AS Title 45, Chapter 1: General Provisions

Chapter 01. General Provisions. Article 1. Short Title, Construction, Application, and Subject Matter of Act. Secs. 45.01.101 — 45.01.109. Short title, construction, application, and subject matter of act. [Repealed, § 113 ch 44 SLA 2009.] Sec. 45.01.111. Short titles. (a) AS 45.01 — AS 45.08 , AS 45.12 , AS 45.14 , and AS 45.29 may be cited as the Uniform Commercial Code. (b) This chapter may be cited as the Uniform Commercial Code — General Provisions. Sec. 45.01.112. Scope of chapter. This chapter applies to a transaction to the extent that the transaction is governed by another chapter of the code. Sec. 45.01.113. Construction of code to promote its purposes and policies; applicability of supplemental principles of law. (a) The code shall be liberally construed and applied to promote the code's underlying purposes and policies, which are to (1) simplify, clarify, and modernize the law governing commercial transactions; (2) permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) make uniform the law among the various jurisdictions. (b) Unless displaced by the particular provisions of the code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause, supplement the code's provisions. Sec. 45.01.114. Construction against implied repeal. The code being a general act intended as a unified coverage of its subject matter, no part of it may be considered to be impliedly repealed by subsequent legislation if that construction can reasonably be avoided. Sec. 45.01.115. Severability. If a provision or clause of the code or application of the clause or provision to a person or circumstances is held invalid, the invalidity does not affect other provisions or applications of the code that can be given effect without the invalid provision or application, and, to this end, the provisions of the code are severable. Sec. 45.01.116. Use of singular and plural; gender. In the code, the rules of construction in AS 01.10.050 (b) and (c) apply, unless the statutory context otherwise requires. Sec. 45.01.117. Section captions. Notwithstanding AS 01.05.006 and 01.05.031(b)(2), section captions are part of the code. Sec. 45.01.118. Relation to Electronic Signatures in Global and National Commerce Act. The code modifies, limits, and supersedes 15 U.S.C. 7001 — 7031 (Electronic Signatures in Global and National Commerce Act) but does not modify, limit, or supersede 15 U.S.C. 7001(c) or authorize electronic delivery of a notice described in 15 U.S.C. 7003(b). Article 2. General Definitions and Principles of Interpretation. Secs. 45.01.201 — 45.01.208. General definitions and principles of interpretation. [Repealed, § 113 ch 44 SLA 2009.] Sec. 45.01.211. General definitions. (a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other chapters of the code that apply to particular chapters or articles of the code, have the meanings stated. (b) Subject to definitions contained in other chapters of the code that apply to particular chapters or articles of the code, (1) “action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and another proceeding in which rights are determined; (2) “aggrieved party” means a party entitled to pursue a remedy; (3) “agreement,” as distinguished from “contract,” means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in AS 45.01.303 ; (4) “bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company; (5) “bearer” means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or endorsed 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; “bill of lading” 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 who 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 who 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 who takes possession of the goods or has a right to recover the goods from the seller under AS 45.02 may be a buyer in ordinary course of business; “buyer in ordinary course of business” does not include a person who acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt; (10) “code” means AS 45.01 — AS 45.08 , AS 45.12 , AS 45.14 , and AS 45.29 ; (11) “conspicuous,” with reference to a term, means written, displayed, or presented in a way that a reasonable person against whom 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 (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and (B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language; (12) “consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes; (13) “contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties' agreement as determined by the code as supplemented by other applicable laws; (14) “creditor” includes a general creditor, a secured creditor, a lien creditor, and a 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; (15) “defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim; (16) “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; (17) “document of title” (A) means a record that (i) 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) purports to be issued by or addressed to a bailee and to cover goods in the bailee's possession that are either identified or are fungible portions of an identified mass; (B) includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods; (18) “electronic document of title” means a document of title evidenced by a record consisting of information stored in an electronic medium; (19) “fault” means a default, breach, or wrongful act or omission; (20) “fungible goods” means goods (A) of which a unit, by nature or usage of trade, is the equivalent of another like unit; or (B) that, by agreement, are treated as equivalent; (21) “genuine” means free of forgery or counterfeiting; (22) “good faith,” except as otherwise provided in AS 45.05 , means honesty in fact and the observance of reasonable commercial standards of fair dealing; (23) “holder” means the person in (A) possession of a negotiable instrument that is payable either to bearer or to an identified person who is the person in possession; (B) 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 (C) control of a negotiable electronic document of title; (24) “insolvency proceeding” includes an assignment for the benefit of creditors or another proceeding intended to liquidate or rehabilitate the estate of the person involved; (25) “insolvent” means (A) having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute; (B) being unable to pay debts as they become due; or (C) being insolvent within the meaning of federal bankruptcy law; (26) “money” means a medium of exchange currently authorized or adopted by a domestic or foreign government, and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries; (27) “organization” means a person other than an individual; (28) “party,” as distinguished from “third party,” means a person who has engaged in a transaction or made an agreement subject to the code; (29) “pawnbroker” has the meaning given in AS 08.76.590 ; (30) “person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or another legal or commercial entity; (31) “present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain (A) by use of an interest rate that is specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into; or (B) if an interest rate is not determined under (A) of this paragraph, by use of a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into; (32) “purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or another voluntary transaction creating an interest in property; (33) “purchaser” means a person who takes by purchase; (34) “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; (35) “remedy” means a remedial right to which an aggrieved party is entitled with or without resort to a tribunal; (36) “representative” means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate; (37) “right” includes remedy; (38) “security interest” means an interest in personal property or fixtures that secures payment or performance of an obligation; “security interest” includes an 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 AS 45.29 ; “security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under AS 45.02.401 , but a buyer may also acquire a security interest by complying with AS 45.29 ; except as otherwise provided in AS 45.02.505 , the right of a seller or lessor of goods under AS 45.02 or AS 45.12 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 AS 45.29 ; the retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under AS 45.02.401 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 under AS 45.01.213 ; (39) “send,” in connection with a writing, record, or notice, means (A) to deposit in the mail or deliver for transmission by a 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 on the instrument or otherwise agreed on, or, if an address is not specified on the instrument or otherwise agreed on, to an address reasonable under the circumstances; or (B) in another way to cause to be received a record or notice within the time it would have arrived if properly sent; (40) “signed” includes using a symbol executed or adopted with present intention to adopt or accept a writing; (41) “state” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or a territory or insular possession subject to the jurisdiction of the United States; (42) “surety” includes a guarantor or other secondary obligor; (43) “tangible document of title” means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium; (44) “term” means a portion of an agreement that relates to a particular matter; (45) “unauthorized signature” means a signature made without actual, implied, or apparent authority, and includes a forgery; (46) “warehouse receipt” means a document of title issued by a warehouse; in this paragraph, “warehouse” has the meaning given in AS 45.07.112 (a); (47) “writing” includes printing, typewriting, or another intentional reduction to tangible form; “written” has a corresponding meaning. Sec. 45.01.212. Notice; knowledge. (a) Subject to (f) of this section, a person has “notice” of a fact if the person (1) has actual knowledge of it; (2) has received a notice or notification of it; or (3) from all the facts and circumstances known to the person at the time in question, has reason to know that it exists. (b) “Knowledge” means actual knowledge. “Knows” has a corresponding meaning. (c) “Discover,” “learn,” or words of similar import refer to knowledge rather than to reason to know. (d) A person “notifies” or “gives” a notice or notification to another person by taking those steps that may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it. (e) Subject to (f) of this section, a person “receives” a notice or notification when it (1) comes to that person's attention; or (2) is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of that type of communication. (f) Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual's attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information. Sec. 45.01.213. Lease distinguished from security interest. (a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case. (b) A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and the (1) original term of the lease is equal to or greater than the remaining economic life of the goods; (2) 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) lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or (4) lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration on compliance with the lease agreement. (c) A transaction in the form of a lease does not create a security interest merely because the (1) 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 greater than the fair market value of the goods at the time the lease is entered into; (2) lessee assumes risk of loss of the goods; (3) lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs; (4) lessee has an option to renew the lease or to become the owner of the goods; (5) lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or (6) lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed. (d) Additional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if, when the option to (1) renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or (2) become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed. (e) The remaining economic life of the goods and reasonably predictable fair market rent, fair market value, or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into. Sec. 45.01.214. Value. Except as otherwise provided in AS 45.03 , AS 45.04 , and AS 45.05 , a person gives value for rights if the person acquires them (1) in return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection; (2) as security for, or in total or partial satisfaction of, a preexisting claim; (3) by accepting delivery under a preexisting contract for purchase; or (4) in return for consideration sufficient to support a simple contract. Sec. 45.01.215. Reasonable time; seasonableness. (a) Whether a time for taking an action required by the code is reasonable depends on the nature, purpose, and circumstances of the action. (b) An action is taken seasonably if it is taken at or within the time agreed on or, if no time is agreed on, at or within a reasonable time. Sec. 45.01.216. Presumptions. Whenever the code creates a presumption with respect to a fact, or provides that a fact is presumed, the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of the nonexistence of the fact. Article 3. Territorial Applicability and General Rules. Sec. 45.01.301. Territorial applicability; parties' power to choose applicable law. (a) Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law of this state or of the other state or nation shall govern the parties' rights and duties. (b) In the absence of an agreement effective under (a) of this section, and except as provided in (c) of this section, the code applies to transactions bearing an appropriate relation to this state. (c) If one of the following provisions of the code specifies the applicable law, that provision governs, and a contrary agreement is effective only to the extent permitted by the applicable law specified by that provision: (1) AS 45.02.402 ; (2) AS 45.04.102 ; (3) AS 45.05.116 ; (4) AS 45.08.110 ; (5) AS 45.12.105 and 45.12.106; (6) AS 45.14.507 ; (7) AS 45.29.301 — 45.29.307. Sec. 45.01.302. Variation by agreement. (a) Except as otherwise provided in (b) of this section or elsewhere in the code, the effect of provisions of the code may be varied by agreement. (b) The obligations of good faith, diligence, reasonableness, and care prescribed by the code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever the code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement. (c) The presence in certain provisions of the code of the phrase “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section. Sec. 45.01.303. Course of performance, course of dealing, and usage of trade. (a) A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if the (1) agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection. (b) A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting the parties' expressions and other conduct. (c) A “usage of trade” is a practice or method of dealing having the 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 a usage of trade must be proved as facts. If it is established that a usage of trade is embodied in a trade code or similar record, the interpretation of the record is a question of law. (d) A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be used as indicated in the previous sentence as to that part of the performance. (e) Except as otherwise provided in (f) of this section, the express terms of an agreement and an applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If this construction is unreasonable, (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; and (3) course of dealing prevails over usage of trade. (f) Subject to AS 45.02.209 , a course of performance is relevant to show a waiver or modification of a term inconsistent with the course of performance. (g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party. Sec. 45.01.304. Obligation of good faith. Every contract or duty within the code imposes an obligation of good faith in its performance and enforcement. Sec. 45.01.305. Remedies to be liberally administered. (a) The remedies provided by the code must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed, but neither consequential or special damages nor penal damages may be had except as specifically provided in the code or by other rule of law. (b) A right or obligation declared by the code is enforceable by action unless the provision declaring it specifies a different and limited effect. Sec. 45.01.306. Waiver or renunciation of claim or right after breach. A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record. Sec. 45.01.307. Prima facie evidence by third-party documents. A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher's or inspector's certificate, consular invoice, or another document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party. Sec. 45.01.308. 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 by the performance, promise, or assent prejudice the rights reserved. The words, “without prejudice,” “under protest,” or the like are sufficient. (b) The provisions of (a) of this section do not apply to an accord and satisfaction. Sec. 45.01.309. Option to accelerate at will. A term providing that one party or that party's successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure,” or words of similar import, means that the party has power to make the acceleration or requirement only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against whom the power has been exercised. Sec. 45.01.310. Subordinated obligations. An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated. Subordination does not create a security interest as against either the common debtor or a subordinated creditor.