) Satisfy the requirements of part 5 for an initial financing statement;

(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

(3) Indicate that the pre-effective-date financing statement remains effective.

24.48.060 Amendment of Pre-Effective-Date Financing Statement

(a) In this section, "pre-effective-date financing statement" means a financing statement filed before [the effective date of Chapters 24.42 through 24.48].

(b) After [the effective date of Chapters 24.42 through 24.48], 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. 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.

(c) Except as otherwise provided in subsection (d), if the law of Tribe governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after [the effective date of Chapters 24.42 through 24.48], if:

(1) The pre-effective-date financing statement and an amendment are filed in the office specified in section 24.4272;

(2) An amendment is filed in the office specified in section 24.4272 concurrently with, or after the filing in that office of, an initial financing statement that satisfies subsection (c) of Section 24.48.050; or

(3) An initial financing statement that provides the information as amended and satisfies subsection (c) of Section 24.48.050 is filed in the office specified in section 24.4272.

(d) If the law of the Tribe 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 24.48.040 and Section 24.48.050.

(e) Regardless of whether 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 [the effective date of Chapters 24.42 through 24.48], 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 24.48.050 has been filed in the office specified by the law of the jurisdiction governing perfection as provided in part 3 as the office in which to file a financing statement.

24.48.070 Persons Entitled to File Initial Financing Statement or Continuation Statement

A person may file an initial financing statement or a continuation statement under this part if:

(a) The secured party of record authorizes the filing; and

(b) The filing is necessary under this part:

(1) To continue the effectiveness of a financing statement filed before [the effective date of Chapters 24.42 through 24.48]; or

(2) To perfect or continue the perfection of a security interest.

24.48.080 Priority

(a) Chapters 24.42 through 24.48 determine the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before [the effective date of Chapters 24.42 through 24.48], the former chapter 24 determines priority.

(b) For purposes of subsection (a) of Section 24.44.220, the priority of a security interest that becomes enforceable under Section 24.43.030 dates from [the effective date of Chapters 24.42 through 24.48], if the security interest is perfected under Chapters 24.42 through 24.48 by the filing of a financing statement [the effective date of Chapters 24.42 through 24.48], which would not have been effective to perfect the security interest under the former chapter 24. This subsection does not apply to conflicting security interests each of which is perfected by the filing of such a financing statement.

24.48.090 Savings Clause

(a) Except as otherwise provided in this section, Chapters 24.42 through 24.48 apply to a transaction or lien within its scope, even if the transaction or lien was entered or created before this Act takes effect.

(b) This Act does not affect an action, case, or proceeding commenced before Chapters 24.42 through 24.48 take effect.

24.48.100 Security Interest Perfected Before Effective Date

(a) A security interest that is a perfected security interest immediately before this Act takes effect is a perfected security interest under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 if, when Chapters 24.42 through 24.48 take effect, the applicable requirements for attachment and perfection under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 are satisfied without further action.

(b) Except as otherwise provided in Section 24.48.120, if, immediately before Chapters 24.42 through 24.48 take effect, a security interest is a perfected security interest, but the applicable requirements for perfection under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 are not satisfied when Chapters 24.42 through 24.48 take effect, the security interest remains perfected thereafter only if the applicable requirements for perfection under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 are satisfied within one year after Chapters 24.42 through 24.48 take effect.

24.48.110 Security Interest Unperfected Before Effective Date

A security interest that is an unperfected security interest immediately before Chapters 24.42 through 24.48 take effect becomes a perfected security interest:

(a) Without further action, when Chapters 24.42 through 24.48 take effect if the applicable requirements for perfection under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 are satisfied before or at that time; or

(b) When the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.

24.48.120 Effectiveness of Action Taken Before Effective Date

(a) The filing of a financing statement before this takes effect is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48.

(b) Chapters 24.42 through 24.48 do not render ineffective an effective financing statement that, before Chapters 24.42 through 24.48 take effect, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in Chapters 24.42 through 24.48 as they existed before amendment of Chapters 24.42 through 24.48. However, except as otherwise provided in subsections (c) and (d) and Section 24.48.130, the financing statement ceases to be effective:

(1) If the financing statement is filed in this state, at the time the financing statement would have ceased to be effective had Chapters 24.42 through 24.48 not taken effect; or

(2) If the financing statement is filed in another jurisdiction, at the time the financing statement would have ceased to be effective under the law of that jurisdiction.

(c) The filing of a continuation statement after Chapters 24.42 through 24.48 take effect does not continue the effectiveness of the financing statement filed before Chapters 24.42 through 24.48 take effect. However, upon the timely filing of a continuation statement after Chapters 24.42 through 24.48 take effect, no later than is required by Section 24.46.140, and in accordance with the law of the jurisdiction governing perfection as provided in Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48, the effectiveness of a financing statement filed in the same office in that jurisdiction before Chapters 24.42 through 24.48 take effect continues for the period provided by the law of that jurisdiction.

(d) Paragraph (B) of subdivision (2) of subsection (b) applies to a financing statement that, before Chapters 24.42 through 24.48 take 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 Chapters 24.42 through 24.48 as they existed before amendment, only to the extent that Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 provide 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.

(e) A financing statement that includes a financing statement filed before Chapters 24.42 through 24.48 take effect and a continuation statement filed after Chapters 24.42 through 24.48 take effect is effective only to the extent that it satisfies the requirements of section 24.4272 through Section 24.46.250 as amended by Chapters 24.42 through 24.48 for an initial financing statement. A financing statement that indicates that the debtor is a decedent's estate indicates that the collateral is being administered by a personal representative within the meaning of subdivision (2) of subsection (a) of Section 24.46.020 as amended by Chapters 24.42 through 24.48. A financing statement that indicates that the debtor is a trust or is a trustee acting with respect to property held in trust indicates that the collateral is held in a trust within the meaning of subdivision (3) of subsection (a) of Section 24.46.020 as amended by Chapters 24.42 through 24.48.

24.48.130 When Initial Financing Statement Suffices to Continue Effectiveness of Financing Statement

(a) The filing of an initial financing statement in the office specified in section 24.4272 continues the effectiveness of a financing statement filed before this title takes effect if:

(1) The filing of an initial financing statement in that office would be effective to perfect a security interest under Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48;

(2) The pre-effective-date financing statement was filed in an office in another state; and

(3) The initial financing statement satisfies subsection (c).

(b) The filing of an initial financing statement under subsection 1 continues the effectiveness of the pre-effective-date financing statement:

(1) If the initial financing statement is filed before Chapters 24.42 through 24.48 take effect, for the period provided in unamended Section 24.46.140 with respect to an initial financing statement; and

(2) If the initial financing statement is filed after Chapters 24.42 through 24.48 take effect, for the period provided in Section 24.46.140 as amended by Chapters 24.42 through 24.48 with respect to an initial financing statement.

(1) Satisfy the requirements of section 24.4272 through Section 24.46.250 as amended by Chapters 24.42 through 24.48 for an initial financing statement

(3) Indicate that the pre-effective-date financing statement remains effective.

24.48.140 Amendment of Pre-Effective-Date Financing Statement

(a) In this section, "pre-effective-date financing statement" means a financing statement filed before Chapters 24.42 through 24.48 take effect.

(b) After Chapters 24.42 through 24.48 take 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 this Code as amended by 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.

(c) Except as otherwise provided in subsection (d), if the law of the Tribe governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after this title takes effect only if:

(1) The pre-effective-date financing statement and an amendment are filed in the office specified in section 24.4272;

(3) An initial financing statement that provides the information as amended and satisfies subsection 3 of section 41-09-136 is filed in the office specified in section 24.4272.

(d) If the law of the Tribe governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under subsections (c) and (e) of Section 24.48.120 or Section 24.48.130.

(e) Whether or not the law of the Tribe governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed within the Tribe's jurisdiction or in another jurisdiction that the Tribe has entered into an Agreement with may be terminated after Chapters 24.42 through 24.48 take 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 24.48.130 has been filed in the office specified by the law of the jurisdiction governing perfection as provided in Chapters 24.42 through 24.48 as amended by Chapters 24.42 through 24.48 as the office in which to file a financing statement.

24.48.150 Person Entitled to File Initial Financing Statement or Continuation Statement

A person may file an initial financing statement or a continuation statement under Section 24.48.090 through Section 24.48.160 if:

(a) The secured party of record authorizes the filing; and

(b) The filing is necessary under Section 24.48.090 through section 24,42139:

(1) To continue the effectiveness of a financing statement filed before Chapters 24.42 through 24.48 take effect; or

(2) To perfect or continue the perfection of a security interest.

24.48.160 Priority

Chapters 24.42 through 24.48 determine the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before Chapters 24.42 through 24.48 take effect, Chapters 24.42 through 24.48 as they existed before amendment determines priority.

Chapter 24.49 Validity of Security Agreement and Rights of Parties

24.49.010 General Validity of Security Agreement

Except as otherwise provided by this title a security agreement is effective according to its terms between the parties, against purchasers of the collateral and against creditors. Nothing in this article validates any charge or practice illegal under any statute or regulation there under governing usury, small loans, retail installment sales, or the like, or extends the application of any such statute or regulation to any transaction not otherwise subject thereto.

24.49.020 Title to Collateral Immaterial

Each provision of this article with regard to rights, obligations and remedies applies whether title to collateral is in the secured party or in the debtor.

24.49.030 Attachment and Enforceability of Security Interest; Proceeds; Formal Requisites

(a) Subject to the provisions of Chapters 24.42 through 24.48 the security interest of a collecting bank, Section 24.43.020 on security interests in securities and Section 24.43.030 on a security interest arising under the article on sales, a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:

(1) The collateral is in the possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned; and

(2) Value has been given; and

(3) The debtor has rights in the collateral.

(b) A security interest attaches when it becomes enforceable against the debtor with respect to the collateral. Attachment occurs as soon as all of the events specified in Subsection (a) have taken place unless explicit agreement postpones the time of attaching.

(c) Unless otherwise agreed a security agreement gives the secured party the rights to proceeds provided by Section 24.50.060.

(d) A transaction, although subject to this article, is also subject to any and all tribal laws regulating small loans, retail installments and the like, and in the case of conflict between the provisions of this article and any such laws, the provisions of said laws control. Failure to comply with any applicable statute has only the effect which is specified therein.

24.49.040 After-Acquired Property; Future Advances

(a) Except as provided in Subsection (b), a security agreement may provide that any or all obligations covered by the security agreement are to be secured by after-acquired collateral.

(b) No security interest attaches under an after-acquired property clause to consumer goods other than accessions (Section 24.50.140) when given as additional security unless the debtor acquires rights in them within ten days after the secured party gives value.

(c) Obligations covered by a security agreement may include future advances or other value whether or not the advances or value are given pursuant to commitment (Section 24.42.050(a).

24.49.050 Use or Disposition of Collateral Without Accounting Permissible

A security interest is not invalid or fraudulent against creditors by reason of liberty in the debtor to use, commingle or dispose of all or part of the collateral (including returned or repossessed goods), or to collect or compromise accounts or chattel paper, or to accept the return of goods or make repossessions, or to use, commingle or dispose of proceeds, or by reason of the failure of the secured party to require the debtor to account for proceeds or replace collateral. This section does not relax the requirements of possession where perfection of a security interest depends upon possession of the collateral by the secured party or by a bailee.

24.49.060 Agreement Not to Assert Defenses Against Assignee; Modification of Sales Warranties Where Security Agreement Exists

(a) Subject to any statute or decision which establishes a different rule for buyers or lessees of consumer goods, an agreement by a buyer or lessee that he or she will not assert against an assignee any claim or defense which he or she may have against the seller or lessor is enforceable by an assignee who takes his or her assignment for value, in good faith and without notice of a claim or defense, except as to defenses of a type which may be asserted against a holder in due course of a negotiable instrument under the article on commercial paper (Chapter 24.03). A buyer who as part of one transaction signs both a negotiable instrument and a security agreement makes such an agreement.

(b) When a seller retains a purchase money security interest in goods the article on sales (Chapter 24.02) govern the sale and any disclaimer, limitation or modification of the seller's warranties.

24.49.070 Rights and Duties When Collateral Is in Secured Party's Possession

(a) A secured party must use reasonable care in the custody and preservation of collateral in his or her possession. In the case of an instrument or chattel paper reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.

(b) Unless otherwise agreed, when collateral is in the secured party's possession:

(1) Reasonable expenses (including the cost of any 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;

(2) The risk of accidental loss or damage is on the debtor to the extent of any deficiency in any effective insurance coverage;

(3) The secured party may hold as additional security any increase or profits (except money) received from the collateral, but money so received, unless remitted to the debtor, shall be applied in reduction of the secured obligation;

(4) The secured party must keep the collateral identifiable but fungible collateral.

(5) the secured party may repledge the collateral upon terms which do not impair the right to redeem it.

(c) A secured party is liable for any loss caused by his or her failure to meet any obligation imposed by the preceding subsections but does not lose his or her security interest.

(d) A secured party may use or operate the collateral for the purpose of preserving the collateral or its value or pursuant to the order of a court of appropriate jurisdiction or, except in the case of consumer goods, in the manner and to the extent provided in the security agreement.

24.49.080 Request for Statement of Account or List of Collateral

(a) A debtor may sign a statement indicating what he or she believes to be the aggregate amount of unpaid indebtedness as of a specified date, and may send it to the secured party with a request that the statement be approved or corrected and returned to the debtor. When the security agreement or any other record kept by the secured party identifies the collateral a debtor may similarly request the secured party to approve or correct a list of the collateral.

(b) The secured party must comply with such a request within two (2) weeks after receipt by sending a written correction or approval. If the secured party claims a security interest in all of a particular type of collateral owned by the debtor he or she may indicate that fact in his or her reply and need not approve or correct an itemized list of such collateral. If the secured party without reasonable excuse fails to comply he or she is liable for any loss caused to the debtor thereby; and if the debtor has properly included in his or her request a good faith statement of the obligation or a list of the collateral or both the secured party may claim a security interest only as shown in the statement against persons misled by his or her failure to comply. If he or she no longer has an interest in the obligation or collateral at the time the request is received he or she must disclose the name and address of any successor in interest known to him or her and he or she is liable for any loss caused to the debtor as a result of failure to disclose. A successor in interest is not subject to this section until a request is received by him.

(c) A debtor is entitled to such a statement once every six (6) months without charge. The secured party may require payment of a charge not exceeding ten dollars ($10) for each additional statement furnished.

Chapter 24.50 Rights of Third Parties; Perfected and Un Perfected Security Interests; Rules of Priority

24.50.010 Persons Who Take Priority over Unperfected Security Interests; "Lien Creditor."

(a) Except as otherwise provided in Subsection (b), an unperfected security interest is subordinate to the rights of:

(1) Persons entitled to priority under Section 24.50.120;

(2) A person who becomes a lien creditor before the security interest is perfected;

(3) In the case of goods, instruments, documents, and chattel paper, a person who is not a secured party and who is a transferee in bulk or other buyer not in ordinary course of business, or is a buyer of farm products in ordinary course of business, to the extent that he or she gives value and receives delivery of the collateral without knowledge of the security interest and before it is perfected;

(4) In the case of accounts and general intangibles, a person who is not a secured party and who is a transferee to the extent that he or she gives value without knowledge of the security interest and before it is perfected.

(b) If the secured party files with respect to a purchase money security interest before or within twenty (20) days after the debtor receives possession of the collateral, he or she takes priority over the rights of a transferee in bulk or of a lien creditor which arise between the time the security interest attaches and the time of filing.

(c) A "lien creditor" means a creditor who has acquired a lien on the property involved by attachment, levy or the like and includes an assignee for benefit of creditors from the time of assignment, and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment.

(d) A person who becomes a lien creditor while a security interest is perfected takes subject to the security interest only to the extent that it secures advances made before he or she becomes a lien creditor or within forty-five (45) days thereafter or made without knowledge of the lien or pursuant to a commitment entered into without knowledge of the lien.

24.50.020 When Filing Is Required to Perfect Security Interest; Security Interests to Which Filing Provisions of This Article Do Not Apply

(a) A financing statement must be filed to perfect all security interests except the following:

(1) A security interest in collateral in possession of the secured party under Section 24.50.050;

(2) A security interest temporarily perfected in instruments or documents without delivery under Section 24.50.040 or in proceeds for a twenty-day (20) period under Section 24.50.060;

(3) A security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;

(4) A purchase money security interest in consumer goods; but filing is required for a motor vehicle required to be registered; and fixture filing is required for priority over conflicting interests in fixtures to the extent provided in Section 24.50.130;

(5) An assignment of accounts which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts of the assignor;

(6) A security interest of a collecting bank (Section 24.21.080) or in securities (Section 24.40.220) or arising under the article on sales (see Section 24.43.030) or covered in Subsection (c) of this section;

(7) An assignment for the benefit of all the creditors of the transferor, and subsequent transfers by the assignee there under.

(b) If a secured party assigns a perfected security interest, no filing under this article is required in order to continue the perfected status of the security interest against creditors of and transferees from the original debtor.

(c) The filing of a financing statement otherwise required by this article is not necessary or effective to perfect a security interest in property subject to:

(1) a statute or treaty of the United States which provides for a national or international registration or a national or international certificate of title or which specifies a place of filing different from that specified in this article for filing of the security interest; or

(2) certificate of title statutes of the Tribe covering automobiles, trailers, mobile homes, boats, farm tractors, and the like, and any central filing statutes; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of this article (Part 4) apply to a security interest in that collateral created by him or her as debtor; or

(3) a certificate of title statute of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection (Section 24.42.030(b).

(d) Compliance with a statute or treaty described in Subsection (c) is equivalent to the filing of a financing statement under this article, and a security interest in property subject to the statute or treaty can be perfected only by compliance therewith except as provided in Chapters 24.42 through 24.48 on multiple state transactions. Duration and renewal of perfection of a security interest perfected by compliance with the statute or treaty are governed by the provisions of the statute or treaty; in other respects the security interest is subject to this article.

24.50.030 When Security Interest Is Perfected; Continuity of Perfection

(a) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in Section 24.50.020, Section 24.50.040, Section 24.50.050 and Section 24.50.060. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches.

(b) If a security interest is originally perfected in any way permitted under this article and is subsequently perfected in some other way under this article, without an intermediate period when it was unperfected, the security interest shall be deemed to be perfected continuously for the purposes of this article.

24.50.040 Perfection of Security Interest in Instruments, Documents, and Goods Covered by Documents; Perfection by Permissive Filing; Temporary Perfection Without Filing or Transfer of Possession

(a) A security interest in chattel paper or negotiable documents may be perfected by filing. A security interest in money or instruments (other than certificated securities or instruments which constitute part of chattel paper) can be perfected only by the secured party's taking possession, except as provided in Subsections (d) and (e) of this section and Section 24.50.060(b) and (c) on proceeds.

A security interest in chattel paper or negotiable documents may be perfected by filing. A security interest in money or instruments (other than certificated securities or instruments which constitute part of chattel paper) can be perfected only by the secured party's taking possession, except as provided in Subsections (d) and (e) of this section and Section 24.50.060(b) and Section 24.50.060(c) on proceeds.

(b) During the period that goods are in the possession of the issuer of a negotiable document therefore, a security interest in the goods is perfected by perfecting a security interest in the document, and any security interest in the goods otherwise perfected during such period is subject thereto.

(c) A security interest in goods in the possession of a bailee other than one who has issued a negotiable document therefore is perfected by issuance of a document in the name of the secured party or by the bailee's receipt of notification of the secured party's interest or by filing as to the goods.

(d) A security interest in instruments (other than certificated securities) or negotiable documents is perfected without filing or the taking of possession for a period of twenty-one (21) days from the time it attaches to the extent that it arises for new value given under a written security agreement.

(e) A security interest remains perfected for a period of twenty-one days without filing where a secured party having a perfected security interest in an instrument (other than a certificated security), a negotiable document or goods in possession of a bailee other than one who has issued a negotiable document therefore

(1) Makes available to the debtor the goods or documents representing the goods for the purpose of ultimate sale or exchange or for the purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with them in a manner preliminary to their sale or exchange; but priority between conflicting security interests in the goods is subject to Section 24.50.120(c); or

(2) Delivers the instrument to the debtor for the purpose of ultimate sale or exchange or of presentation, collection, renewal or registration of transfer.

(f) After the twenty-one (21) day period in Subsections (d) and (e) perfection depends upon compliance with applicable provisions of this article.

24.50.050 When Possession by Secured Party Perfects Security Interest Without Filing

A security interest in letters of credit and advices of credit (Section 24.3016(2)(a), goods, instruments (other than certificated securities), money, negotiable documents or chattel paper may be perfected by the secured party's taking possession of the collateral. If such collateral other than goods covered by a negotiable document is held by a bailee, the secured party is deemed to have possession from the time the bailee receives notification of the secured party's interest. A security interest is perfected by possession from the time possession is taken without relation back and continues only so long as possession is retained, unless otherwise specified in this article. The security interest may be otherwise perfected as provided in this article before or after the period of possession by the secured party.

24.50.060 "Proceeds"; Secured Party's Rights on Disposition of Collateral

(a) "Proceeds" includes whatever is received upon the sale, lease, exchange, collection or other disposition of collateral or proceeds. Insurance payable by reason of loss or damage to the collateral is proceeds, except to the extent that it is payable to a person other than a party to the security agreement. Money, checks, deposit accounts and the like are "cash proceeds."

(b) Except where this article otherwise provides, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.

(c) The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected but it ceases to be a perfected security interest and becomes unperfected twenty days (20) after receipt of the proceeds by the debtor unless:

(1) A filed financing statement covers the original collateral and the proceeds are collateral in which a security interest may be perfected by filing in the office or offices where the financing statement has been filed and, if the proceeds are acquired with cash proceeds, the description of collateral in the financing statement indicates the types of property constituting the proceeds; or

(2) A filed financing statement covers the original collateral and the proceeds are identifiable cash proceeds; or

(3) The security interest in the proceeds is perfected before the expiration of the twenty-day (20) period.

(4) Except as provided in this section, a security interest in proceeds can be perfected only by the methods or under" the circumstances permitted in this article for original collateral of the same type.

(d) In the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security interest in proceeds has a perfected security interest:

(1) In identifiable noncash proceeds and in separate deposit accounts containing only proceeds;

(2) In identifiable cash proceeds in the form of money which is neither commingled with other money nor deposited in a deposit account prior to the insolvency proceedings;

(3) In identifiable cash proceeds in the form of checks and the like which are not deposited in a deposit account prior to the insolvency proceedings; and

(4) In all cash and deposit accounts of the debtor, in which proceeds have been commingled with other funds, but the perfected security interest under this paragraph (d) is

(A) Subject to any right of setoff; and

(B) Limited to an amount not greater than the amount of any cash proceeds received by the debtor within twenty days before the institution of the insolvency proceedings less the sum of (i) the payments to the secured party on account of cash proceeds received by the debtor during such period and (ii) the cash proceeds received by the debtor during such period to which the secured party is entitled under paragraphs (1) through (3) of this Subsection (d).

(e) If a sale of goods results in an account or chattel paper which is transferred by the seller to a secured party, and if the goods are returned to or are repossessed by the seller or the secured party, the following rules determine priorities:

(1) If the goods were collateral at the time of sale for an indebtedness of the seller which is still unpaid, the original security interest attaches again to the goods and continues as a perfected security interest if it was perfected at the time when the goods were sold. If the security interest was originally perfected by a filing which is still effective, nothing further is required to continue the perfected status; in any other case, the secured party must take possession of the returned or repossessed goods or must file.

(2) An unpaid transferee of the chattel paper has a security interest in the goods against the transferor. Such security interest is prior to a security interest asserted under paragraph (1) to the extent that the transferee of the chattel paper was entitled to priority under Section 24.50.080.

(3) An unpaid transferee of the account has a security interest in the goods against the transferor. Such security interest is subordinate to a security interest asserted under paragraph (1).

(4) A security interest of an unpaid transferee asserted under paragraph (2) or (3) must be perfected for protection against creditors of the transferor and purchasers of the returned or repossessed goods.

24.50.070 Protection of Buyers of Goods

(a) A buyer in ordinary course of business (Section 24.01.100(i)) other than a person buying farm products from a person engaged in farming operations takes free of a security intern created by his or her seller even though the security interest is perfected and even though the buyer knows of its existence.

(b) In the case of consumer goods, a buyer takes free of a security interest even though perfected if] or she buys without knowledge of the security interest, for value and for his or her own personal family or household purposes unless prior to the purchase the secured party has filed a financing statement covering such goods.

(c) A buyer other than a buyer in ordinary course of business (Subsection (a) of this section) takes free of a security interest to the extent that it secures future advances made after the secured party acquires knowledge of the purchase, or more than forty-five (45) days after the purchase, whichever first occurs, unless made pursuant to a commitment entered into without knowledge of the purchase and before the expiration of the forty-five day period.

24.50.080 Purchase of Chattel Paper and Instruments

A purchaser of chattel paper or an instrument who gives new value and takes possession of it in the ordinary course of his or her business has priority over a security interest in the chattel paper or instrument:

(a) which is perfected under Section 24.50.040 (permissive filing and temporary perfection) or under Section 24.50.060 (perfection as to proceeds) if he or she acts without knowledge that the specific paper or instrument is subject to a security interest; or

(b) which is claimed merely as proceeds of inventory subject to a security interest (Section 24.50.060) even though he or she knows that the specific paper or instrument is subject to the security interest.

24.50.090 Protection of Purchasers of Instruments, Documents and Securities

Nothing in this article limits the rights of a holder in due course of a negotiable instrument (Section 24.16.020) or a holder to whom a negotiable document of title has been duly negotiated (Section 24.36.010) or a bona fide purchaser of a security (Section 24.40.020(a) and such holders or purchasers take priority over an earlier security interest even though perfected. Filing under this article does not constitute notice of the security interest to such holders or purchasers.

24.50.100 Priority of Certain Liens Arising by Operation of Law

When a person in the ordinary course of his or her business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.

24.50.110 Alienability of Debtor's Rights; Judicial Process

The debtor's rights in collateral may be voluntarily or involuntarily transferred (by way of sale, creation of a security interest, attachment, levy, garnishment or other judicial process) notwithstanding a provision in the security agreement prohibiting any transfer or making the transfer constitute a default.

24.50.120 Priorities Among Conflicting Security Interests in the Same Collateral

(a) The rules of priority stated in other sections of this part and in the following sections shall govern when applicable: Section 24.17.170 with respect to the security interests of collecting banks in items being collected, accompanying documents and proceeds; Section 24.42.030 on security interests related to other jurisdictions; Section 24.43.040 on consignments.

(b) A perfected security interest in crops for new value given to enable the debtor to produce the crops during the production season and given not more than three (3) months before the crops become growing crops by planting or otherwise takes priority over an earlier perfected security interest to the extent that such earlier interest secures obligations due more than six (6) months before the crops become growing crops by planting or otherwise, even though the person giving new value had knowledge of the earlier security interest.

(c) A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory and also has priority in identifiable cash proceeds received on or before the delivery of the inventory to a buyer if:

(1) The purchase money security interest is perfected at the time the debtor. receives possession of the inventory; and

(2) The purchase money secured party gives notification in writing to the holder of the conflicting security interest if the holder had filed a financing statement covering the same types of inventory (i) before the date of the filing made by the purchase money secured party, or (ii) before the beginning of the twenty one day period where the purchase money security interest is temporarily perfected without filing or possession (Section 24.50.040(e); and

(3) The holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and

(4) Such notification states that the person giving the notice has or expects to acquire a purchase money security interest in inventory of the debtor, describing such inventory by item or type.

(d) A purchase money security interest in collateral other than inventory has priority over a conflicting security interest in the same collateral or its proceeds if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within twenty (20) days thereafter.

(e) In all cases not governed by other rules stated in this section (including cases of purchase money security interests which do not qualify for the special priorities set forth in Subsections (c) and (d) of this section), priority between conflicting security interests in the same collateral shall be determined according to the following rules:

(1) Conflicting security interests rank according to priority in time of filing or perfection. Priority dates from the time a filing is first made covering the collateral or the time the security interest is first perfected, whichever is earlier, provided that there is no period thereafter when there is neither filing nor perfection.

(2) So long as conflicting security interests are unperfected, the first to attach has priority.

(f) For the purposes of Subsection (e) a date of filing or perfection as to collateral is also a date of filing or perfection as to proceeds.

(g) If future advances are made while a security interest is perfected by filing, the taking of possession, or under Section 24.40.220 on securities, the security interest has the same priority for the purposes of Subsection (e) with respect to the future advances as it does with respect to the first advance. If a commitment is made before or while the security interest is so perfected, the security interest has the same priority with respect to advances made pursuant thereto. In other cases a perfected security interest has priority from the date the advance is made.

24.50.130 Priority of Security Interests in Fixtures

(a) In this section and in the provisions of Part 4 of this article referring to fixture filing, unless the context otherwise requires:

(1) goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law;

(2) 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 which are or are to become fixtures and conforming to the requirement of Subsections (e) of this section.

(3) 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 the recorded writing so indicates.

(b) A security interest under this article may be created in goods which are fixtures or may continue in goods which become fixtures, but no security interest exists under this article in ordinary building materials incorporated into an improvement on land.

(d) A perfected security interest in fixtures has priority over the conflicting interest of an encumbrancer or owner of the real estate where:

(1) the security interest is a purchase money security interest, the interest of the encumbrancer or owner arises before the goods become fixtures, the security interest is perfected by a fixture filing before the goods become fixtures or within (10) ten days thereafter, and the debtor has an interest of record in the real estate or is in possession of the real estate; or

(2) the security interest is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the security interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the debtor has an interest of record in the real estate or is in possession of the real estate; or

(3) the fixtures are readily removable factory or office machines or readily removable replacements of domestic appliances which are consumer goods, and before the goods become fixtures the security interest is perfected by any method permitted by this article; or

(4) the conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this article.

(e) A security interest in fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the estate where

(1) the encumbrancer or owner has consented in writing to the security interest or has disclaimed an interest in the goods as fixtures; or

(2) the debtor has a right to remove the goods as against the encumbrancer or owner. If the debtor's right terminates, the priority of the security interest continues for a reasonable time.

(f) Notwithstanding Paragraph (1) of Subsection (d) but otherwise subject to Subsections (d) and (e), a security interest in fixtures is subordinate to a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent that it is given to refinance a construction mortgage, a mortgage has this priority to the same extent as the construction mortgage.

(g) In cases not within the preceding subsections, a security interest in fixtures is subordinate to the conflicting interest of an encumbrancer or owner of the related real estate who is not the debtor.

(h) When the secured party has priority over all owners and encumbrancers of the real estate, he or she may, on default, subject to the provisions of Section 24.52.010 to Section 24.52.070, remove his or her collateral from the real estate but he or she must reimburse any encumbrancer or owner of the real estate who is not the debtor and who 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 for replacing them. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate security for the performance of this obligation.

24.50.140 Accessions

(a) A security interest in goods which attaches before they are installed in or affixed to other goods takes priority as to the goods installed or affixed (called in this section "accessions") over the claims of all persons to the whole except as stated in Subsection (c) and subject to Section 24.50.150(a).

(b) A security interest which attaches to goods after they become part of a whole is valid against all persons subsequently acquiring interests in the whole except as stated in Subsection (c) but is invalid against any person with an interest in the whole at the time the security interest attaches to the goods who has not in writing consented to the security interest or disclaimed an interest in the goods as part of the whole.

(1) A subsequent purchaser for value of any interest in the whole; or

(2) A creditor with a lien on the whole subsequently obtained by judicial proceedings; or

(3) A creditor with a prior perfected security interest in the whole to the extent that he or she makes subsequent advances

(d) If the subsequent purchase is made, the lien by judicial proceedings obtained or the subsequent advance under a prior perfected security interest is made or contracted for without knowledge of the security interest and before it is perfected. A purchaser of the whole at a foreclosure sale other than the holder of a perfected security interest purchasing at his or her own foreclosure sale is a subsequent purchaser within this section.

(e) When under Subsections (a) or (b) and (c) a secured party has an interest in accessions which ha priority over the claims of all persons who have interests in the whole, he or she may on default subject to the provisions of Chapter 24.52 to remove his or her collateral from the whole but he or she must reimburse any encumbrancer or owner of the whole who is not the debtor 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 secured party gives adequate security for the performance of this obligation.

24.50.150 Priority When Goods Are Commingled or Processed

(a) If a security interest in goods was perfected and subsequently the goods or a part thereof have become part of a product or mass, the security interest continues in the product or mass if:

(1) The goods are so manufactured, processed, assembled or commingled that their identity is lost in the product or mass; or

(2) A financing statement covering the original goods also covers the product into which the goods have been manufactured, processed or assembled in a case to which paragraph (b) applies, no separate security interest in that part of the original goods which has been manufactured, processed or assembled into the product may be claimed under Section 24.50.140.

(b) When under Subsection (a) more than one security interest attaches to the product or mass, they rank equally according to the ratio that the cost of the goods to which each interest originally attached bears to the cost of the total production or mass.

24.50.160 Priority Subject to Subordination

Nothing in this article prevents subordination by agreement by any person entitled to priority.

24.50.170 Secured Party Not Obligated on Contract of Debtor

The mere existence of a security interest or authority given to the debtor to dispose of or use collateral does not dispose contract or tort liability upon the secured party for the debtor's acts or omissions.

24.50.180 Defenses Against Assignee; Modification of Contract After Notification of Assignment; Term Prohibiting Assignment Ineffective; Identification and Proof of Assignment

(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in Section 24.49.060 the rights of an assignee are subject to:

(1) All the terms of the contract between the account debtor and assignor and any defense or claim arising there from; and

(2) Any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives notification of the assignment.

(b) So far as the right to payment or a part thereof under an assigned contract has not been fully earned by performance, and notwithstanding notification of the assignment, any modification of or substitution for the contract made in good faith and in accordance with reasonable commercial standards is effective against an assignee unless the account debtor has otherwise agreed but the assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that such modification or substitution is a breach by the assignor.

(c) The account debtor is authorized to pay the assignor until the account debtor receives notification that the amount due or to become due has been assigned and that payment is to be made to the assignee. A notification which does not reasonably identify the rights assigned is ineffective. If requested by the account debtor, the assignee must seasonably furnish reasonable proof that the assignment has been made and unless he or she does so the account debtor may pay the assignor.

(d) A term in any contract between an account debtor and an assignor is ineffective if it prohibits assignment of an account or prohibits creation of a security interest in chattel paper or a security interest in a general intangible for money due or to become due or requires the account debtor's consent to the assignment or security interest.

Chapter 24.51 Filing

24.51.010 Place of Filing; Erroneous Filing; Removal of Collateral

(a) The proper place to file in order to perfect a security interest is as follows:

(1) When the collateral is timber to be cut or is minerals or the like (including oil and gas) or accounts subject to Section 24.42.030(e), or when the financing statement is filed as a fixture filing (Section 24.50.130) and the collateral is goods which are or are to become fixtures, then in the office where a mortgage on the real estate concerned would be filed or recorded;

(2) In all other cases, in the office of the Secretary of the Tribe.

(3) Collateral already subject to a security interest in another jurisdiction when it is brought into this jurisdiction, or when the debtor's location is changed to this jurisdiction. Such a financing statement must state that the collateral was brought into this jurisdiction or that the debtor's location was changed to this jurisdiction under such circumstances; or

(4) Proceeds under Section 24.51.030(b) if the security interest in the original collateral was perfected. Such a financing statement must describe the original collateral; or

(5) Collateral as to which the filing has lapsed; or

(6) Collateral acquired after a change of name, identity or corporate structure of the debtor (Subsection (g)).

(b) A form substantially as follows is sufficient to comply with subsection (1):

(1) Name and social security number or internal revenue service tax payer identification number of debtor (or assignor)

(2) Address

(3) Name of secured party (or assignee)

(4) Address

(1) (If collateral is crops) The above described crops are growing or are to be grown on: (Describe real estate)

(2) (If applicable) The above goods are to become fixtures on: (Describe real estate)

(3) (If products of collateral are claimed).

(4) Products of the collateral are also covered. (use whichever is applicable)

(5) Signature of debtor (or assignor)

(6) Signature of secured party (or assignee)

(d) If an amendment to a financing statement relates only to a change in the name or address of the secured party, the amendment may be signed by the secured party alone. Otherwise a financing statement may be amended by filing a writing signed by both the debtor and the secured party. An amendment does not extend the period of effectiveness of a financing statement. If any amendment adds collateral, it is effective as to the added collateral only from the filing date of the amendment.

(e) In this article, unless the context otherwise requires, the term "financing statement" means the original financing statement and any amendments.

(f) A financing statement covering timber to be cut or covering minerals or the like (including oil and gas) or accounts subject to Section 24.42.030(e), or a financing statement filed as a fixture filing where the debtor is not a transmitting utility, must show that it covers this type of collateral, must recite that it is to be filed for record in the real estate records, and the financing statement must contain a description of the real estate sufficient if it were contained in a mortgage of the real estate to give constructive notice of the mortgage under the law of the Tribe. If the debtor does not have an interest of record in the real estate, the financing statement must show the name of a record owner. No description of the real estate or the name of the record owner thereof is required for a fixture filing where the debtor is a transmitting utility (Section 24.51.010(e).

(g) A mortgage is effective as a financing statement filed as a fixture filing from the date of its recording if:

(1) the goods are described in the mortgage by item or type;

(2) the goods are or are to become fixtures related to the real estate described in the mortgage;

(3) the mortgage complies with the requirements for a financing statement in this section other than a recital that it is to be filed in the real estate records; and

(4) the mortgage is duly recorded. No fee with reference to the financing statement is required other than the regular recording and satisfaction fees with respect to the mortgage.

(h) A financing statement sufficiently shows the name of the debtor if it gives the individual, partnership or corporate name of the debtor, whether or not it adds other trade names or the names of partners.

(i) Where the debtor so changes his or her name or in the case of an organization its name, identity or corporate structure that a filed financing statement becomes seriously misleading, the filing is not effective to perfect a security interest in collateral acquired by the debtor more than four (4) months after the change, unless a new appropriate financing statement is filed before the expiration of that time. A filed financing statement remains effective with respect to collateral transferred by the debtor even though the secured party knows of or consents to the transfer.

24.51.020 [This Section Is Reserved.]

24.51.030 What Constitutes Filing; Duration of Filing; Effect of Lapsed Filing; Duties of Filing Officer; Filing Fee; Centralized Computer System

(a) Presentation for filing of a financing statement and tender of the filing fee or acceptance of the statement by the filing officer constitutes filing under this article.

(b) Except as provided in Subsection (f) a filed financing statement is effective for a period of five years from the date of filing and thereafter for a period of sixty (60) days. A filed financing statement which states that the obligation secured is payable on demand is effective for five (5) years from the date of filing and thereafter for a period of sixty (60) days. The effectiveness of a filed financing statement lapses on the expiration of the five-year and sixty-day period unless a continuation statement is filed prior to the lapse. If a security interest perfected by filing exists at the time insolvency proceedings are commenced by or against the debtor, the security interest remains perfected until termination of the insolvency proceedings and thereafter for a period of sixty (60) days or until expiration of the five-year and sixty-day period, whichever occurs later. Upon such lapse the security interest becomes unperfected, unless it is perfected without filing. If the security interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse.

(c) A continuation statement may be filed by the secured party within six (6) months before and sixty (60) days after the expiration of the five-year period specified in Subsection (b). Any such continuation statement must be signed by the secured party, identify the original statement by file number and by the debtor's social security number or internal revenue service taxpayer identification number, and state that the original statement is still effective. A continuation statement signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment signed by the secured party of record and complying with Section 24.51.050(b), including payment of the required fee. Upon timely filing of the continuation statement, the effectiveness of the original statement is continued for five (5) years after the last date to which the filing was effective whereupon it lapses in the same manner as provided in Subsection (b) unless another continuation statement is filed prior to such lapse. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the original statement. Unless a statute on disposition of public records provides otherwise, the filing officer may remove a lapsed statement from the files and destroy it immediately if he or she has retained a microfilm or other photographic record, or in other cases after one year after the lapse. The filing officer shall so arrange matters by physical annexation of financing statements to continuation statements or other related filings, or by other means, that if he or she physically destroys the financing statements of a period more than five (5) years past, those which have been continued by a continuation statement, or which are still effective under Subsection (f) shall be retained.

(d) Except as provided in Subsection (g) a filing officer shall mark each statement with a file number and with the date and hour of filing and shall hold the statement or a microfilm or other photographic copy thereof for public inspection. In addition, the filing officer shall index the statements according to the name of the debtor and shall note in the index the file number and the address of the debtor given in the statement.

(e) Except as provided in Subsection (h), the uniform fee for filing and indexing and for stamping a copy furnished by the secured party to show the date and place of filing for an original financing statement or for a continuation statement shall be three dollars ($3) if the statement is in the standard form prescribed by the Secretary of the Tribe and otherwise shall be seven dollars ($7), plus in each case, if the financing statement is subject to Subsection (e) of Section 24.51.020, two dollars ($2). The uniform fee for each name more than one required to be indexed shall be two dollars ($2). The secured party may at his or her option show a trade name for any person and an extra uniform indexing fee of two dollars ($2) shall be paid with respect thereto.

(f) If the debtor is a transmitting utility (Section 24.51.010(e) and a filed financing statement so states, it is effective until a termination statement is filed. A real estate mortgage which is effective as a fixture filing under Subsection (f) of Section 24.4502(6) remains effective as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real estate.

(g) When a financing statement covers timber to be cut or covers minerals or the like (including oil and gas) or accounts subject to Section 24.42.030(e), or is filed as a fixture filing, it shall be filed for record and the filing officer shall index it under the names of the debtor and any owner of record shown on the financing statement in the same fashion as if they were the mortgagors in a mortgage of the real estate described, and to the extent that the law of the Tribe provides for indexing of mortgages under the name of the mortgagee, under the name of the secured party as if he or she were the mortgagee there under, or where indexing is by description in the same fashion as if the financing statement were a mortgage of the real estate described.

(h) When a filed financing or continuation statement covers farm products or accounts, or livestock, or general intangibles arising from or relating to the sale of farm products by a farmer, or crops growing or to be grown, or equipment used in farming operations, the fee for filing must be established by the Secretary of the Tribe. The Secretary of the Tribe shall deposit all fees he or she collects in the general fund of the Tribe.

(i) Within one working day of receipt of a financing or continuation statement described in Subsection (h), the Secretary of the Tribe shall record the information contained in the statement on a centralized computer system that the Secretary shall establish. The computer system shall allow access to financing statement information by any type of communications which conform to standards used by the central computer. The system shall have safeguards to allow only access to Turtle Mountain Band of Chippewa Indians Commercial Code data and to prevent alteration, addition, or deletion of the Turtle Mountain Band of Chippewa Indians Commercial Code data. The computer shall be accessible whenever the computer system is available. A printout of information from the system is prima facie evidence of the existence or nonexistence of the filing of a financing statement.

24.51.040 Termination Statement

(a) If a financing statement is filed then within one (1) month or within ten (10) days following written demand by the debtor after there is no outstanding secured obligation and no commitment to make advances, incur obligations or otherwise give value, the secured party must file with each filing officer with whom the financing statement was filed, a termination statement to the effect that he or she no longer claims a security interest under the financing statement, which shall be identified by file number. A termination statement signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment signed by the secured party of record complying with Section 24.51.050(b), including payment of the required fee. If the affected secured party fails to file such a termination statement as required by this subsection, or to send such a termination statement within ten (10) days after proper demand therefore he or she shall be liable to the debtor for one hundred dollars ($100), and in addition for any loss caused to the debtor by such failure.

(b) On presentation to the filing officer of such a termination statement he or she must note it in the index. If he or she has received the termination statement in duplicate, he or she shall return one copy of the termination statement to the secured party stamped to show the time of receipt thereof. If the filing officer has a microfilm or other photographic record of the financing statement and of any related continuation statement, statement of assignment and statement of release, he or she may remove the originals from the files at any time after receipt of the termination statement, or if he or she has no such record, he or she may remove them from the files at any time after one year after receipt of the termination statement.

(c) If the termination statement is in the standard form prescribed by the Secretary of the Tribe, the uniform fee for filing and indexing the termination statement shall be two dollars ($2), and unless otherwise indicated shall be two dollars ($2), plus in each case an additional fee of two dollars ($2) for each name more than one against which the termination statement is required to be indexed.

24.51.050 Assignment of Security Interest; Duties of Filing Officer; Fees

(a) A financing statement may disclose an assignment of a security interest in the collateral described in the financing statement by indication in the financing statement of the name and address of the assignee or by an assignment itself or a copy thereof on the face or back of the statement. On presentation to the filing officer of such a financing statement the filing officer shall mark the same as provided in Section 24.51.030(d). The uniform fee for filing, indexing and furnishing filing data for a financing statement so indicating an assignment shall be three dollars ($3) if the statement is in the standard form prescribed by the Secretary of the Tribe and otherwise shall be seven dollars ($7), plus in each case an additional fee of two dollars ($2) for each name more than one against which the financing statement is required be indexed.

(b) A secured party may assign of record all or a part of his or her rights under a financing statement by the filing in the place where the original financing statement was filed of a separate written statement of assignment signed by the secured party of record and setting forth the name of the secured party of record and the debtor, the file number and the date of filing of the financing statement and the name and address of the assignee and containing a description of the collateral assigned. A copy of the assignment is sufficient as a separate statement if it complies with the preceding sentence. On presentation to the filing officer of such a separate statement, the filing officer shall mark such separate statement with the date and hour of the filing. he or she shall note the assignment on the index of the financing statement, or in the case of a fixture filing, or a filing covering timber to be cut, or covering minerals or the like (including oil and gas) or accounts subject to Section 24.42.030(e), he or she shall index the assignment under the name of the assignor as grantor and, to the extent that the law of Tribe provides for indexing the assignment of a mortgage under the name of the assignee, he or she shall index the assignment of the financing statement under the name of the assignee. The uniform fee for filing, indexing and furnishing filing data about such a separate statement of assignment shall be three dollars if the statement is in the standard form prescribed by the Secretary of the Tribe and otherwise shall be seven dollars ($7), plus in each case an additional fee of one dollar ($1) for each name more than one against which the statement of assignment is required to be indexed. Notwithstanding the provisions of this subsection, an assignment of record of a security interest in a fixture contained in a mortgage effective as a fixture filing (Section 24.51.030(b)) may be made only by an assignment of the mortgage in the manner provided by the law of Tribe other than this title.

24.51.060 Release of Collateral; Duties of Filing Officer; Fees

A secured party of record may by his or her signed statement release all or part of any collateral described in a filed financing statement. The statement of release is sufficient if it contains a description of the collateral being released, the name and address of the debtor, the name and address of the secured party, and the file number of the financing statement. A statement of release signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment signed by the secured party of record and complying with Section 24.51.050(b), including payment of the required fee. Upon presentation of such a statement of release to the filing officer he or she shall mark the statement with the hour and date of filing and shall note the same upon the margin of the index of the filing of the financing statement. The uniform fee for filing and noting such a statement of release shall be three dollars ($3) if the statement is in the standard form prescribed by the Secretary of the Tribe and otherwise shall be seven dollars ($7), plus in each case an additional fee of one dollar ($1) for each name more than one against which the statement of release is required to be indexed.

24.51.070 [This Section Is Reserved.]

24.51.080 Financing Statements Covering Consigned or Leased Goods

A consignor or lessor of goods may file a financing statement using the terms "consignor," "consignee," "lessor," "lessee" or the like instead of the terms specified in Section 24.42.020. The provisions of this part shall apply as appropriate to such a financing statement but its filing shall not of itself be a factor in determining whether or not the consignment or lease is intended as security (Section 24.01.100(kk)). However, if it is determined for other reasons that the consignment or lease is so intended, a security interest of the consignor or lessor which attaches to the consigned or leased goods is perfected by such filing.

Chapter 24.52 Default

24.52.010 Default; Procedure When Security Agreement Covers Both Real and Personal Property

(a) When a debtor is in default under a security agreement, a secured party has the rights and remedies provided in this article, and except as limited by Subsection (c) those provided in the security agreement. He or she may reduce his or her claim to judgment, foreclose or otherwise enforce the security interest by any available judicial procedure. If the collateral is documents the secured party may proceed either as to the documents or as to the goods covered thereby. A secured party in possession has the rights, remedies and duties provided in Section 24.49.070. The rights and remedies referred to in this subsection are cumulative.

(b) After default, the debtor has the rights and remedies provided in this article, those provided in the security agreement and those provided in Section 24.49.070.

(c) To the extent that they give rights to the debtor and impose duties on the secured party, the rules stated in the subsections referred to below may not be waived or varied except as provided with respect to compulsory disposition of collateral (Section 24.52.040(c) and Section 24.52.050) and with respect to redemption of collateral (Section 24.52.060) but the parties may by agreement determine the standards by which the fulfillment of these rights and duties is to be measured if such standards are not manifestly unreasonable:

(1) Section 24.52.020(b) and Section 24.52.040(b) insofar as they require accounting for surplus proceeds of collateral;

(2) Section 24.52.040(c) and Section 24.52.050(a) which deal with disposition of collateral;

(3) Section 24.52.050(b) which deals with acceptance of collateral as discharge of obligation;

(4) Section 24.52.060 which deals with redemption of collateral; and

(5) Section 24.52.070(a) which deals with the secured party's liability for failure to comply with this part.

(d) If the security agreement covers both real and personal property, the secured party may proceed under this part as to the personal property, or he or she may proceed as to both the real and the personal property in accordance with his or her rights and remedies in respect of the real property in which case the provisions of this part do not apply.

(e) "When a secured party has reduced his or her claim to judgment the lien of any levy which may be made upon his or her collateral by virtue of any execution based upon the judgment shall relate back to the date of the perfection of the security interest in such collateral. A judicial sale, pursuant to such execution, is a foreclosure of the security interest by judicial procedure within the meaning of this section, and the secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this article.

24.52.020 Collection Rights of Secured Party

(a) When so agreed and in any event on default the secured party is entitled to notify an account debtor or the obligor on an instrument to make payment to him or her whether or not the assignor was theretofore making collections on the collateral, and also to take control of any proceeds to which he or she is entitled under Section 24.50.060.

(b) A secured party who by agreement is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor and who undertakes to collect from the account debtors or obligors must proceed in a commercially reasonable manner and may deduct his or her reasonable expenses of realization from the collections. If the security agreement secures an indebtedness, the secured party must account to the debtor for any surplus, and unless otherwise agreed, the debtor is liable for any deficiency. But, if the underlying transaction was a sale of accounts or chattel paper, the debtor is entitled to any surplus or is liable for any deficiency only if the security agreement so provides.

24.52.030 Secured Party's Right to Take Possession After Default

Unless otherwise agreed a secured party has on default the right to take possession of the collateral. In taking possession a secured party may proceed without judicial process if this can be done without breach of the peace or may proceed by action. If the security agreement so provides the 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. Without removal a secured party may render equipment unusable, and may dispose of collateral on the debtor's premises under Section 24.52.040.

24.52.040 Secured Party's Right to Dispose of Collateral After Default; Effect of Disposition

(a) A secured party after default may sell, lease or otherwise dispose of any or all of the collateral in its then condition or following any commercially reasonable preparation or processing. Any sale of goods is subject to the article on sales (Chapter 24.02). The proceeds of disposition shall be applied in the order following to:

(1) The reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and, to the extent provided for in the agreement and not prohibited by law, the reasonable attorneys' fees and legal expenses incurred by the secured party;

(2) The satisfaction of indebtedness secured by the security interest under which the disposition is made;

(3) The satisfaction of indebtedness secured by any subordinate security interest in the collateral if written notification of demand therefore is received before distribution of the proceeds is completed. If requested by the secured party, the holder of a subordinate security interest must seasonably furnish reasonable proof of his or her interest, and unless he or she does so, the secured party need not comply with his or her demand.

(b) If the security interest secures an indebtedness, the secured party must account to the debtor for any surplus, and, unless otherwise agreed, the debtor is liable for any deficiency. But if the underlying transaction was a sale of accounts or chattel paper, the debtor is entitled to any surplus or is liable for any deficiency only if the security agreement so provides.

(c) Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor if he or she has not signed after default a statement renouncing or modifying his or her right to notification of sale. In the case of consumer goods no other notification need be sent. In other cases notification shall be sent to any other secured party from whom the secured party has received (before sending his or her notification to the debtor or before the debtor's renunciation of his or her rights) written notice of a claim of an interest in the collateral. The secured party may buy at any public sale and if the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations he or she may buy at private sale.

(d) When collateral is disposed of by a secured party after default, the disposition transfers to a purchaser for value all of the debtor's rights therein, discharges the security interest under which it is made and any security interest or lien subordinate thereto. The purchaser takes free of all such rights and, interests even though the secured party fails to comply with the requirements of this part or of any judicial proceedings:

(1) In the case of a public sale, if the purchaser has no knowledge of any defects in the sale and if he or she does not buy in collusion with the secured party, other bidders or the person conducting the sale; or

(2) In any other case, if the purchaser acts in good faith.

(e) A person who is liable to a secured party under a guaranty, endorsement, repurchase agreement or the like and who receives a transfer of collateral from the secured party or is subrogated to his or her rights has thereafter the rights and duties of the secured party. Such a transfer of collateral is not a sale or disposition of the collateral under this article.

24.52.050 Compulsory Disposition of Collateral; Acceptance of the Collateral as Discharge of Obligation

(a) If the debtor has paid sixty percent (60%) of the cash price in the case of a purchase money security interest in consumer goods or sixty percent (60%) of the loan in the case of another security interest in consumer goods, and has not signed after default a statement renouncing or modifying his or her rights under this part a secured party who has taken possession of collateral must dispose of it under Section 24.52.040 and if he or she fails to do so within ninety days after he or she takes possession the debtor at his or her option may recover in conversion or under Section 24.52.070(a) on secured party's liability.

(b) In any other case involving consumer goods or any other collateral a secured party in possession may, after default, propose to retain the collateral in satisfaction of the obligation. Written notice of such proposal shall be sent to the debtor if he or she has not signed after default a statement renouncing or modifying his or her rights under this subsection. In the case of consumer goods no other notice need be given. In other cases notice shall be sent to any other secured party from whom the secured party has received (before sending his or her notice to the debtor or before the debtor's renunciation of his or her rights) written notice of a claim of an interest in the collateral. If the secured party receives objection in writing from a person entitled to receive notification within twenty-one (21) days after the notice was sent, the secured party must dispose of the collateral under Section 24.52.040. In the absence of such written objection the secured party may retain the collateral in satisfaction of the debtor's obligation.

24.52.060 Debtor's Right to Redeem Collateral

Any time before the secured party has disposed of collateral or entered into a contract for its disposition under Section 24.52.040, or before the obligation has been discharged under Section 24.52.050(b) the debtor or any other secured party may unless otherwise agreed in writing after default redeem the collateral by tendering fulfillment of all obligations secured by the collateral as well as the expenses reasonably incurred by the secured party in retaking, holding and preparing the collateral for disposition, in arranging for the sale, and to the extent provided in the agreement and not prohibited by law, his or her reasonable attorneys' fees and legal expenses.

24.52.070 Secured Party's Liability for Failure to Comply with This Part

(a) If it is established that the secured party is not proceeding in accordance with the provisions of this part disposition may be ordered or restrained on appropriate terms and conditions. If the disposition has occurred the debtor or any person entitled to notification or whose security interest has been made known to the secured party prior to the disposition has a right to recover from the secured party any loss caused by a failure to comply with the provisions of this part. If the collateral is consumer goods, the debtor has a right to recover in any event an amount not less than the credit service charge plus ten percent (10%) of the principal amount of the debt or the time price differential plus ten percent (10%)of the cash price.

(b) The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the secured party either sells the collateral in the usual manner in any recognized market therefore or if he or she sells at the price current in such market at the time of his or her sale or if he or she has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold he or she has sold in a commercially reasonable manner. The principles stated in the two preceding sentences with respect to sales also apply as may be appropriate to other types of disposition. A disposition which has been approved in any judicial proceeding, or by any bona fide creditors' committee or representative of creditors shall conclusively be deemed to be commercially reasonable, but this sentence does not indicate that any such approval must be obtained in any case nor does it indicate that any disposition not so approved is not commercially reasonable.