§ 4-1-201. General Definitions

1. Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other articles of this title that apply to particular articles or parts thereof, have the meanings stated.
2. Subject to definitions contained in other articles of this title that apply to particular articles or parts thereof:
   1. “Action”, in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and any other proceeding in which rights are determined.
   2. “Aggrieved party” means a party entitled to pursue a remedy.
   3. “Agreement” means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in section 4-1-303. (Compare “contract”.)

      (3.5) “Authenticate” means:

      1. To sign; or
      2. With the intent to sign a record, otherwise to execute or adopt an electronic symbol, sound, message, or process referring to, attached to, included in, or logically associated or linked with, that record.
      3. The person in control of a negotiable electronic document of title.
   4. “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.
   5. “Bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or indorsed in blank.
   6. “Bill of lading” means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt.
   7. “Branch” includes a separately incorporated foreign branch of a bank.
   8. “Burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.
   9. “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under article 2 of this title may be a buyer in ordinary course of business. A person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt is not a buyer in ordinary course of business.
   10. “Conspicuous”, with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. Conspicuous terms include the following:

       (A) A heading in capital letters equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and

       (B) Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.

       (10.5) “Consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes.

   11. “Contract” means the total legal obligation that results from the parties’ agreement as determined by this title as supplemented by any other applicable laws. (Compare “agreement”.)
   12. “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.
   13. “Defendant” includes a person in the position of defendant in a counterclaim or third-party claim.
   14. “Delivery”, with respect to an electronic document of title, means voluntary transfer of control and with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession.
   15. “Document of title” means a record (i) that in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers and (ii) that purports to be issued by or addressed to a bailee and to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass. The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.
   16. “Fault” means a wrongful act, omission, breach, or default.
   17. “Fungible goods” means either:

       (A) Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or

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

   18. “Genuine” means free of forgery or counterfeiting.
   19. “Good faith”, except as provided in article 5 of this title, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
   20. “Holder” means:

       (A) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;

       (B) The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or

   21. “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.
   22. An “insolvent” person is a person that:

       (A) Has generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute as to the debts;

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

       (C) Is insolvent within the meaning of federal bankruptcy law.

   23. “Money” means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.
   24. “Organization” means a person other than an individual.
   25. “Party”, as distinct from a “third party”, means a person that has engaged in a transaction or made an agreement subject to this title.
   26. “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, government subdivision, agency, or instrumentality, or any other legal or commercial entity.
   27. “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.
   28. “Presumption” or “presumed” means that the trier of fact must find the existence of the fact presumed unless and until evidence is introduced that would support a finding of its nonexistence.
   29. “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.
   30. “Purchaser” means a person that takes by purchase.
   31. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
   32. “Remedy” means any remedial right to which an aggrieved party is entitled, with or without resort to a tribunal.
   33. “Representative” means any person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.
   34. “Right” includes remedy.
   35. “Security interest” means an interest in personal property or fixtures that secures payment or performance of an obligation. The term also includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to article 9 of this title. The special property interest of a buyer of goods on identification of those goods to a contract for sale under section 4-2-401 is not a “security interest”, but a buyer may also acquire a “security interest” by complying with article 9 of this title. Except as otherwise provided in section 4-2-505, the right of a seller or lessor of goods under article 2 or 2.5 of this title to retain or acquire possession of the goods is not a “security interest”, but a seller or lessor may also acquire a “security interest” by complying with article 9 of this title. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (section 4-2-401) is limited in effect to a reservation of a “security interest”. Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to section 4-1-203.
   36. “Send”, in connection with a writing, record, or notice, means to:

       (A) Deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or, if there is none, to any address reasonable under the circumstances; or

       (B) In any other way cause to be received any record or notice within the time it would have arrived if properly sent.

   37. “Signed” includes any symbol executed or adopted with present intention to adopt or accept a writing.
   38. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
   39. “Surety” includes a guarantor or other secondary obligor.
   40. “Term” means a portion of an agreement that relates to a particular matter.
   41. “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery.
   42. “Warehouse receipt” means a document of title issued by a person engaged in the business of storing goods for hire.
   43. “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning.

Source: L. 2006: Entire article R&RE, p. 458, § 1, effective September 1. L. 2007: (b)(5), (b)(15), (b)(20)(A), and (b)(20)(C) amended, p. 374, § 26, effective August 3.

Editor’s note: This section is similar to former § 4-1-201 as it existed prior to 2006.

Cross references: For offenses relating to security interest, see §§ 18-5-504, 18-5-505, and 18-5-511.

OFFICIAL COMMENT

Source: Former Section 1-201.

Changes from former law: In order to make it clear that all definitions in the Uniform Commercial Code — not just those in Article 1 — do not apply if the context otherwise requires, a new subsection (a) to that effect has been added. The reference to the “context” is intended to refer to the context in which the defined term is used in the UCC. In other words, the definition applies whenever the defined term is used unless the context in which the defined term is used in the statute indicates that the term was not used in its defined sense. Consider, for example, UCC §§ 3-103(a)(9) (defining “promise,” in relevant part, as “a written undertaking to pay money signed by the person undertaking to pay”) and 3-303(a)(1) (indicating that an instrument is issued or transferred for value if “the instrument is issued or transferred for a promise of performance, to the extent that the promise has been performed.” It is clear from the statutory context of the use of the word “promise” in § 3-303(a)(1) that the term was not used in the sense of its definition in § 3-103(a)(9). Thus, the § 3-103(a)(9) definition should not be used to give meaning to the word “promise” in § 3-303(a). The remainder of former Section 1-201, as revised, now appears as subsection (b).

Other than minor stylistic changes, the definitions in this draft are as in former Article 1 (as amended, most recently, in conjunction with revisions to Article 9) except as noted below. It should be noted that numbering of existing definitions has been left constant even though some new definitions have been added to this section and some others have been moved to other sections.

1. “Action.” Unchanged from former Section 1-201, which was derived from similar definitions in Section 191, Uniform Negotiable Instruments Law; Section 76, Uniform Sales Act; Section 58, Uniform Warehouse Receipts Act; Section 53, Uniform Bills of Lading Act.
2. “Aggrieved party.” Unchanged from former Section 1-201.
3. “Agreement.” Derived from former Section 1-201. As used in the Uniform Commercial Code the word is intended to include full recognition of usage of trade, course of dealing, course of performance and the surrounding circumstances as effective parts thereof, and of any agreement permitted under the provisions of the Uniform Commercial Code to displace a stated rule of law. Whether an agreement has legal consequences is determined by applicable provisions of the Uniform Commercial Code and, to the extent provided in Section 1-103, by the law of contracts.
4. “Bank.” Derived from Section 4A-104.
5. “Bearer.” Unchanged from former Section 1-201, which was derived from Section 191, Uniform Negotiable Instruments Law.
6. “Bill of Lading.” Derived from former Section 1-201. The reference to airbills has been deleted as no longer necessary.
7. “Branch.” Unchanged from former Section 1-201.
8. “Burden of establishing a fact.” Unchanged from former Section 1-201.
9. “Buyer in ordinary course of business.” Unchanged from former Section 1-201 (as amended in conjunction with the 1999 revisions to Article 9). The major significance of the phrase lies in Section 2-403 and in the Article on Secured Transactions (Article 9).
10. “Conspicuous.” Derived from Section 2-103(a)(10). It states the general standard that to be conspicuous a term ought to be noticed by a reasonable person. Whether a term is conspicuous is an issue for the court. Subparagraphs (A) and (B) set out several methods for making a term conspicuous. Requiring that a term be conspicuous blends a notice function (the term ought to be noticed) and a planning function (giving guidance to the party relying on the term regarding how that result can be achieved). Although these paragraphs indicate some of the methods for making a term attention-calling, the test is whether attention can reasonably be expected to be called to it. The statutory language should not be construed to permit a result that is inconsistent with that test.
11. “Contract.” Unchanged from former Section 1-201.
12. “Creditor.” Unchanged from former Section 1-201.
13. “Defendant.” Unchanged from former Section 1-201, which was derived from Section 76, Uniform Sales Act.
14. “Delivery.” Derived from former Section 1-201. The reference to certificated securities has been deleted in light of the more specific treatment of the matter in Section 8-301.
15. “Document of title.” Unchanged from former Section 1-201, which was derived from Section 76, Uniform Sales Act. By making it explicit that the obligation or designation of a third party as “bailee” is essential to a document of title, this definition clearly rejects any such result as obtained in Hixson v. Ward, 254 Ill.App. 505 (1929), which treated a conditional sales contract as a document of title. Also the definition is left open so that new types of documents may be included. It is unforeseeable what documents may one day serve the essential purpose now filled by warehouse receipts and bills of lading. Truck transport has already opened up problems which do not fit the patterns of practice resting upon the assumption that a draft can move through banking channels faster than the goods themselves can reach their destination. There lie ahead air transport and such probabilities as teletype transmission of what may some day be regarded commercially as “Documents of Title.” The definition is stated in terms of the function of the documents with the intention that any document which gains commercial recognition as accomplishing the desired result shall be included within its scope. Fungible goods are adequately identified within the language of the definition by identification of the mass of which they are a part.
16. “Fault.” Derived from former Section 1-201. “Default” has been added to the list events constituting fault.
17. “Fungible.” Derived from former Section 1-201. The definition has been reorganized and references to securities have been deleted because Article 8 no longer uses the term “fungible” to describe securities.
18. “Genuine.” Unchanged from former Section 1-201.
19. “Good faith.” Former Section 1-201(19) defined “good faith” simply as honesty in fact; the definition contained no element of commercial reasonableness. Initially, that definition applied throughout the Code with only one exception. Former Section 2-103(1)(b) provided that “in this Article . . . 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.” This alternative definition was limited in applicability in three ways. First, it applied only to transactions within the scope of Article 2. Second, it applied only to merchants. Third, strictly construed it applied only to uses of the phrase “good faith” in Article 2; thus, so construed it would not define “good faith” for its most important use — the obligation of good faith imposed by former UCC Section 1-203.
20. “Holder.” Derived from former Section 1-201. The definition has been reorganized for clarity.

3a. “Authenticate.” This is the standard definition of the term used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

The first sentence of paragraph (9) makes clear that a buyer from a pawnbroker cannot be a buyer in ordinary course of business. The second sentence tracks Section 6-102(1)(m). It explains what it means to buy “in the ordinary course.” The penultimate sentence prevents a buyer that does not have the right to possession as against the seller from being a buyer in ordinary course of business. Concerning when a buyer obtains possessory rights, see Sections 2-502 and 2-716. However, the penultimate sentence is not intended to affect a buyer’s status as a buyer in ordinary course of business in cases (such as a “drop shipment”) involving delivery by the seller to a person buying from the buyer or a donee from the buyer. The requirement relates to whether as against the seller the buyer or one taking through the buyer has possessory rights.

11a. “Consumer.” Derived from Section 9-102(a)(25).

Dock warrants were within the Sales Act definition of document of title apparently for the purpose of recognizing a valid tender by means of such paper. In current commercial practice a dock warrant or receipt is a kind of interim certificate issued by steamship companies upon delivery of the goods at the dock, entitling a designated person to have issued to him at the company’s office a bill of lading. The receipt itself is invariably nonnegotiable in form although it may indicate that a negotiable bill is to be forthcoming. Such a document is not within the general compass of the definition, although trade usage may in some cases entitle such paper to be treated as a document of title. If the dock receipt actually represents a storage obligation undertaken by the shipping company, then it is a warehouse receipt within this Section regardless of the name given to the instrument.

The goods must be “described,” but the description may be by marks or labels and may be qualified in such a way as to disclaim personal knowledge of the issuer regarding contents or condition. However, baggage and parcel checks and similar “tokens” of storage which identify stored goods only as those received in exchange for the token are not covered by this Article.

The definition is broad enough to include an airway bill.

Over time, however, amendments to the UCC brought the Article 2 merchant concept of good faith (subjective honesty and objective reasonableness) into other Articles. First, Article 2A explicitly incorporated the Article 2 standard. See current UCC Section 2A-103(7). Then, other Articles broadened the applicability of that standard by adopting it for all parties rather than just for merchants. See, e.g., UCC Sections 3-103(a)(4), 4A-105(a)(6), 8-102(a)(10), and 9-102(a)(43). See also Draft of Revised Article 2. All of these definitions are comprised of two elements — honesty in fact and the observance of reasonable commercial standards of fair dealing. Only revised Article 5 defines “good faith” solely in terms of subjective honesty, and only Article 6 and Article 7 are without definitions of good faith. (It should be noted that, while revised Article 6 did not define good faith, Comment 2 to revised UCC section 6-102 states that “this Article adopts the definition of ‘good faith’ in Article 1 in all cases, even when the buyer is a merchant.”) Given this near unanimity, it is appropriate to move the broader definition of “good faith” to Article 1. Of course, this definition is subject to the applicability of the narrower definition in revised Article 5.

22. “Insolvency proceedings.” Unchanged from former Section 1-201.

23. “Insolvent.” Derived from former Section 1-201. The three tests of insolvency — “generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute as to them,” “unable to pay debts as they become due,” and “insolvent within the meaning of the federal bankruptcy law” — are expressly set up as alternative tests and must be approached from a commercial standpoint.

24. “Money.” Unchanged from former Section 1-201. The test is that of sanction of government, whether by authorization before issue or adoption afterward, which recognizes the circulating medium as a part of the official currency of that government. The narrow view that money is limited to legal tender is rejected.

28. “Organization.” The former definition of this word has been replaced with the standard definition used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

29. “Party.” Substantively identical to former Section 1-201. Mention of a party includes, of course, a person acting through an agent. However, where an agent comes into opposition or contrast to the principal, particular account is taken of that situation.

30. “Person.” The former definition of this word has been replaced with the standard definition used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

30a. “Present value.” This definition was formerly contained within the definition of “security interest” in former Section 1-201(37).

31. “Presumption.” Unchanged from former Section 1-201.

32. “Purchase.” Derived from former UCC Section 1-201. The form of definition has been changed from “includes” to “means.”

33. “Purchaser.” Unchanged from former Section 1-201.

33a. “Record.” Derived from Section 9-102(a)(69).

34. “Remedy.” Unchanged from former Section 1-201. The purpose is to make it clear that both remedy and right (as defined) include those remedial rights of “self help” which are among the most important bodies of rights under the Uniform Commercial Code, remedial rights being those to which an aggrieved party can resort on its own motion.

35. “Representative.” Derived from former Section 1-201. Reorganized, and form changed from “includes” to “means.”

36. “Right.” Unchanged from former Section 1-201.

37. “Security Interest.” The definition is the first paragraph of the definition of “security interest” in former Section 1-201. The remaining portion has been moved to Section 1-203. Notice that in view of Article 9 the term includes the interest of certain outright buyers of certain kinds of property.

38. “Send.” New. Compare “notifies”.

39. “Signed.” Derived from former Section 1-201. Former Section 1-201 referred to “intention to authenticate”; because authenticate is now a defined term, the language has been changed to “intention to adopt or accept.” The latter formulation is derived from the definition of “authenticate,” The definition of “signed” is to make clear that, as the term is used in the Uniform Commercial Code, a complete signature is not necessary. The symbol may be printed, stamped or written; it may be by initials or by thumbprint. It may be on any part of the document and in appropriate cases may be found in a billhead or letterhead. No catalog of possible situations can be complete and the court must use common sense and commercial experience in passing upon these matters. The question always is whether the symbol was executed or adopted by the party with present intention to adopt or accept the writing.

39a. “State.” This is the standard definition of the term used in acts prepared by the National Conference of Commissioners on Uniform State Laws.

40. “Surety.” This definition makes it clear that “surety” includes all secondary obligors, not just those whose obligation refers to them person obligated as a surety. As to the nature of secondary obligations generally, see Restatement of Suretyship and Guaranty § 1.

42. “Term.” Unchanged from former Section 1-201.

43. “Unauthorized signature.” Unchanged from former Section 1-201.

45. “Warehouse receipt.” Unchanged from former Section 1-201, which was derived from Section 76(1), Uniform Sales Act; Section 1, Uniform Warehouse Receipts Act. Receipts issued by a field warehouse are included, provided the warehouseman and the depositor of the goods are different persons.

46. “Written” or “writing.” Unchanged from former Section 1-201.