CHAPTER 554UNIFORM COMMERCIAL CODEReferred to in 12.71, 12.81, 12.87, 12.91, 12A.4, 12E.11, 15.106D, 15E.204, 15E.207, 16.26, 16.105, 16.132, 16.177, 34A.21, 173.14B, 203.12A, 203C.4, 203C.12A, 257C.8, 260C.72, 261.43A, 321.50, 321.105A, 331.606B, 331.609, 390.17, 423.1, 453A.45, 455G.6, 462A.83, 483A.51, 491.46, 501A.902, 521I.12, 537.1103, 537A.3, 554B.2, 554D.104, 554D.118, 558.1, 558.42, 654A.1, 654A.6, 654A.8, 717.3, 717.4, 809A.1
1
GENERAL PROVISIONS
PART 1
GENERAL PROVISIONS
554.1101Short titles.
554.1102Scope of Article.
554.1103Construction of this chapter to promote its purposes and policies — applicability of supplemental principles of law.
554.1104Construction against implied repeal.
554.1105Severability.
554.1106Use of singular and plural — gender.
554.1107Section captions.
554.1108Relation to Electronic Signatures in Global and National Commerce Act.
554.1109Reserved.
554.1110 Rules for filing and indexing.
PART 2
GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
554.1201General definitions.
554.1202Notice — knowledge.
554.1203Lease distinguished from security interest.
554.1204Value.
554.1205Reasonable time — seasonableness.
554.1206Presumptions.
PART 3
TERRITORIAL APPLICABILITY AND GENERAL RULES
554.1301Territorial applicability — parties’ power to choose applicable law.
554.1302Variation by agreement.
554.1303Course of performance, course of dealing, and usage of trade.
554.1304Obligation of good faith.
554.1305Remedies to be liberally administered.
554.1306Waiver or renunciation of claim or right after breach.
554.1307Prima facie evidence by third-party documents.
554.1308Performance or acceptance under reservation of rights.
554.1309Option to accelerate at will.
554.1310Subordinated obligations.
2
SALES
PART 1
SHORT TITLE, GENERAL CONSTRUCTION, AND SUBJECT MATTER
554.2101Short title.
554.2102Scope — certain security and other transactions excluded from this Article.
554.2103Definitions and index of definitions.
554.2104Definitions: “merchant” — “between merchants” — “financing agency”.
554.2105Definitions: transferability — “goods” — “future” goods — “lot” — “commercial unit”.
554.2106Definitions: “contract” — “agreement” — “contract for sale” — “sale” — “present sale” — “conforming” to contract — “termination” — “cancellation”.
554.2107Goods to be severed from realty: recording.
PART 2
FORM, FORMATION, AND READJUSTMENT OF CONTRACT
554.2201Formal requirements — statute of frauds.
554.2202Final written expression — parol or extrinsic evidence.
554.2203Seals inoperative.
554.2204Formation in general.
554.2205Firm offers.
554.2206Offer and acceptance in formation of contract.
554.2207Additional terms in acceptance or confirmation.
554.2208Course of performance or practical construction. Repealed by 2007 Acts, ch 41, §60.
554.2209Modification, rescission and waiver.
554.2210Delegation of performance — assignment of rights.
PART 3
GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT
554.2301General obligations of parties.
554.2302Unconscionable contract or clause.
554.2303Allocation or division of risks.
554.2304Price payable in money, goods, realty, or otherwise.
554.2305Open price term.
554.2306Output, requirements and exclusive dealings.
554.2307Delivery in single lot or several lots.
554.2308Absence of specified place for delivery.
554.2309Absence of specific time provisions — notice of termination.
554.2310Open time for payment or running of credit — authority to ship under reservation.
554.2311Options and cooperation respecting performance.
554.2312Warranty of title and against infringement — buyer’s obligation against infringement.
554.2313Express warranties by affirmation, promise, description, sample.
554.2314Implied warranty: merchantability — usage of trade.
554.2315Implied warranty — fitness for particular purpose.
554.2316Exclusion or modification of warranties.
554.2317Cumulation and conflict of warranties express or implied.
554.2318Third party beneficiaries of warranties express or implied.
554.2319F.O.B. and F.A.S. terms.
554.2320C.I.F. and C. & F. terms.
554.2321C.I.F. or C. & F. — “net landed weights” — “payment on arrival” — warranty of condition on arrival.
554.2322Delivery “ex-ship”.
554.2323Form of bill of lading required in overseas shipment — “overseas”.
554.2324“No arrival, no sale” term.
554.2325“Letter of credit” term — “confirmed credit”.
554.2326Sale on approval and sale or return — rights of creditors.
554.2327Special incidents of sale on approval and sale or return.
554.2328Sale by auction.
PART 4
TITLE, CREDITORS, AND GOOD FAITH PURCHASERS
554.2401Passing of title — reservation for security — limited application of this section.
554.2402Rights of seller’s creditors against sold goods.
554.2403Power to transfer — good faith purchase of goods — “entrusting”.
PART 5
PERFORMANCE
554.2501Insurable interest in goods — manner of identification of goods.
554.2502Buyer’s right to goods on seller’s repudiation, failure to deliver, or insolvency.
554.2503Manner of seller’s tender of delivery.
554.2504Shipment by seller.
554.2505Seller’s shipment under reservation.
554.2506Rights of financing agency.
554.2507Effect of seller’s tender — delivery on condition.
554.2508Cure by seller of improper tender or delivery — replacement.
554.2509Risk of loss in the absence of breach.
554.2510Effect of breach on risk of loss.
554.2511Tender of payment by buyer — payment by check.
554.2512Payment by buyer before inspection.
554.2513Buyer’s right to inspection of goods.
554.2514When documents deliverable on acceptance — when on payment.
554.2515Preserving evidence of goods in dispute.
PART 6
BREACH, REPUDIATION, AND EXCUSE
554.2601Buyer’s rights on improper delivery.
554.2602Manner and effect of rightful rejection.
554.2603Merchant buyer’s duties as to rightfully rejected goods.
554.2604Buyer’s options as to salvage of rightfully rejected goods.
554.2605Waiver of buyer’s objections by failure to particularize.
554.2606What constitutes acceptance of goods.
554.2607Effect of acceptance — notice of breach — burden of establishing breach after acceptance — notice of claim or litigation to person answerable over.
554.2608Revocation of acceptance in whole or in part.
554.2609Right to adequate assurance of performance.
554.2610Anticipatory repudiation.
554.2611Retraction of anticipatory repudiation.
554.2612“Installment contract” — breach.
554.2613Casualty to identified goods.
554.2614Substituted performance.
554.2615Excuse by failure of presupposed conditions.
554.2616Procedure on notice claiming excuse.
PART 7
REMEDIES
554.2701Remedies for breach of collateral contracts not impaired.
554.2702Seller’s remedies on discovery of buyer’s insolvency.
554.2703Seller’s remedies in general.
554.2704Seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.
554.2705Seller’s stoppage of delivery in transit or otherwise.
554.2706Seller’s resale including contract for resale.
554.2707“Person in the position of a seller”.
554.2708Seller’s damages for nonacceptance or repudiation.
554.2709Action for the price.
554.2710Seller’s incidental damages.
554.2711Buyer’s remedies in general — buyer’s security interest in rejected goods.
554.2712“Cover” — buyer’s procurement of substitute goods.
554.2713Buyer’s damages for nondelivery or repudiation.
554.2714Buyer’s damages for breach in regard to accepted goods.
554.2715Buyer’s incidental and consequential damages.
554.2716Buyer’s right to specific performance or replevin.
554.2717Deduction of damages from the price.
554.2718Liquidation or limitation of damages — deposits.
554.2719Contractual modification or limitation of remedy.
554.2720Effect of “cancellation” or “rescission” on claims for antecedent breach.
554.2721Remedies for fraud.
554.2722Who can sue third parties for injury to goods.
554.2723Proof of market price — time and place.
554.2724Admissibility of market quotations.
554.2725Statute of limitations in contracts for sale.
2A
LEASES
3
NEGOTIABLE INSTRUMENTS
PART 1
GENERAL PROVISIONS AND DEFINITIONS
554.3101Short title.
554.3102Subject matter.
554.3103Definitions.
554.3104Negotiable instrument.
554.3105Issue of instrument.
554.3106Unconditional promise or order.
554.3107Instrument payable in foreign money.
554.3108Payable on demand or at definite time.
554.3109Payable to bearer or to order.
554.3110Identification of person to whom instrument is payable.
554.3111Place of payment.
554.3112Interest.
554.3113Date of instrument.
554.3114Contradictory terms of instrument.
554.3115Incomplete instrument.
554.3116Joint and several liability — contribution.
554.3117Other agreements affecting instrument.
554.3118Accrual of cause of action.
554.3119Notice of right to defend action.
554.3120through 554.3122 Repealed by 94 Acts, ch 1167, §121, 122.
PART 2
NEGOTIATION, TRANSFER, AND ENDORSEMENT
554.3201Negotiation.
554.3202Negotiation subject to rescission.
554.3203Transfer of instrument — rights acquired by transfer.
554.3204Endorsement.
554.3205Special endorsement — blank endorsement — anomalous endorsement.
554.3206Restrictive endorsement.
554.3207Reacquisition.
554.3208Reacquisition. Repealed by 94 Acts, ch 1167, §121, 122.
PART 3
ENFORCEMENT OF INSTRUMENTS
554.3301Person entitled to enforce instrument.
554.3302Holder in due course.
554.3303Value and consideration.
554.3304Overdue instrument.
554.3305Defenses and claims in recoupment.
554.3306Claims to an instrument.
554.3307Notice of breach of fiduciary duty.
554.3308Proof of signatures and status as holder in due course.
554.3309Enforcement of lost, destroyed, or stolen instrument.
554.3310Effect of instrument on obligation for which taken.
554.3311Accord and satisfaction by use of instrument.
554.3312Lost, destroyed, or stolen cashier’s check, teller’s check, or certified check.
PART 4
LIABILITY OF PARTIES
554.3401Signature.
554.3402Signature by representative.
554.3403Unauthorized signature.
554.3404Impostors — fictitious payees.
554.3405Employer’s responsibility for fraudulent endorsement by employee.
554.3406Negligence contributing to forged signature or alteration of instrument.
554.3407Alteration.
554.3408Drawee not liable on unaccepted draft.
554.3409Acceptance of draft — certified check.
554.3410Acceptance varying draft.
554.3411Refusal to pay cashier’s checks, teller’s checks, and certified checks.
554.3412Obligation of issuer of note or cashier’s check.
554.3413Obligation of acceptor.
554.3414Obligation of drawer.
554.3415Obligation of endorser.
554.3416Transfer warranties.
554.3417Presentment warranties.
554.3418Payment or acceptance by mistake.
554.3419Instruments signed for accommodation.
554.3420Conversion of instrument.
PART 5
DISHONOR
554.3501Presentment.
554.3502Dishonor.
554.3503Notice of dishonor.
554.3504Excused presentment and notice of dishonor.
554.3505Evidence of dishonor.
554.3506through 554.3511 Repealed by 94 Acts, ch 1167, §121, 122.
554.3512Holder’s recourse for dishonor.
554.3513Civil remedy for dishonor.
PART 6
DISCHARGE AND PAYMENT
554.3601Discharge and effect of discharge.
554.3602Payment.
554.3603Tender of payment.
554.3604Discharge by cancellation or renunciation.
554.3605Discharge of endorsers and accommodation parties.
554.3606Impairment of recourse or of collateral. Repealed by 94 Acts, ch 1167, §121, 122.
554.3701and 554.3801 Repealed by 94 Acts, ch 1167, §121, 122.
554.3802through 554.3806 Repealed by 94 Acts, ch 1167, §121, 122.
4
BANK DEPOSITS AND COLLECTIONS
PART 1
GENERAL PROVISIONS AND DEFINITIONS
554.4101Short title.
554.4102Applicability.
554.4103Variation by agreement — measure of damages — action constituting ordinary care.
554.4104Definitions and index of definitions.
554.4105“Bank” — “depositary bank” — “intermediary bank” — “collecting bank” — “payor bank” — “presenting bank”.
554.4106Payable through or payable at bank — collecting bank.
554.4107Separate office of a bank.
554.4108Time of receipt of items.
554.4109Delays.
554.4110Electronic presentment.
554.4111Statute of limitations.
PART 2
COLLECTION OF ITEMS: DEPOSITARY AND COLLECTING BANKS
554.4201Status of collecting bank as agent and provisional status of credits — applicability of Article — item endorsed “pay any bank”.
554.4202Responsibility for collection or return — when action timely.
554.4203Effect of instructions.
554.4204Methods of sending and presenting — sending directly to payor bank.
554.4205Depositary bank holder of unendorsed item.
554.4206Transfer between banks.
554.4207Transfer warranties.
554.4208Presentment warranties.
554.4209Encoding and retention warranties.
554.4210Security interest of collecting bank in items, accompanying documents and proceeds.
554.4211When bank gives value for purposes of holder in due course.
554.4212Presentment by notice of item not payable by, through, or at a bank; liability of drawer or endorser.
554.4213Medium and time of settlement by bank.
554.4214Right of charge-back or refund — liability of collecting bank — return of item.
554.4215Final payment of item by payor bank — when provisional debits and credits become final — when certain credits become available for withdrawal.
554.4216Insolvency and preference.
PART 3
COLLECTION OF ITEMS: PAYOR BANKS
554.4301Deferred posting — recovery of payment by return of items — time of dishonor — return of items by payor bank.
554.4302Payor bank’s responsibility for late return of item.
554.4303When items subject to notice, stop-payment order, legal process, or setoff — order in which items may be charged or certified.
PART 4
RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
554.4401When bank may charge customer’s account.
554.4402Bank’s liability to customer for wrongful dishonor — time of determining insufficiency of account.
554.4403Customer’s right to stop payment — burden of proof of loss.
554.4404Bank not obligated to pay check more than six months old.
554.4405Death or incompetence of customer.
554.4406Customer’s duty to discover and report unauthorized signature or alteration.
554.4407Payor bank’s right to subrogation on improper payment.
PART 5
COLLECTION OF DOCUMENTARY DRAFTS
554.4501Handling of documentary drafts — duty to send for presentment and to notify customer of dishonor.
554.4502Presentment of “on arrival” drafts.
554.4503Responsibility of presenting bank for documents and goods — report of reasons for dishonor — referee in case of need.
554.4504Privilege of presenting bank to deal with goods — security interest for expenses.
4A
FUNDS TRANSFERS
5
LETTERS OF CREDIT
554.5101Short title.
554.5102Definitions.
554.5103Scope.
554.5104Formal requirements.
554.5105Consideration.
554.5106Issuance, amendment, cancellation, and duration.
554.5107Confirmer, nominated person, and adviser.
554.5108Issuer’s rights and obligations.
554.5109Fraud and forgery.
554.5110Warranties.
554.5111Remedies.
554.5112Transfer of letter of credit.
554.5113Transfer by operation of law.
554.5114Assignment of proceeds.
554.5115Statute of limitations.
554.5116Choice of law and forum.
554.5117Subrogation of issuer, applicant, and nominated person.
554.5118Security interest of issuer or nominated person.
6
BULK TRANSFERS
7
WAREHOUSE RECEIPTS, BILLS OF LADING, AND OTHER DOCUMENTS OF TITLE
PART 1
GENERAL
554.7101Short title.
554.7102Definitions and index of definitions.
554.7103Relation of Article to treaty or statute.
554.7104Negotiable and nonnegotiable document of title.
554.7105Reissuance in alternative medium.
554.7106Control of electronic document of title.
PART 2
WAREHOUSE RECEIPTS: SPECIAL PROVISIONS
554.7201Person that may issue a warehouse receipt — storage under bond.
554.7202Form of warehouse receipt — effect of omission.
554.7203Liability for nonreceipt or misdescription.
554.7204Duty of care — contractual limitation of warehouse’s liability.
554.7205Title under warehouse receipt defeated in certain cases.
554.7206Termination of storage at warehouse’s option.
554.7207Goods must be kept separate — fungible goods.
554.7208Altered warehouse receipts.
554.7209Lien of warehouse.
554.7210Enforcement of warehouse’s lien.
PART 3
BILLS OF LADING: SPECIAL PROVISIONS
554.7301Liability for nonreceipt or misdescription — “said to contain” — “shipper’s weight, load, and count” — improper handling.
554.7302Through bills of lading and similar documents of title.
554.7303Diversion — reconsignment — change of instructions.
554.7304Tangible bills of lading in a set.
554.7305Destination bills.
554.7306Altered bills of lading.
554.7307Lien of carrier.
554.7308Enforcement of carrier’s lien.
554.7309Duty of care — contractual limitation of carrier’s liability.
PART 4
WAREHOUSE RECEIPTS AND BILLS OF LADING: GENERAL OBLIGATIONS
554.7401Irregularities in issue of receipt or bill or conduct of issuer.
554.7402Duplicate document of title — overissue.
554.7403Obligation of bailee to deliver — excuse.
554.7404No liability for good-faith delivery pursuant to document of title.
PART 5
WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND TRANSFER
554.7501Form of negotiation and requirements of due negotiation.
554.7502Rights acquired by due negotiation.
554.7503Document of title to goods defeated in certain cases.
554.7504Rights acquired in absence of due negotiation — effect of diversion — stoppage of delivery.
554.7505Indorser not guarantor for other parties.
554.7506Delivery without indorsement — right to compel indorsement.
554.7507Warranties on negotiation or delivery of document of title.
554.7508Warranties of collecting bank as to documents of title.
554.7509Adequate compliance with commercial contract.
PART 6
WAREHOUSE RECEIPTS AND BILLS OF LADING: MISCELLANEOUS PROVISIONS
554.7601Lost, stolen, or destroyed documents of title.
554.7601ALost, stolen, or destroyed documents — additional requirements.
554.7602Judicial process against goods covered by negotiable document of title.
554.7603Conflicting claims — interpleader.
8
INVESTMENT SECURITIES
PART 1
SHORT TITLE AND GENERAL MATTERS
554.8101Short title.
554.8102Definitions.
554.8103Rules for determining whether certain obligations and interests are securities or financial assets.
554.8104Acquisition of security or financial asset or interest therein.
554.8105Notice of adverse claim.
554.8106Control.
554.8107Whether indorsement, instruction, or entitlement order is effective.
554.8108Warranties in direct holding.
554.8109Warranties in indirect holding.
554.8110Applicability — choice of law.
554.8111Clearing corporation rules.
554.8112Creditor’s legal process.
554.8113Statute of frauds inapplicable.
554.8114Evidentiary rules concerning certificated securities.
554.8115Securities intermediary and others not liable to adverse claimant.
554.8116Securities intermediary as purchaser for value.
PART 2
ISSUE AND ISSUER
554.8201Issuer.
554.8202Issuer’s responsibility and defenses — notice of defect or defense.
554.8203Staleness as notice of defect or defense.
554.8204Effect of issuer’s restriction on transfer.
554.8205Effect of unauthorized signature on security certificate.
554.8206Completion or alteration of security certificate.
554.8207Rights and duties of issuer with respect to registered owners.
554.8208Effect of signature of authenticating trustee, registrar, or transfer agent.
554.8209Issuer’s lien.
554.8210Overissue.
PART 3
TRANSFER OF CERTIFICATED AND UNCERTIFICATED SECURITIES
554.8301Delivery.
554.8302Rights of purchaser.
554.8303Protected purchaser.
554.8304Indorsement.
554.8305Instruction.
554.8306Effect of guaranteeing signature, indorsement, or instruction.
554.8307Purchaser’s right to requisites for registration of transfer.
554.8308through 554.8321 Repealed by 96 Acts, ch 1138, §81, 84.
PART 4
REGISTRATION
554.8401Duty of issuer to register transfer.
554.8402Assurance that indorsement or instruction is effective.
554.8403Demand that issuer not register transfer.
554.8404Wrongful registration.
554.8405Replacement of lost, destroyed, or wrongfully taken security certificate.
554.8406Obligation to notify issuer of lost, destroyed, or wrongfully taken security certificate.
554.8407Authenticating trustee, transfer agent, and registrar.
554.8408Statements of uncertificated securities. Repealed by 96 Acts, ch 1138, §81, 84.
PART 5
SECURITY ENTITLEMENTS
554.8501Securities account — acquisition of security entitlement from securities intermediary.
554.8502Assertion of adverse claim against entitlement holder.
554.8503Property interest of entitlement holder in financial asset held by securities intermediary.
554.8504Duty of securities intermediary to maintain financial asset.
554.8505Duty of securities intermediary with respect to payments and distributions.
554.8506Duty of securities intermediary to exercise rights as directed by entitlement holder.
554.8507Duty of securities intermediary to comply with entitlement order.
554.8508Duty of securities intermediary to change entitlement holder’s position to other form of security holding.
554.8509Specification of duties of securities intermediary by other statute or regulation — manner of performance of duties of securities intermediary and exercise of rights of entitlement holder.
554.8510Rights of purchaser of security entitlement from entitlement holder.
554.8511Priority among security interests and entitlement holders.
9
SECURED TRANSACTIONS
PART 1
GENERAL PROVISIONS
A
SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
554.9101Short title.
554.9102Definitions and index of definitions.
554.9103Purchase-money security interest — application of payments — burden of establishing.
554.9104Control of deposit account.
554.9105Control of electronic chattel paper.
554.9106Control of investment property.
554.9107Control of letter-of-credit right.
554.9108Sufficiency of description.
B
APPLICABILITY OF ARTICLE
554.9109Scope.
554.9110Security interests arising under Article 2 or 13.
554.9111Applicability of bulk transfer laws. Repealed by 94 Acts, ch 1121, §17, 18.
554.9112through 554.9116 Repealed by 2000 Acts, ch 1149, §185, 187.
PART 2
EFFECTIVENESS OF SECURITY AGREEMENT — ATTACHMENT OF SECURITY INTEREST — RIGHTS OF PARTIES TO SECURITY AGREEMENT
A
EFFECTIVENESS AND ATTACHMENT
554.9201General effectiveness of security agreement.
554.9202Title to collateral immaterial.
554.9203Attachment and enforceability of security interest — proceeds — supporting obligations — formal requisites.
554.9204After-acquired property — future advances.
554.9205Use or disposition of collateral permissible.
554.9206Security interest arising in purchase or delivery of financial asset.
B
RIGHTS AND DUTIES
554.9207Rights and duties of secured party having possession or control of collateral.
554.9208Additional duties of secured party having control of collateral.
554.9209Duties of secured party if account debtor has been notified of assignment.
554.9210Request for accounting — request regarding list of collateral or statement of account.
PART 3
PERFECTION AND PRIORITY
A
LAW GOVERNING PERFECTION AND PRIORITY
554.9301Law governing perfection and priority of security interests.
554.9302Law governing perfection and priority of agricultural liens.
554.9303Law governing perfection and priority of security interests in goods covered by a certificate of title.
554.9304Law governing perfection and priority of security interests in deposit accounts.
554.9305Law governing perfection and priority of security interests in investment property.
554.9306Law governing perfection and priority of security interests in letter-of-credit rights.
554.9307Location of debtor.
B
PERFECTION
554.9308When security interest or agricultural lien is perfected — continuity of perfection.
554.9309Security interest perfected upon attachment.
554.9310When filing required to perfect security interest or agricultural lien — security interests and agricultural liens to which filing provisions do not apply.
554.9311Perfection of security interests in property subject to certain statutes, regulations, and treaties.
554.9312Perfection of security interests in chattel paper, deposit accounts, documents, goods covered by documents, instruments, investment property, letter-of-credit rights, and money — perfection by permissive filing — temporary perfection without filing or transfer of possession.
554.9313When possession by or delivery to secured party perfects security interest without filing.
554.9314Perfection by control.
554.9315Secured party’s rights on disposition of collateral and in proceeds.
554.9316Effect of change in governing law.
C
PRIORITY
554.9317Interests that take priority over or take free of security interest or agricultural lien.
554.9318No 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.
554.9319Rights and title of consignee with respect to creditors and purchasers.
554.9320Buyer of goods.
554.9321Licensee of general intangible and lessee of goods in ordinary course of business.
554.9322Priorities among conflicting security interests in and agricultural liens on same collateral.
554.9323Future advances.
554.9324Priority of purchase-money security interests.
554.9325Priority of security interests in transferred collateral.
554.9326Priority of security interests created by new debtor.
554.9327Priority of security interests in deposit account.
554.9328Priority of security interests in investment property.
554.9329Priority of security interests in letter-of-credit right.
554.9330Priority of purchaser of chattel paper or instrument.
554.9331Priority of rights of purchasers of instruments, documents, and securities under other articles — priority of interests in financial assets and security entitlements under Article 8.
554.9332Transfer of money — transfer of funds from deposit account.
554.9333Priority of certain liens arising by operation of law.
554.9334Priority of security interests in fixtures and crops.
554.9335Accessions.
554.9336Commingled goods.
554.9337Priority of security interests in goods covered by certificate of title.
554.9338Priority of security interest or agricultural lien perfected by filed financing statement providing certain incorrect information.
554.9339Priority subject to subordination.
D
RIGHTS OF BANK
554.9340Effectiveness of right of recoupment or setoff against deposit account.
554.9341Bank’s rights and duties with respect to deposit account.
554.9342Bank’s right to refuse to enter into or disclose existence of control agreement.
PART 4
RIGHTS OF THIRD PARTIES
554.9401Alienability of debtor’s rights.
554.9402Secured party not obligated on contract of debtor or in tort.
554.9403Agreement not to assert defenses against assignee.
554.9404Rights acquired by assignee — claims and defenses against assignee.
554.9405Modification of assigned contract.
554.9406Discharge of account debtor — notification of assignment — identification and proof of assignment — restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.
554.9407Restrictions on creation or enforcement of security interest in leasehold interest or in lessor’s residual interest.
554.9408Restrictions on assignment of promissory notes, health care insurance receivables, and certain general intangibles ineffective.
554.9409Restrictions on assignment of letter-of-credit rights ineffective.
PART 5
FILING
A
FILING OFFICE — CONTENTS AND EFFECTIVENESS OF FINANCING STATEMENT
554.9501Filing office.
554.9502Contents of financing statement — record of mortgage as financing statement — time of filing financing statement.
554.9503Name of debtor and secured party.
554.9504Indication of collateral.
554.9505Filing and compliance with other statutes and treaties for consignments, leases, other bailments, and other transactions.
554.9506Effect of errors or omissions.
554.9507Effect of certain events on effectiveness of financing statement.
554.9508Effectiveness of financing statement if new debtor becomes bound by security agreement.
554.9509Persons entitled to file a record.
554.9510Effectiveness of filed record.
554.9511Secured party of record.
554.9512Amendment of financing statement.
554.9513Termination statement.
554.9514Assignment of powers of secured party of record.
554.9515Duration and effectiveness of financing statement — effect of lapsed financing statement.
554.9516What constitutes filing — effectiveness of filing.
554.9517Effect of indexing errors.
554.9518Claim concerning inaccurate or wrongfully filed record.
B
DUTIES AND OPERATION OF FILING OFFICE
554.9519Numbering, maintaining, and indexing records — communicating information provided in records.
554.9520Acceptance and refusal to accept record.
554.9521Uniform form of written financing statement and amendment.
554.9522Maintenance and destruction of records.
554.9523Information from filing office — sale or license of records.
554.9524Delay by filing office.
554.9525Fees.
554.9526Filing-office rules.
554.9527Duty to report.
PART 6
DEFAULT
A
DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
554.9601Rights after default — judicial enforcement — consignor or buyer of accounts, chattel paper, payment intangibles, or promissory notes.
554.9602Waiver and variance of rights and duties.
554.9603Agreement on standards concerning rights and duties.
554.9604Procedure if security agreement covers real property or fixtures.
554.9605Unknown debtor or secondary obligor.
554.9606Time of default for agricultural lien.
554.9607Collection and enforcement by secured party.
554.9608Application of proceeds of collection or enforcement — liability for deficiency and right to surplus.
554.9609Secured party’s right to take possession after default.
554.9610Disposition of collateral after default.
554.9611Notification before disposition of collateral.
554.9612Timeliness of notification before disposition of collateral.
554.9613Contents and form of notification before disposition of collateral — general.
554.9614Contents and form of notification before disposition of collateral — consumer-goods transaction.
554.9615Application of proceeds of disposition — liability for deficiency and right to surplus.
554.9616Explanation of calculation of surplus or deficiency.
554.9617Rights of transferee of collateral.
554.9618Rights and duties of certain secondary obligors.
554.9619Transfer of record or legal title.
554.9620Acceptance of collateral in full or partial satisfaction of obligation — compulsory disposition of collateral.
554.9621Notification of proposal to accept collateral.
554.9622Effect of acceptance of collateral.
554.9623Right to redeem collateral.
554.9624Waiver.
B
NONCOMPLIANCE WITH ARTICLE
554.9625Remedies for secured party’s failure to comply with Article.
554.9626Action in which deficiency or surplus is in issue.
554.9627Determination of whether conduct was commercially reasonable.
554.9628Nonliability and limitation on liability of secured party — liability of secondary obligor.
PART 7
2001 TRANSITION
554.9701through 554.9710 Repealed by Acts, ch , §.
PART 8
2013 TRANSITION
554.9801through 554.9809 Repealed by Acts, ch , §.
10
EFFECTIVE DATE AND REPEALER
554.10101Effective date.
554.10102Reserved.
554.10103General repealer.
554.10104Laws not repealed. Repealed by 2007 Acts, ch 30, §44 – 46.
554.10105Secretary of state exempted from personal liability.
11
EFFECTIVE DATE OF 1974 AMENDMENTS
554.11101Effective date.
554.11102Preservation of old transition provision.
554.11103Transition to this chapter as amended — general rule.
554.11104Transition provision on change of requirement of filing.
554.11105Transition provision on change of place of filing. Repealed by 2000 Acts, ch 1149, §186, 187.
554.11106Reserved.
554.11107Transition provisions as to priorities.
554.11108Presumption that rule of law continues unchanged.
554.11109Effect of official comments.
12
FUNDS TRANSFERS
PART 1
SUBJECT MATTER AND DEFINITIONS
554.12101Short title.
554.12102Subject matter.
554.12103Payment order — definitions.
554.12104Funds transfer — definitions.
554.12105Other definitions.
554.12106Time payment order is received.
554.12107Federal reserve regulations and operating circulars.
554.12108 Relationship to Electronic Fund Transfer Act.
PART 2
ISSUE AND ACCEPTANCE OF PAYMENT ORDER
554.12201Security procedure.
554.12202Authorized and verified payment orders.
554.12203Unenforceability of certain verified payment orders.
554.12204Refund of payment and duty of customer to report with respect to unauthorized payment order.
554.12205Erroneous payment orders.
554.12206Transmission of payment order through funds-transfer or other communication system.
554.12207Misdescription of beneficiary.
554.12208Misdescription of intermediary bank or beneficiary’s bank.
554.12209Acceptance of payment order.
554.12210Rejection of payment order.
554.12211Cancellation and amendment of payment order.
554.12212Liability and duty of receiving bank regarding unaccepted payment order.
PART 3
EXECUTION OF SENDER’S PAYMENT ORDER BY RECEIVING BANK
554.12301Execution and execution date.
554.12302Obligations of receiving bank in execution of payment order.
554.12303Erroneous execution of payment order.
554.12304Duty of sender to report erroneously executed payment order.
554.12305Liability for late or improper execution or failure to execute payment order.
PART 4
PAYMENT
554.12401Payment date.
554.12402Obligation of sender to pay receiving bank.
554.12403Payment by sender to receiving bank.
554.12404Obligation of beneficiary’s bank to pay and give notice to beneficiary.
554.12405Payment by beneficiary’s bank to beneficiary.
554.12406Payment by originator to beneficiary — discharge of underlying obligation.
PART 5
MISCELLANEOUS PROVISIONS
554.12501Variation by agreement and effect of funds-transfer system rule.
554.12502Creditor process served on receiving bank — setoff by beneficiary’s bank.
554.12503Injunction or restraining order with respect to funds transfer.
554.12504Order in which items and payment orders may be charged to account — order of withdrawals from account.
554.12505Preclusion of objection to debit of customer’s account.
554.12506Rate of interest.
554.12507Choice of law.
13
LEASES
PART 1
GENERAL PROVISIONS
554.13101Short title.
554.13102Scope.
554.13103Definitions and index of definitions.
554.13104Leases subject to other law.
554.13105Territorial application of Article to goods covered by certificate of title.
554.13106Limitation on power of parties to consumer lease to choose applicable law and judicial forum.
554.13107Waiver or renunciation of claim or right after default.
554.13108Unconscionability.
554.13109Option to accelerate at will.
PART 2
FORMATION AND CONSTRUCTION OF LEASE CONTRACT
554.13201Statute of frauds.
554.13202Final written expression — parol or extrinsic evidence.
554.13203Seals inoperative.
554.13204Formation in general.
554.13205Firm offers.
554.13206Offer and acceptance in formation of lease contract.
554.13207Course of performance or practical construction. Repealed by 2007 Acts, ch 41, §61.
554.13208Modification, rescission, and waiver.
554.13209Lessee under finance lease as beneficiary of supply contract.
554.13210Express warranties.
554.13211Warranties against interference and against infringement — lessee’s obligation against infringement.
554.13212Implied warranty of merchantability.
554.13213Implied warranty of fitness for particular purpose.
554.13214Exclusion or modification of warranties.
554.13215Cumulation and conflict of warranties express or implied.
554.13216Third-party beneficiaries of express and implied warranties.
554.13217Identification.
554.13218Insurance and proceeds.
554.13219Risk of loss.
554.13220Effect of default on risk of loss.
554.13221Casualty to identified goods.
PART 3
EFFECT OF LEASE CONTRACT
554.13301Enforceability of lease contract.
554.13302Title to and possession of goods.
554.13303Alienability of party’s interest under lease contract or of lessor’s residual interest in goods — delegation of performance — transfer of rights.
554.13304Subsequent lease of goods by lessor.
554.13305Sale or sublease of goods by lessee.
554.13306Priority of certain liens arising by operation of law.
554.13307Priority of liens arising by attachment or levy on, security interests in, and other claims to goods.
554.13308Special rights of creditors.
554.13309Lessor’s and lessee’s rights when goods become fixtures.
554.13310Lessor’s and lessee’s rights when goods become accessions.
554.13311Priority subject to subordination.
PART 4
PERFORMANCE OF LEASE CONTRACT — REPUDIATED, SUBSTITUTED, AND EXCUSED
554.13401Insecurity — adequate assurance of performance.
554.13402Anticipatory repudiation.
554.13403Retraction of anticipatory repudiation.
554.13404Substituted performance.
554.13405Excused performance.
554.13406Procedure on excused performance.
554.13407Irrevocable promises — finance leases.
PART 5
DEFAULT
A
IN GENERAL
554.13501Default — procedure.
554.13502Notice after default.
554.13503Modification or impairment of rights and remedies.
554.13504Liquidation of damages.
554.13505Cancellation and termination and effect of cancellation, termination, rescission, or fraud on rights and remedies.
554.13506Statute of limitations.
554.13507Proof of market rent — time and place.
B
DEFAULT BY LESSOR
554.13508Lessee’s remedies.
554.13509Lessee’s rights on improper delivery — rightful rejection.
554.13510Installment lease contracts — rejection and default.
554.13511Merchant lessee’s duties as to rightfully rejected goods.
554.13512Lessee’s duties as to rightfully rejected goods.
554.13513Cure by lessor of improper tender or delivery — replacement.
554.13514Waiver of lessee’s objections.
554.13515Acceptance of goods.
554.13516Effect of acceptance of goods — notice of default — burden of establishing default after acceptance — notice of claim or litigation to person answerable over.
554.13517Revocation of acceptance of goods.
554.13518Cover — substitute goods.
554.13519Lessee’s damages for nondelivery, repudiation, default, and breach of warranty in regard to accepted goods.
554.13520Lessee’s incidental and consequential damages.
554.13521Lessee’s right to specific performance or replevin.
554.13522Lessee’s right to goods on lessor’s insolvency.
C
DEFAULT BY LESSEE
554.13523Lessor’s remedies.
554.13524Lessor’s right to identify goods to lease contract.
554.13525Lessor’s right to possession of goods.
554.13526Lessor’s stoppage of delivery in transit or otherwise.
554.13527Lessor’s rights to dispose of goods.
554.13528Lessor’s damages for nonacceptance, failure to pay, repudiation, or other default.
554.13529Lessor’s action for the rent.
554.13530Lessor’s incidental damages.
554.13531Standing to sue third parties for injury to goods.
554.13532Lessor’s rights to residual interest.
(1)GENERAL PROVISIONSReferred to in 554.2103, 554.3103, 554.4104, 554.5102, 554.7102, 554.8102, 554.9102, 554.12105, 554.13103PART 1GENERAL PROVISIONS554.1101Short titles.1.  This chapter may be cited as the Uniform Commercial Code.2.  This Article may be cited as Uniform Commercial Code — General Provisions.[C66, 71, 73, 75, 77, 79, 81, §554.1101]2007 Acts, ch 41, §1554.1102Scope of Article.This Article applies to a transaction to the extent that it is governed by another Article of this chapter.2007 Acts, ch 41, §2,57554.1103Construction of this chapter to promote its purposes and policies — applicability of supplemental principles of law.1.  This chapter must be liberally construed and applied to promote its underlying purposes and policies, which are:a.  to simplify, clarify, and modernize the law governing commercial transactions;b.  to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; andc.  to make uniform the law among the various jurisdictions.2.  Unless displaced by the particular provisions of this chapter, 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 its provisions.[S13, §3060-a196, 3138-a56, -b50; C24, 27, 31, 35, 39, §8295, 9657, 9716, 9931, 10002; C46, §487.52, 541.197, 542.56, 554.2, 554.74; C50, 54, 58, 62, §487.52, 493A.18, 541.197, 542.56, 554.2, 554.74; C66, 71, 73, 75, 77, 79, 81, §554.1103]2007 Acts, ch 41, §3554.1104Construction against implied repeal.This chapter being a general Act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.[C66, 71, 73, 75, 77, 79, 81, §554.1104]2007 Acts, ch 41, §4554.1105Severability.If any provision or clause of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.[C66, 71, 73, 75, 77, 79, 81, §554.1108]2007 Acts, ch 41, §9,48CS2007, §554.1105554.1106Use of singular and plural — gender.In this chapter, unless the statutory context otherwise requires:1.  words in the singular number include the plural, and those in the plural include the singular; and2.  words of any gender also refer to any other gender.2007 Acts, ch 41, §7,57554.1107Section captions.Section captions are parts of this chapter.[C66, 71, 73, 75, 77, 79, 81, §554.1109]2007 Acts, ch 41, §49CS2007, §554.1107Referred to in 3.3554.1108Relation to Electronic Signatures in Global and National Commerce Act.This Article modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §7001 et seq., except that nothing in this Article modifies, limits, or supersedes §7001(c) of that Act or authorizes electronic delivery of any of the notices described in §7003(b) of that Act.2007 Acts, ch 41, §10,57554.1109Reserved.554.1110 Rules for filing and indexing.The secretary of state shall make and promulgate rules for all filing and indexing pursuant to this chapter and chapter 554B including but not limited to rules on whether statements and documents shall be indexed in real estate records.[C71, 73, 75, 77, 79, 81, §554.1110]2014 Acts, ch 1026, §117PART 2GENERAL DEFINITIONS AND PRINCIPLESOF INTERPRETATION554.1201General 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 chapter that apply to particular Articles or parts thereof, have the meanings stated.2.  Subject to definitions contained in other Articles of this chapter that apply to particular Articles or parts thereof:a.  “Action” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, suit in equity, and any other proceedings in which rights are determined.b.  “Aggrieved party” means a party entitled to pursue a remedy.c.  “Agreement”, as distinguished from “contract”, means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in section 554.1303.d.  “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.e.  “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.f.  “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.g.  “Branch” includes a separately incorporated foreign branch of a bank.h.  “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.i.  “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 may be a buyer in ordinary course of business. “Buyer in ordinary course of business” does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.j.  “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:(1)  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(2)  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.k.  “Consumer” means an individual who enters into a transaction primarily for personal, family, or household purposes.l.  “Contract”, as distinguished from “agreement”, means the total legal obligation that results from the parties’ agreement as determined by this chapter as supplemented by any other applicable laws.m.  “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.n.  “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.o.  “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.p.  “Document of title” means a record that in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers and 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.q.  “Fault” means a default, breach, or wrongful act or omission.r.  “Fungible goods” means:(1)  goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or(2)  goods that by agreement are treated as equivalent.s.  “Genuine” means free of forgery or counterfeiting.t.  “Good faith”, except as otherwise provided in Article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.u.  “Holder” means:(1)  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;(2)  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(3)  the person in control of a negotiable electronic document of title.v.  “Insolvency proceeding” includes any assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.w.  “Insolvent” means:(1)  having generally ceased to pay debts in the ordinary course of business other than as a result of a bona fide dispute;(2)  being unable to pay debts as they become due; or(3)  being insolvent within the meaning of federal bankruptcy law.x.  “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.y.  “Organization” means a person other than an individual.z.  “Party”, as distinguished from “third party”, means a person that has engaged in a transaction or made an agreement subject to this chapter.aa.  “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity.ab.  “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.ac.  “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.ad.  “Purchaser” means a person who takes by purchase.ae.  “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.af.  “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.ag.  “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.ah.  “Right” includes remedy.ai.  “Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. “Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9. “Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under section 554.2401, but a buyer may also acquire a “security interest” by complying with Article 9. Except as otherwise provided in section 554.2505, the right of a seller or lessor of goods under Article 2 or 13 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. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under section 554.2401 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 554.1203.aj.  “Send” in connection with a writing, record, or notice means:(1)  to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or(2)  in any other way to cause to be received any record or notice within the time it would have arrived if properly sent.ak.  “Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing.al.  “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.am.  “Surety” includes a guarantor or other secondary obligor.an.  “Term” means that portion of an agreement that relates to a particular matter.ao.  “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery.ap.  “Warehouse receipt” means a document of title issued by a person engaged in the business of storing goods for hire.aq.  “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning.[S13, §1889-a, 3060-a6, -a25, -a27, -a56, -a191, 3138-a1, -a58, -b, -b52; C24, 27, 31, 35, 39, §8245, 8297, 9266, 9466, 9485 – 9487, 9516, 9652, 9661, 9718, 9932, 9934, 9935, 10000, 10005; C46, 50, 54, 58, 62, §487.1, 487.54, 528.61, 541.6, 541.25 – 541.27, 541.56, 541.192, 542.1, 542.58, 554.3, 554.6, 554.7, 554.72, 554.77; C50, 54, 58, 62, §493A.22; C58, 62, §539.12; C66, 71, 73, 75, 77, 79, 81, §554.1201]89 Acts, ch 113, §54, 94 Acts, ch 1052, §3, 94 Acts, ch 1167, §6, 122, 2000 Acts, ch 1149, §138, 139, 187, 2007 Acts, ch 30, §45 – 47, 2007 Acts, ch 41, §11, 43, 44, 2007 Acts, ch 215, §262, 2013 Acts, ch 30, §261, 2014 Acts, ch 1026, §118, 2018 Acts, ch 1041, §108, 109Referred to in 123A.2, 537.3603, 554.3103, 554.12105, 554.13103, 554D.118554.1202Notice — knowledge.1.  Subject to subsection 6, a person has “notice” of a fact if the person:a.  has actual knowledge of it;b.  has received a notice or notification of it; orc.  from all the facts and circumstances known to the person at the time in question, has reason to know that it exists.2.  “Knowledge” means actual knowledge. “Knows” has a corresponding meaning.3.  “Discover”, “learn”, or words of similar import refer to knowledge rather than to reason to know.4.  A person “notifies” or “gives” a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.5.  Subject to subsection 6, a person “receives” a notice or notification when:a.  it comes to that person’s attention; orb.  it is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.6.  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.2007 Acts, ch 41, §13,57Referred to in 554.12106554.1203Lease distinguished from security interest.1.  Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.2.  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:a.  the original term of the lease is equal to or greater than the remaining economic life of the goods;b.  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;c.  the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; ord.  the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.3.  A transaction in the form of a lease does not create a security interest merely because:a.  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;b.  the lessee assumes risk of loss of the goods;c.  the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;d.  the lessee has an option to renew the lease or to become the owner of the goods;e.  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; orf.  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.4.  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:a.  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; orb.  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.5.  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.2007 Acts, ch 41, §14,57Referred to in 554.1201554.1204Value.Except as otherwise provided in Articles 3, 4, and 5, a person gives value for rights if the person acquires them:1.  in return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;2.  as security for, or in total or partial satisfaction of, a preexisting claim;3.  by accepting delivery under a preexisting contract for purchase; or4.  in return for any consideration sufficient to support a simple contract.2007 Acts, ch 41, §16,57554.1205Reasonable time — seasonableness.1.  Whether a time for taking an action required by this chapter is reasonable depends on the nature, purpose, and circumstances of the action.2.  An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.[S13, §3060-a193; C24, 27, 31, 35, 39, §9654, 9972; C46, 50, 54, 58, 62, §541.194, 554.44; C66, 71, 73, 75, 77, 79, 81, §554.1204]2007 Acts, ch 41, §15,52CS2007, §554.1205554.1206Presumptions.Whenever this chapter creates a “presumption” with respect to a fact, or provides that a fact is “presumed”, the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.2007 Acts, ch 41, §18,57PART 3TERRITORIAL APPLICABILITYAND GENERAL RULES554.1301Territorial applicability — parties’ power to choose applicable law.1.  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 either of this state or of such other state or nation shall govern their rights and duties.2.  In the absence of an agreement effective under subsection 1, and except as provided in subsection 3, this chapter applies to transactions bearing an appropriate relation to this state.3.  If one of the following provisions of this chapter specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:a.  Section 554.2402;b.  Section 554.4102;c.  Section 554.5116;d.  Section 554.8110;e.  Sections 554.9301 through 554.9307;f.  Section 554.12507;g.  Sections 554.13105 and 554.13106.[C66, 71, 73, 75, 77, 79, 81, §554.1105]1992 Acts, ch 1146, §39; 1994 Acts, ch 1052, §2; 1994 Acts, ch 1121, §3; 1996 Acts, ch 1026, §19; 1996 Acts, ch 1138, §5,84; 2000 Acts, ch 1149, §137,187; 2007 Acts, ch 41, §5,45CS2007, §554.1301554.1302Variation by agreement.1.  Except as otherwise provided in subsection 2 or elsewhere in this chapter, the effect of provisions of this chapter may be varied by agreement.2.  The obligations of good faith, diligence, reasonableness, and care prescribed by this chapter may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever this chapter requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.3.  The presence in certain provisions of this chapter 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.2007 Acts, ch 41, §22Referred to in 554.5103, 554.12204, 554.13518, 554.13519, 554.13527, 554.13528554.1303Course of performance, course of dealing, and usage of trade.1.  A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if:a.  the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; andb.  the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.2.  A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.3.  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 must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.4.  A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.5.  Except as otherwise provided in subsection 6, the express terms of an agreement and any applicable course of dealing, or usage of trade must be construed wherever reasonable as consistent with each other. If such a construction is unreasonable:a.  express terms prevail over course of performance, course of dealing, and usage of trade;b.  course of performance prevails over course of dealing and usage of trade; andc.  course of dealing prevails over usage of trade.6.  Subject to section 554.2209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.7.  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.[C24, 27, 31, 35, 39, §9938, 9944, 9947, 10000; C46, 50, 54, 58, 62, §554.10, 554.16, 554.19, 554.72; C66, 71, 73, 75, 77, 79, 81, §554.1205]2007 Acts, ch 41, §17,53CS2007, §554.1303Referred to in 554.1201, 554.2202554.1304Obligation of good faith.Every contract or duty within this chapter imposes an obligation of good faith in its performance or enforcement.[C66, 71, 73, 75, 77, 79, 81, §554.1203]2007 Acts, ch 41, §51CS2007, §554.1304554.1305Remedies to be liberally administered.1.  The remedies provided by this chapter must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in this chapter or by other rule of law.2.  Any right or obligation declared by this chapter is enforceable by action unless the provision declaring it specifies a different and limited effect.[C24, 27, 31, 35, 39, §10001; C46, 50, 54, 58, 62, §554.73; C66, 71, 73, 75, 77, 79, 81, §554.1106]2007 Acts, ch 41, §6,46CS2007, §554.1305Referred to in 554.13501554.1306Waiver 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.[S13, §3060-a118, -a122; SS15, §3060-a120; C24, 27, 31, 35, 39, §9579, 9581, 9583; C46, 50, 54, 58, 62, §541.119, 541.121, 541.123; C66, 71, 73, 75, 77, 79, 81, §554.1107]2007 Acts, ch 41, §8,47CS2007, §554.1306Referred to in 554D.104554.1307Prima facie evidence by third-party documents.A document in due form purporting to be a bill of lading, policy or certificate of insurance, official weigher’s or inspector’s certificate, consular invoice, or any other document authorized or required by the contract to be issued by a third party is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.[C66, 71, 73, 75, 77, 79, 81, §554.1202]2007 Acts, ch 41, §12,50CS2007, §554.1307554.1308Performance or acceptance under reservation of rights.1.  A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as “without prejudice”, “under protest”, or the like are sufficient.2.  Subsection 1 does not apply to an accord and satisfaction.[C66, 71, 73, 75, 77, 79, 81, §554.1207]1994 Acts, ch 1167, §7,122; 2007 Acts, ch 41, §19,54CS2007, §554.1308554.1309Option 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 that party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.[C66, 71, 73, 75, 77, 79, 81, §554.1208]2007 Acts, ch 41, §20,55CS2007, §554.1309554.1310Subordinated 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.[C75, 77, 79, 81, §554.1209]2007 Acts, ch 41, §21,56CS2007, §554.1310(2)SALESReferred to in 554.1201, 554.7509, 554.9110, 554.9203, 554.9322, 554D.104PART 1SHORT TITLE, GENERAL CONSTRUCTION,AND SUBJECT MATTER554.2101Short title.This Article shall be known and may be cited as Uniform Commercial Code — Sales.[C66, 71, 73, 75, 77, 79, 81, §554.2101]554.2102Scope — certain security and other transactions excluded from this Article.Unless the context otherwise requires, this Article applies to transactions in goods; it does 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, farmers or other specified classes of buyers.[C24, 27, 31, 35, 39, §10004; C46, 50, 54, 58, 62, §554.76; C66, 71, 73, 75, 77, 79, 81, §554.2102]554.2103Definitions and index of definitions.1.  In this Article unless the context otherwise requiresa.  “Buyer” means a person who buys or contracts to buy goods.b.  Reserved.c.  “Receipt” of goods means taking physical possession of them.d.  “Seller” means a person who sells or contracts to sell goods.2.  Other definitions applying to this Article or to specified Parts thereof, and the sections in which they appear are:a.  “Acceptance” Section 554.2606b.  “Banker’s credit” Section 554.2325c.  “Between merchants” Section 554.2104d.  “Cancellation” Section 554.2106(4)e.  “Commercial unit” Section 554.2105f.  “Confirmed credit” Section 554.2325g.  “Conforming to contract” Section 554.2106h.  “Contract for sale” Section 554.2106i.  “Cover” Section 554.2712j.  “Entrusting” Section 554.2403k.  “Financing agency” Section 554.2104l.  “Future goods” Section 554.2105m.  “Goods” Section 554.2105n.  “Identification” Section 554.2501o.  “Installment contract” Section 554.2612p.  “Letter of credit” Section 554.2325q.  “Lot” Section 554.2105r.  “Merchant” Section 554.2104s.  “Overseas” Section 554.2323t.  “Person in position of seller” Section 554.2707u.  “Present sale” Section 554.2106v.  “Sale” Section 554.2106w.  “Sale on approval” Section 554.2326x.  “Sale or return” Section 554.2326y.  “Termination” Section 554.21063.   The following definitions in other Articles apply to this Article:a.  “Check”Section 554.3104b.  “Consignee”Section 554.7102c.  “Consignor”Section 554.7102d.  “Consumer goods”Section 554.9102e.  “Control”Section 554.7106f.  “Dishonor”Section 554.3502g.  “Draft”Section 554.31044.  In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.[C24, 27, 31, 35, 39, §10005; C46, 50, 54, 58, 62, §554.77; C66, 71, 73, 75, 77, 79, 81, §554.2103]94 Acts, ch 1167, §8, 122, 2000 Acts, ch 1149, §140, 187, 2007 Acts, ch 30, §45, 46, 48, 2007 Acts, ch 41, §23, 2012 Acts, ch 1023, §144, 157Referred to in 554.7102, 554.13103554.2104Definitions: “merchant” — “between merchants” — “financing agency”.1.  “Merchant” means a person who deals in goods of the kind or otherwise by the person’s occupation holds that person out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by the person’s employment of an agent or broker or other intermediary who by the intermediary’s occupation holds the intermediary out as having such knowledge or skill.2.  “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 or are associated with 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 554.2707).3.  “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.[S13, §3138-b34, -b36; C24, 27, 31, 35, 39, §8279, 8281; C46, 50, 54, 58, 62, §487.35, 487.37; C66, 71, 73, 75, 77, 79, 81, §554.2104]2007 Acts, ch 30, §45,46,49Referred to in 546A.1, 554.2103, 554.9102, 554.13103554.2105Definitions: transferability — “goods” — “future” goods — “lot” — “commercial unit”.1.  “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 (Article 8) 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 section on goods to be severed from realty (section 554.2107).2.  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.3.  There may be a sale of a part interest in existing identified goods.4.  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.5.  “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.6.  “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.[C24, 27, 31, 35, 39, §9934, 9935, 10005; C46, 50, 54, 58, 62, §554.6, 554.7, 554.77; C66, 71, 73, 75, 77, 79, 81, §554.2105]Referred to in 537.1301, 554.2103554.2106Definitions: “contract” — “agreement” — “contract for sale” — “sale” — “present sale” — “conforming” to contract — “termination” — “cancellation”.1.  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 554.2401). A “present sale” means a sale which is accomplished by the making of the contract.2.  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.3.  “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.4.  “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.[C24, 27, 31, 35, 39, §9930, 9940; C46, 50, 54, 58, 62, §554.1, 554.12; C66, 71, 73, 75, 77, 79, 81, §554.2106]Referred to in 554.2103, 554.7102, 554.9102, 554.13103554.2107Goods to be severed from realty: recording.1.  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.2.  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 1 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.3.  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.[C24, 27, 31, 35, 39, §10005; C46, 50, 54, 58, 62, §554.77; C66, 71, 73, 75, 77, 79, 81, §554.2107]Referred to in 554.2105PART 2FORM, FORMATION, AND READJUSTMENTOF CONTRACT554.2201Formal requirements — statute of frauds.1.  Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars 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 that party’s 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.2.  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 1 against such party unless written notice of objection to its contents is given within ten days after it is received.3.  A contract which does not satisfy the requirements of subsection 1 but which is valid in other respects is enforceablea.  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; orb.  if the party against whom enforcement is sought admits in that party’s 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; orc.  with respect to goods for which payment has been made and accepted or which have been received and accepted (section 554.2606).[C24, 27, 31, 35, 39, §9933; C46, 50, 54, 58, 62, §554.4; C66, 71, 73, 75, 77, 79, 81, §554.2201]Referred to in 554.2209, 554.2326554.2202Final 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 supplemented1.  by course of performance, course of dealing, or usage of trade (section 554.1303); and2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2202]2007 Acts, ch 41, §24Referred to in 554.2316, 554.2326, 715B.2554.2203Seals 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.[C24, 27, 31, 35, 39, §9932; C46, 50, 54, 58, 62, §554.3; C66, 71, 73, 75, 77, 79, 81, §554.2203]554.2204Formation in general.1.  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.2.  An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.3.  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.[C24, 27, 31, 35, 39, §9930, 9932; C46, 50, 54, 58, 62, §554.1, 554.3; C66, 71, 73, 75, 77, 79, 81, §554.2204]Referred to in 554.2311554.2205Firm 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 months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.[C24, 27, 31, 35, 39, §9930, 9932; C46, 50, 54, 58, 62, §554.1, 554.3; C66, 71, 73, 75, 77, 79, 81, §554.2205]554.2206Offer and acceptance in formation of contract.1.  Unless otherwise unambiguously indicated by the language or circumstancesa.  an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;b.  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.2.  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.[C24, 27, 31, 35, 39, §9930, 9932; C46, 50, 54, 58, 62, §554.1, 554.3; C66, 71, 73, 75, 77, 79, 81, §554.2206]554.2207Additional terms in acceptance or confirmation.1.  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.2.  The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:a.  the offer expressly limits acceptance to the terms of the offer;b.  they materially alter it; orc.  notification of objection to them has already been given or is given within a reasonable time after notice of them is received.3.  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 chapter.[C24, 27, 31, 35, 39, §9930, 9932; C46, 50, 54, 58, 62, §554.1, 554.3; C66, 71, 73, 75, 77, 79, 81, §554.2207]554.2208Course of performance or practical construction.Repealed by 2007 Acts, ch 41, §60. See §554.1303. 554.2209Modification, rescission and waiver.1.  An agreement modifying a contract within this Article needs no consideration to be binding.2.  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.3.  The requirements of the statute of frauds section of this Article (section 554.2201) must be satisfied if the contract as modified is within its provisions.4.  Although an attempt at modification or rescission does not satisfy the requirements of subsection 2 or 3 it can operate as a waiver.5.  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.[C24, 27, 31, 35, 39, §9990; C46, 50, 54, 58, 62, §554.62; C66, 71, 73, 75, 77, 79, 81, §554.2209]Referred to in 554.1303554.2210Delegation of performance — assignment of rights.1.  A party may perform that party’s duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having the 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.2.  Except as otherwise provided in section 554.9406, 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 of risk imposed on the other party by the contract, or impair materially the other party’s 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 the assignor’s entire obligation can be assigned despite agreement otherwise.3.  The creation, attachment, perfection, or enforcement of a security interest in the seller’s interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer’s chance of obtaining return performance within the purview of subsection 2 unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection, and enforcement of the security interest remain effective, but the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer, and a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.4.  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.5.  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 the assignee to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.6.  The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to that party’s rights against the assignor demand assurances from the assignee (section 554.2609).[C66, 71, 73, 75, 77, 79, 81, §554.2210]2000 Acts, ch 1149, §141, 142, 187, 2013 Acts, ch 30, §261PART 3GENERAL OBLIGATION AND CONSTRUCTIONOF CONTRACT554.2301General obligations 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.[C24, 27, 31, 35, 39, §9940, 9970; C46, 50, 54, 58, 62, §554.12, 554.42; C66, 71, 73, 75, 77, 79, 81, §554.2301]554.2302Unconscionable contract or clause.1.  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.2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2302]554.2303Allocation 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.[C66, 71, 73, 75, 77, 79, 81, §554.2303]554.2304Price payable in money, goods, realty, or otherwise.1.  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 that party is to transfer.2.  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.[C24, 27, 31, 35, 39, §9938; C46, 50, 54, 58, 62, §554.10; C66, 71, 73, 75, 77, 79, 81, §554.2304]554.2305Open price term.1.  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 ifa.  nothing is said as to price; orb.  the price is left to be agreed by the parties and they fail to agree; orc.  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.2.  A price to be fixed by the seller or by the buyer means a price for that party to fix in good faith.3.  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 that party’s option treat the contract as canceled or fix a reasonable price.4.  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 so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.[C24, 27, 31, 35, 39, §9938, 9939; C46, 50, 54, 58, 62, §554.10, 554.11; C66, 71, 73, 75, 77, 79, 81, §554.2305]554.2306Output, requirements and exclusive dealings.1.  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.2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2306]554.2307Delivery 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.[C24, 27, 31, 35, 39, §9974; C46, 50, 54, 58, 62, §554.46; C66, 71, 73, 75, 77, 79, 81, §554.2307]554.2308Absence of specified place for delivery.Unless otherwise agreed1.  the place for delivery of goods is the seller’s place of business or if the seller has none the seller’s residence; but2.  in a contract for sale of 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; and3.  documents of title may be delivered through customary banking channels.[C24, 27, 31, 35, 39, §9972; C46, 50, 54, 58, 62, §554.44; C66, 71, 73, 75, 77, 79, 81, §554.2308]2009 Acts, ch 41, §263554.2309Absence of specific time provisions — notice of termination.1.  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.2.  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.3.  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.[C24, 27, 31, 35, 39, §9972, 9974, 9976, 9977; C46, 50, 54, 58, 62, §554.44, 554.46, 554.48, 554.49; C66, 71, 73, 75, 77, 79, 81, §554.2309]554.2310Open time for payment or running of credit — authority to ship under reservation.Unless otherwise agreed1.  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; and2.  if the seller is authorized to send the goods the seller 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 554.2513); and3.  if delivery is authorized and made by way of documents of title otherwise than by subsection 2 then payment is due regardless of where the goods are to be received at the time and place at which the buyer is to receive delivery of the tangible documents or at the time the buyer is to receive delivery of the electronic documents and at the seller’s place of business or if none, the seller’s residence; and4.  where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.[C24, 27, 31, 35, 39, §9971, 9976; C46, 50, 54, 58, 62, §554.43, 554.48; C66, 71, 73, 75, 77, 79, 81, §554.2310]2007 Acts, ch 30, §45, 46, 50, 2009 Acts, ch 41, §263, 2010 Acts, ch 1061, §72554.2311Options and cooperation respecting performance.1.  An agreement for sale which is otherwise sufficiently definite (section 554.2204, subsection 3) 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.2.  Unless otherwise agreed specifications relating to assortment of the goods are at the buyer’s option and except as otherwise provided in section 554.2319, subsection 1, paragraph “c”, and section 554.2319, subsection 3, specifications or arrangements relating to shipment are at the seller’s option.3.  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 remediesa.  is excused for any resulting delay in that party’s own performance; andb.  may also either proceed to perform in any reasonable manner or after the time for a material part of that party’s own performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.[C66, 71, 73, 75, 77, 79, 81, §554.2311]2013 Acts, ch 30, §140, 2014 Acts, ch 1026, §119, 2015 Acts, ch 29, §87Referred to in 554.2319554.2312Warranty of title and against infringement — buyer’s obligation against infringement.1.  Subject to subsection 2 there is in a contract for sale a warranty by the seller thata.  the title conveyed shall be good, and its transfer rightful; andb.  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.2.  A warranty under subsection 1 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 or that the person selling is purporting to sell only such right or title as the person selling or a third person may have.3.  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 furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.[C24, 27, 31, 35, 39, §9942; C46, 50, 54, 58, 62, §554.14; C66, 71, 73, 75, 77, 79, 81, §554.2312]Referred to in 554.2607554.2313Express warranties by affirmation, promise, description, sample.1.  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.2.  It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that the seller 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.[C24, 27, 31, 35, 39, §9941, 9943, 9945; C46, 50, 54, 58, 62, §554.13, 554.15, 554.17; C66, 71, 73, 75, 77, 79, 81, §554.2313]554.2314Implied warranty: merchantability — usage of trade.1.  Unless excluded or modified (section 554.2316), 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.2.  Goods to be merchantable must be at least such asa.  pass without objection in the trade under the contract description; andb.  in the case of fungible goods, are of fair average quality within the description; andc.  are fit for the ordinary purposes for which such goods are used; andd.  run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; ande.  are adequately contained, packaged, and labeled as the agreement may require; andf.  conform to the promises or affirmations of fact made on the container or label if any.3.  Unless excluded or modified (section 554.2316) other implied warranties may arise from course of dealing or usage of trade.[C24, 27, 31, 35, 39, §9944; C46, 50, 54, 58, 62, §554.16; C66, 71, 73, 75, 77, 79, 81, §554.2314]Referred to in 554A.1554.2315Implied 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 554.2316 an implied warranty that the goods shall be fit for such purpose.[C24, 27, 31, 35, 39, §9944; C46, 50, 54, 58, 62, §554.16; C66, 71, 73, 75, 77, 79, 81, §554.2315]2008 Acts, ch 1032, §67Referred to in 554A.1554.2316Exclusion or modification of warranties.1.  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 parol or extrinsic evidence (section 554.2202) negation or limitation is inoperative to the extent that such construction is unreasonable.2.  Subject to subsection 3, 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.”3.  Notwithstanding subsection 2a.  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; andb.  when the buyer before entering into the contract has examined the goods or the sample or model as fully as the buyer 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 the buyer; andc.  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 (sections 554.2718 and 554.2719).[C66, 71, 73, 75, 77, 79, 81, §554.2316]Referred to in 554.2314, 554.2315, 554A.1
Livestock warranty exemption, chapter 554A
554.2317Cumulation 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:1.  Exact or technical specifications displace an inconsistent sample or model or general language of description.2.  A sample from an existing bulk displaces inconsistent general language of description.3.  Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.[C24, 27, 31, 35, 39, §9943 – 9945; C46, 50, 54, 58, 62, §554.15 – 554.17; C66, 71, 73, 75, 77, 79, 81, §554.2317]2009 Acts, ch 41, §263554.2318Third 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 with respect to injury to the person of an individual to whom the warranty extends.[C66, 71, 73, 75, 77, 79, 81, §554.2318]554.2319F.O.B. and F.A.S. terms.1.  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 whicha.  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 (section 554.2504) and bear the expense and risk of putting them into the possession of the carrier; orb.  when the term is F.O.B. the place of destination, the seller must at the seller’s own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article (section 554.2503);c.  when under either paragraph “a” or “b” the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at the seller’s 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 554.2323).2.  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 musta.  at the seller’s 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; andb.  obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.3.  Unless otherwise agreed in any case falling within subsection 1, paragraph “a” or “c” or subsection 2 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 (section 554.2311). The seller may also at the seller’s option move the goods in any reasonable manner preparatory to delivery or shipment.4.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2319]2013 Acts, ch 30, §141, 142Referred to in 554.2311554.2320C.I.F. and C. & F. terms.1.  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.2.  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 the seller’s own expense and risk toa.  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; andb.  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; andc.  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; andd.  prepare an invoice of the goods and procure any other documents required to effect shipment or to comply with the contract; ande.  forward and tender with commercial promptness all the documents in due form and with any endorsement necessary to perfect the buyer’s rights.3.  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.4.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2320]554.2321C.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.1.  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.2.  An agreement described in subsection 1 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.3.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2321]Referred to in 554.2513554.2322Delivery “ex-ship”.1.  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.2.  Under such a term unless otherwise agreeda.  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; andb.  the risk of loss does not pass to the buyer until the goods leave the ship’s tackle or are otherwise properly unloaded.[C66, 71, 73, 75, 77, 79, 81, §554.2322]554.2323Form of bill of lading required in overseas shipment — “overseas”.1.  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.2.  Where in a case within subsection 1 a tangible 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,a.  due tender of a single part is acceptable within the provisions of this Article on cure of improper delivery (section 554.2508, subsection 1); andb.  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.3.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2323]2007 Acts, ch 30, §45, 46, 51, 2015 Acts, ch 29, §88Referred to in 554.2103, 554.2319, 554.2503554.2324“No arrival, no sale” term.Under a term “no arrival, no sale” or terms of like meaning, unless otherwise agreed,1.  the seller must properly ship conforming goods and if they arrive by any means the seller must tender them on arrival but the seller assumes no obligation that the goods will arrive unless the seller has caused the nonarrival; and2.  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 554.2613).[C66, 71, 73, 75, 77, 79, 81, §554.2324]2009 Acts, ch 41, §263Referred to in 554.2613554.2325“Letter of credit” term — “confirmed credit”.1.  Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.2.  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 the buyer.3.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2325]Referred to in 554.2103554.2326Sale on approval and sale or return — rights of creditors.1.  Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform to the contract, the transaction isa.  a “sale on approval” if the goods are delivered primarily for use, andb.  a “sale or return” if the goods are delivered primarily for resale.2.  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.3.  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 Article (section 554.2201) and as contradicting the sale aspect of the contract within the provisions of this Article on parol or extrinsic evidence (section 554.2202).[C24, 27, 31, 35, 39, §9948; C46, 50, 54, 58, 62, §554.20; C66, 71, 73, 75, 77, 79, 81, §554.2326]2000 Acts, ch 1149, §143,187Referred to in 554.2103, 554.13103554.2327Special incidents of sale on approval and sale or return.1.  Under a sale on approval unless otherwise agreeda.  although the goods are identified to the contract the risk of loss and the title do not pass to the buyer until acceptance; andb.  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; andc.  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.2.  Under a sale or return unless otherwise agreeda.  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; andb.  the return is at the buyer’s risk and expense.[C24, 27, 31, 35, 39, §9948; C46, 50, 54, 58, 62, §554.20; C66, 71, 73, 75, 77, 79, 81, §554.2327]Referred to in 554.2509554.2328Sale by auction.1.  In a sale by auction if goods are put up in lots each lot is the subject of a separate sale.2.  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 the auctioneer’s discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.3.  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 the auctioneer 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 the bidder’s bid until the auctioneer’s announcement of completion of the sale, but a bidder’s retraction does not revive any previous bid.4.  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 the buyer’s 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.[C24, 27, 31, 35, 39, §9950; C46, 50, 54, 58, 62, §554.22; C66, 71, 73, 75, 77, 79, 81, §554.2328]
PART 4TITLE, CREDITORS, AND GOOD FAITHPURCHASERS554.2401Passing 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:1.  Title to goods cannot pass under a contract for sale prior to their identification to the contract (section 554.2501), and unless otherwise explicitly agreed the buyer acquires by their identification a special property as limited by this chapter. 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.2.  Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes the seller’s 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 ladinga.  if the contract requires or authorizes the seller to send the goods to the buyer but does not require the seller to deliver them at destination, title passes to the buyer at the time and place of shipment; butb.  if the contract requires delivery at destination, title passes on tender there.3.  Unless otherwise explicitly agreed where delivery is to be made without moving the goods,a.  if the seller is to deliver a tangible document of title, title passes at the time when and the place where the seller delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; orb.  if the goods are at the time of contracting already identified and no documents of title are to be delivered, title passes at the time and place of contracting.4.  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”.[C24, 27, 31, 35, 39, §9946 – 9949; C46, 50, 54, 58, 62, §554.18 – 554.21; C66, 71, 73, 75, 77, 79, 81, §554.2401]2007 Acts, ch 30, §45,46,52Referred to in 554.1201, 554.2106, 554.9102, 554.9109, 554.9110, 554.9309554.2402Rights of seller’s creditors against sold goods.1.  Except as provided in subsections 2 and 3, 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 (sections 554.2502 and 554.2716).2.  A creditor of the seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor a retention of possession by the seller is fraudulent under any rule of law of the state 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.3.  Nothing in this Article shall be deemed to impair the rights of creditors of the sellera.  under the provisions of the Article on Secured Transactions (Article 9); orb.  where identification to the contract or delivery is made not in current course of trade but in satisfaction of or as security for a pre-existing claim for money, security or the like and is made under circumstances which under any rule of law of the state where the goods are situated would apart from this Article constitute the transaction a fraudulent transfer or voidable preference.[C24, 27, 31, 35, 39, §9955; C46, 50, 54, 58, 62, §554.27; C66, 71, 73, 75, 77, 79, 81, §554.2402]Referred to in 554.1301, 554.7504554.2403Power to transfer — good faith purchase of goods — “entrusting”.1.  A purchaser of goods acquires all title which the purchaser’s 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 thougha.  the transferor was deceived as to the identity of the purchaser, orb.  the delivery was in exchange for a check which is later dishonored, orc.  it was agreed that the transaction was to be a “cash sale”, ord.  the delivery was procured through fraud punishable as larcenous under the criminal law.2.  Any entrusting of possession of goods to a merchant who deals in goods of that kind gives the merchant power to transfer all rights of the entruster to a buyer in ordinary course of business.3.  “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 larcenous under the criminal law.4.  The rights of other purchasers of goods and of lien creditors are governed by the Articles on Secured Transactions (Article 9) and Documents of Title (Article 7).[C24, 27, 31, 35, 39, §9949, 9952 – 9954; C46, 50, 54, 58, 62, §554.21, 554.24 – 554.26; C66, 71, 73, 75, 77, 79, 81, §554.2403]1994 Acts, ch 1121, §4Referred to in 554.2103, 554.2702, 554.7209, 554.7503, 554.9315, 554.13103PART 5PERFORMANCE554.2501Insurable interest in goods — manner of identification of goods.1.  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 the buyer 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 occursa.  when the contract is made if it is for the sale of goods already existing and identified;b.  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;c.  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 months or the next normal harvest season after contracting whichever is longer.2.  The seller retains an insurable interest in goods so long as title to or any security interest in the goods remains in the seller and where the identification is by the seller alone the seller may until default or insolvency or notification to the buyer that the identification is final substitute other goods for those identified.3.  Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.[C24, 27, 31, 35, 39, §9946, 9948; C46, 50, 54, 58, 62, §554.18, 554.20; C66, 71, 73, 75, 77, 79, 81, §554.2501]Referred to in 554.2103, 554.2401, 554.2502554.2502Buyer’s right to goods on seller’s repudiation, failure to deliver, or insolvency.1.  Subject to subsections 2 and 3 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 the buyer has a special property under the provisions of section 554.2501 may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:a.  in the case of goods bought for personal, family, or household purposes, the seller repudiates or fails to deliver as required by the contract; orb.  in all cases the seller becomes insolvent within ten days after receipt of the first installment on their price.2.  The buyer’s right to recover the goods under subsection 1, paragraph “a”, vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.3.  If the identification creating the buyer’s special property has been made by the buyer, the buyer acquires the right to recover the goods only if they conform to the contract for sale.[C24, 27, 31, 35, 39, §9946 – 9948; C46, 50, 54, 58, 62, §554.18 – 554.20; C66, 71, 73, 75, 77, 79, 81, §554.2502]2000 Acts, ch 1149, §144,187; 2008 Acts, ch 1032, §68Referred to in 554.2402, 554.2711554.2503Manner of seller’s tender of delivery.1.  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 the buyer to take delivery. The manner, time and place for tender are determined by the agreement and this Article, and in particular,a.  tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; butb.  unless otherwise agreed the buyer must furnish facilities reasonably suited to the receipt of the goods.2.  Where the case is within section 554.2504 respecting shipment tender requires that the seller comply with its provisions.3.  Where the seller is required to deliver at a particular destination tender requires that the seller comply with subsection 1 and also in any appropriate case tender documents as described in subsections 4 and 5 of this section.4.  Where goods are in the possession of a bailee and are to be delivered without being moved,a.  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; butb.  tender to the buyer of a nonnegotiable document of title or of a record directing the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in Article 9 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.5.  Where the contract requires the seller to deliver documents,a.  the seller must tender all such documents in correct form except as provided in this Article with respect to bills of lading in a set (section 554.2323, subsection 2); andb.  tender through customary banking channels is sufficient and dishonor of a draft accompanying or associated with the documents constitutes nonacceptance or rejection.[C24, 27, 31, 35, 39, §9940, 9948, 9949, 9972, 9975, 9980; C46, 50, 54, 58, 62, §554.12, 554.20, 554.21, 554.44, 554.47, 554.52; C66, 71, 73, 75, 77, 79, 81, §554.2503]2007 Acts, ch 30, §45, 46, 53, 54, 2008 Acts, ch 1032, §69, 2015 Acts, ch 29, §89Referred to in 554.2319, 554.2509554.2504Shipment by seller.1.  Where the seller is required or authorized to send the goods to the buyer and the contract does not require the seller to deliver them at a particular destination, then unless otherwise agreed the seller 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; andb.  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; andc.  Promptly notify the buyer of the shipment.2.  Failure to notify the buyer under subsection 1, paragraph “c”, or to make a proper contract under subsection 1, paragraph “a”, is a ground for rejection only if material delay or loss ensues.[C24, 27, 31, 35, 39, §9975; C46, 50, 54, 58, 62, §554.47; C66, 71, 73, 75, 77, 79, 81, §554.2504]2009 Acts, ch 41, §258Referred to in 554.2319, 554.2503, 554.2505554.2505Seller’s shipment under reservation.1.  Where the seller has identified goods to the contract by or before shipment:a.  the seller’s procurement of a negotiable bill of lading to the seller’s own order or otherwise reserves in the seller a security interest in the goods. The seller’s 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.b.  a nonnegotiable bill of lading to the seller or the seller’s nominee reserves possession of the goods as security, but except in a case of conditional delivery (section 554.2507, subsection 2) a nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.2.  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 under section 554.2504 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 of title.[C24, 27, 31, 35, 39, §9949; C46, 50, 54, 58, 62, §554.21; C66, 71, 73, 75, 77, 79, 81, §554.2505]2007 Acts, ch 30, §45, 46, 55, 56, 2008 Acts, ch 1031, §61, 2015 Acts, ch 29, §90Referred to in 554.1201, 554.2509, 554.9102, 554.9109, 554.9110, 554.9309554.2506Rights of financing agency.1.  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.2.  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.[S13, §3138-b36; C24, 27, 31, 35, 39, §8281; C46, 50, 54, 58, 62, §487.37; C66, 71, 73, 75, 77, 79, 81, §554.2506]2007 Acts, ch 30, §45,46,57554.2507Effect of seller’s tender — delivery on condition.1.  Tender of delivery is a condition to the buyer’s duty to accept the goods and, unless otherwise agreed, to the buyer’s duty to pay for them. Tender entitles the seller to acceptance of the goods and to payment according to the contract.2.  Where payment is due and demanded on the delivery to the buyer of goods or documents of title, the buyer’s right as against the seller to retain or dispose of them is conditional upon the buyer’s making the payment due.[C24, 27, 31, 35, 39, §9940, 9970, 9971, 9998; C46, 50, 54, 58, 62, §554.12, 554.42, 554.43, 554.70; C66, 71, 73, 75, 77, 79, 81, §554.2507]Referred to in 554.2505554.2508Cure by seller of improper tender or delivery — replacement.1.  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 the seller’s intention to cure and may then within the contract time make a conforming delivery.2.  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 the seller seasonably notifies the buyer have a further reasonable time to substitute a conforming tender.[C66, 71, 73, 75, 77, 79, 81, §554.2508]Referred to in 554.2323554.2509Risk of loss in the absence of breach.1.  Where the contract requires or authorizes the seller to ship the goods by carrier:a.  if it does not require the seller 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 554.2505); butb.  if it does require the seller 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.2.  Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer:a.  on the buyer’s receipt of possession or control of a negotiable document of title covering the goods; orb.  on acknowledgment by the bailee of the buyer’s right to possession of the goods; orc.  after the buyer’s receipt of possession or control of a nonnegotiable document of title or other direction to deliver in a record, as provided in section 554.2503, subsection 4, paragraph “b”.3.  In any case not within subsection 1 or 2, the risk of loss passes to the buyer on the buyer’s receipt of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery.4.  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 554.2327) and on effect of breach on risk of loss (section 554.2510).[C24, 27, 31, 35, 39, §9951; C46, 50, 54, 58, 62, §554.23; C66, 71, 73, 75, 77, 79, 81, §554.2509]2007 Acts, ch 30, §45,46,58554.2510Effect of breach on risk of loss.1.  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.2.  Where the buyer rightfully revokes acceptance the buyer may to the extent of any deficiency in the buyer’s effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.3.  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 the buyer, the seller may to the extent of any deficiency in the seller’s effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.[C66, 71, 73, 75, 77, 79, 81, §554.2510]Referred to in 554.2509554.2511Tender of payment by buyer — payment by check.1.  Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.2.  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.3.  Subject to the provisions of this chapter on the effect of an instrument on an obligation (section 554.3310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.[C24, 27, 31, 35, 39, §9971; C46, 50, 54, 58, 62, §554.43; C66, 71, 73, 75, 77, 79, 81, §554.2511]1994 Acts, ch 1167, §9,122554.2512Payment by buyer before inspection.1.  Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unlessa.  the nonconformity appears without inspection; orb.  despite tender of the required documents the circumstances would justify injunction against honor under this chapter (section 554.5109, subsection 2).2.  Payment pursuant to subsection 1 does not constitute an acceptance of goods or impair the buyer’s right to inspect or any of the buyer’s remedies.[C24, 27, 31, 35, 39, §9976, 9978; C46, 50, 54, 58, 62, §554.48, 554.50; C66, 71, 73, 75, 77, 79, 81, §554.2512]1996 Acts, ch 1026, §20; 1997 Acts, ch 23, §68554.2513Buyer’s right to inspection of goods.1.  Unless otherwise agreed and subject to subsection 3, 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.2.  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.3.  Unless otherwise agreed and subject to the provisions of this Article on C.I.F. contracts (section 554.2321, subsection 3), the buyer is not entitled to inspect the goods before payment of the price when the contract providesa.  for delivery “C.O.D.” or on other like terms; orb.  for payment against documents of title, except where such payment is due only after the goods are to become available for inspection.4.  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.[C24, 27, 31, 35, 39, §9976; C46, 50, 54, 58, 62, §554.48; C66, 71, 73, 75, 77, 79, 81, §554.2513]2015 Acts, ch 29, §91Referred to in 554.2310554.2514When 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 days after presentment; otherwise, only on payment.[S13, §3138-b40; C24, 27, 31, 35, 39, §8285; C46, 50, 54, 58, 62, §487.41; C66, 71, 73, 75, 77, 79, 81, §554.2514]554.2515Preserving evidence of goods in dispute.In furtherance of the adjustment of any claim or dispute1.  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; and2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2515]2009 Acts, ch 41, §263PART 6BREACH, REPUDIATION, AND EXCUSE554.2601Buyer’s rights on improper delivery.Subject to the provisions of this Article on breach in installment contracts (section 554.2612) and unless otherwise agreed under the sections on contractual limitations of remedy (sections 554.2718 and 554.2719), if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may1.  reject the whole; or2.  accept the whole; or3.  accept any commercial unit or units and reject the rest.[C24, 27, 31, 35, 39, §9940, 9973, 9998; C46, 50, 54, 58, 62, §554.12, 554.45, 554.70; C66, 71, 73, 75, 77, 79, 81, §554.2601]2009 Acts, ch 41, §263554.2602Manner and effect of rightful rejection.1.  Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller.2.  Subject to the provisions of the two following sections on rejected goods (sections 554.2603 and 554.2604),a.  after rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller; andb.  if the buyer has before rejection taken physical possession of goods in which the buyer does not have a security interest under the provisions of this Article (section 554.2711, subsection 3), the buyer 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; butc.  the buyer has no further obligations with regard to goods rightfully rejected.3.  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 554.2703).[C24, 27, 31, 35, 39, §9979; C46, 50, 54, 58, 62, §554.51; C66, 71, 73, 75, 77, 79, 81, §554.2602]2015 Acts, ch 29, §92, 2016 Acts, ch 1011, §107Referred to in 554.2606554.2603Merchant buyer’s duties as to rightfully rejected goods.1.  Subject to any security interest in the buyer (section 554.2711, subsection 3), 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 the merchant buyer’s 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.2.  When the buyer sells goods under subsection 1, that buyer 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 on the gross proceeds.3.  In complying with this section the buyer is held only to good faith and good faith conduct hereunder is neither acceptance nor conversion nor the basis of an action for damages.[C66, 71, 73, 75, 77, 79, 81, §554.2603]2015 Acts, ch 29, §93Referred to in 554.2602, 554.2604554.2604Buyer’s options as to salvage of rightfully rejected goods.Subject to the provisions of section 554.2603 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 the seller or resell them for the seller’s account with reimbursement as provided in section 554.2603. Such action is not acceptance or conversion.[C66, 71, 73, 75, 77, 79, 81, §554.2604]2008 Acts, ch 1032, §70Referred to in 554.2602554.2605Waiver of buyer’s objections by failure to particularize.1.  The buyer’s failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes the buyer from relying on the unstated defect to justify rejection or to establish breach:a.  where the seller could have cured it if stated seasonably; orb.  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.2.  Payment against documents made without reservation of rights precludes recovery of the payment for defects apparent in the documents.[C66, 71, 73, 75, 77, 79, 81, §554.2605]2007 Acts, ch 30, §45,46,59554.2606What constitutes acceptance of goods.1.  Acceptance of goods occurs when the buyera.  after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that the buyer will take or retain them in spite of their nonconformity; orb.  fails to make an effective rejection (section 554.2602, subsection 1), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; orc.  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 the seller.2.  Acceptance of a part of any commercial unit is acceptance of that entire unit.[C24, 27, 31, 35, 39, §9977; C46, 50, 54, 58, 62, §554.49; C66, 71, 73, 75, 77, 79, 81, §554.2606]2015 Acts, ch 29, §94Referred to in 554.2103, 554.2201554.2607Effect of acceptance — notice of breach — burden of establishing breach after acceptance — notice of claim or litigation to person answerable over.1.  The buyer must pay at the contract rate for any goods accepted.2.  Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a 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.3.  Where a tender has been accepted.a.  the buyer must within a reasonable time after the buyer discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; andb.  if the claim is one for infringement or the like (section 554.2312, subsection 3) and the buyer is sued as a result of such a breach the buyer must so notify the seller within a reasonable time after the buyer receives notice of the litigation or be barred from any remedy over for liability established by the litigation.4.  The burden is on the buyer to establish any breach with respect to the goods accepted.5.  Where the buyer is sued for breach of a warranty or other obligation for which the buyer’s seller is answerable overa.  the buyer may give the buyer’s 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 the seller will be bound in any action against the seller by the seller’s 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 the seller is so bound.b.  if the claim is one for infringement or the like (section 554.2312, subsection 3) the original seller may demand in writing that the seller’s buyer turn over to the seller control of the litigation including settlement or else be barred from any remedy over and if the seller 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.6.  The provisions of subsections 3, 4 and 5 apply to any obligation of a buyer to hold the seller harmless against infringement or the like (section 554.2312, subsection 3).[C24, 27, 31, 35, 39, §9970, 9978, 9998; C46, 50, 54, 58, 62, §554.42, 554.50, 554.70; C66, 71, 73, 75, 77, 79, 81, §554.2607]2015 Acts, ch 29, §95 – 97Referred to in 554.2714554.2608Revocation of acceptance in whole or in part.1.  The buyer may revoke the buyer’s acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the buyer if the buyer has accepted ita.  on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; orb.  without discovery of such nonconformity if the buyer’s acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.2.  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.3.  A buyer who so revokes has the same rights and duties with regard to the goods involved as if the buyer had rejected them.[C24, 27, 31, 35, 39, §9998; C46, 50, 54, 58, 62, §554.70; C66, 71, 73, 75, 77, 79, 81, §554.2608]554.2609Right to adequate assurance of performance.1.  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 that party receives such assurance may if commercially reasonable suspend any performance for which that party has not already received the agreed return.2.  Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.3.  Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.4.  After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.[C24, 27, 31, 35, 39, §9982 – 9984, 9992; C46, 50, 54, 58, 62, §554.54 – 554.56, 554.64; C66, 71, 73, 75, 77, 79, 81, §554.2609]Referred to in 554.2210, 554.2611554.2610Anticipatory 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 may1.  for a commercially reasonable time await performance by the repudiating party; or2.  resort to any remedy for breach (section 554.2703 or 554.2711), even though the aggrieved party has notified the repudiating party that the aggrieved party would await the latter’s performance and has urged retraction; and3.  in either case suspend the aggrieved party’s 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 554.2704).[C24, 27, 31, 35, 39, §9992, 9994; C46, 50, 54, 58, 62, §554.64, 554.66; C66, 71, 73, 75, 77, 79, 81, §554.2610]2009 Acts, ch 41, §263Referred to in 554.2709554.2611Retraction of anticipatory repudiation.1.  Until the repudiating party’s next performance is due the repudiating party can retract the repudiation unless the aggrieved party has since the repudiation canceled or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final.2.  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 554.2609).3.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2611]554.2612“Installment contract” — breach.1.  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.2.  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 3 and the seller gives adequate assurance of its cure the buyer must accept that installment.3.  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 the aggrieved party accepts a nonconforming installment without seasonably notifying of cancellation or if the aggrieved party brings an action with respect only to past installments or demands performance as to future installments.[C24, 27, 31, 35, 39, §9974; C46, 50, 54, 58, 62, §554.46; C66, 71, 73, 75, 77, 79, 81, §554.2612]Referred to in 554.2103, 554.2601, 554.2616, 554.2703, 554.2711554.2613Casualty 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 554.2324) then1.  if the loss is total the contract is avoided; and2.  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 the buyer’s 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.[C24, 27, 31, 35, 39, §9936, 9937; C46, 50, 54, 58, 62, §554.8, 554.9; C66, 71, 73, 75, 77, 79, 81, §554.2613]2009 Acts, ch 41, §263Referred to in 554.2324554.2614Substituted performance.1.  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.2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2614]Referred to in 554.2615554.2615Excuse by failure of presupposed conditions.Except so far as a seller may have assumed a greater obligation and subject to section 554.2614 on substituted performance:1.  Delay in delivery or nondelivery in whole or in part by a seller who complies with subsections 2 and 3, is not a breach of the seller’s 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.2.  Where the causes mentioned in subsection 1 affect only a part of the seller’s capacity to perform, the seller must allocate production and deliveries among the seller’s customers but may at the seller’s option include regular customers not then under contract as well as the seller’s own requirements for further manufacture. The seller may so allocate in any manner which is fair and reasonable.3.  The seller must notify the buyer seasonably that there will be delay or nondelivery and, when allocation is required under subsection 2, of the estimated quota thus made available for the buyer.[C66, 71, 73, 75, 77, 79, 81, §554.2615]2008 Acts, ch 1032, §71; 2009 Acts, ch 41, §259Referred to in 554.2616554.2616Procedure on notice claiming excuse.1.  Where the buyer receives notification of a material or indefinite delay or an allocation justified under section 554.2615 the buyer 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 554.2612), then also as to the whole,a.  terminate and thereby discharge any unexecuted portion of the contract; orb.  modify the contract by agreeing to take the buyer’s available quota in substitution.2.  If after receipt of such notification from the seller the buyer fails so to modify the contract within a reasonable time not exceeding thirty days the contract lapses with respect to any deliveries affected.3.  The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under section 554.2615.[C66, 71, 73, 75, 77, 79, 81, §554.2616]2008 Acts, ch 1032, §72PART 7REMEDIES554.2701Remedies 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.[C66, 71, 73, 75, 77, 79, 81, §554.2701]554.2702Seller’s remedies on discovery of buyer’s insolvency.1.  Where the seller discovers the buyer to be insolvent the seller may refuse delivery except for cash including payment for all goods theretofore delivered under the contract, and stop delivery under this Article (section 554.2705).2.  Where the seller discovers that the buyer has received goods on credit while insolvent the seller may reclaim the goods upon demand made within ten days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three months before delivery the ten-day limitation does not apply. Except as provided in this subsection 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.3.  The seller’s right to reclaim under subsection 2 is subject to the rights of a buyer in ordinary course or other good faith purchaser under this Article (section 554.2403). Successful reclamation of goods excludes all other remedies with respect to them.[C24, 27, 31, 35, 39, §9982, 9983, 9986; C46, 50, 54, 58, 62, §554.54, 554.55, 554.58; C66, 71, 73, 75, 77, 79, 81, §554.2702]Referred to in 554.2705554.2703Seller’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 554.2612), then also with respect to the whole undelivered balance, the aggrieved seller may:1.  withhold delivery of such goods;2.  stop delivery by any bailee as hereafter provided (section 554.2705);3.  proceed under section 554.2704 respecting goods still unidentified to the contract;4.  resell and recover damages as hereafter provided (section 554.2706);5.  recover damages for nonacceptance (section 554.2708) or in a proper case the price (section 554.2709);6.  cancel.[C24, 27, 31, 35, 39, §9993; C46, 50, 54, 58, 62, §554.65; C66, 71, 73, 75, 77, 79, 81, §554.2703]2008 Acts, ch 1032, §73Referred to in 554.2602, 554.2610, 554.2704, 554.2706554.2704Seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods.1.  An aggrieved seller under section 554.2703 may:a.  identify to the contract conforming goods not already identified if at the time the seller learned of the breach they are in the seller’s possession or control;b.  treat as the subject of resale goods which have demonstrably been intended for the particular contract even though those goods are unfinished.2.  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.[C24, 27, 31, 35, 39, §9992, 9993; C46, 50, 54, 58, 62, §554.64, 554.65; C66, 71, 73, 75, 77, 79, 81, §554.2704]2008 Acts, ch 1032, §74Referred to in 554.2610, 554.2703554.2705Seller’s stoppage of delivery in transit or otherwise.1.  The seller may stop delivery of goods in the possession of a carrier or other bailee when the seller discovers the buyer to be insolvent (section 554.2702) 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.2.  As against such buyer the seller may stop delivery until:a.  receipt of the goods by the buyer; orb.  acknowledgment to the buyer by any bailee of the goods except a carrier that the bailee holds the goods for the buyer; orc.  such acknowledgment to the buyer by a carrier by reshipment or as a warehouse; ord.  negotiation to the buyer of any negotiable document of title covering the goods.3.a.  To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.b.  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.c.  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 possession or control of the document.d.  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.[S13, §3138-a9, -a11, -a49, -b11, -b13, -b41; C24, 27, 31, 35, 39, §8256, 8258, 8286, 9669, 9671, 9709, 9986 – 9988; C46, 50, 54, 58, 62, §487.12, 487.14, 487.42, 542.9, 542.11, 542.49, 554.58 – 554.60; C66, 71, 73, 75, 77, 79, 81, §554.2705]2007 Acts, ch 30, §45,46,60,61Referred to in 554.2702, 554.2703, 554.2707, 554.7403, 554.7504554.2706Seller’s resale including contract for resale.1.  Under the conditions stated in section 554.2703 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 554.2710), but less expenses saved in consequence of the buyer’s breach.2.  Except as otherwise provided in subsection 3 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.3.  Where the resale is at private sale the seller must give the buyer reasonable notification of the seller’s intention to resell.4.  Where the resale is at public salea.  only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; andb.  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; andc.  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; andd.  the seller may buy.5.  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.6.  The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller (section 554.2707) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of that person’s security interest, as hereinafter defined (section 554.2711, subsection 3).[C24, 27, 31, 35, 39, §9989; C46, 50, 54, 58, 62, §554.61; C66, 71, 73, 75, 77, 79, 81, §554.2706]2015 Acts, ch 29, §98Referred to in 554.2703, 554.2707, 554.2711, 554.2718554.2707“Person in the position of a seller”.1.  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 the agent’s principal or anyone who otherwise holds a security interest or other right in goods similar to that of a seller.2.  A person in the position of a seller may as provided in this Article withhold or stop delivery (section 554.2705) and resell (section 554.2706) and recover incidental damages (section 554.2710).[C24, 27, 31, 35, 39, §9981; C46, 50, 54, 58, 62, §554.53; C66, 71, 73, 75, 77, 79, 81, §554.2707]Referred to in 554.2103, 554.2104, 554.2706554.2708Seller’s damages for nonacceptance or repudiation.1.  Subject to subsection 2 and to the provisions of this Article with respect to proof of market price (section 554.2723), 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 554.2710), but less expenses saved in consequence of the buyer’s breach.2.  If the measure of damages provided in subsection 1 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 554.2710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.[C24, 27, 31, 35, 39, §9993; C46, 50, 54, 58, 62, §554.65; C66, 71, 73, 75, 77, 79, 81, §554.2708]Referred to in 554.2703, 554.2709, 554.2723554.2709Action for the price.1.  When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under section 554.2710, the price:a.  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; andb.  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.2.  Where the seller sues for the price the seller must hold for the buyer any goods which have been identified to the contract and are still in the seller’s control except that if resale becomes possible the seller 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 the buyer to any goods not resold.3.  After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (section 554.2610), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for nonacceptance under section 554.2708.[C24, 27, 31, 35, 39, §9992; C46, 50, 54, 58, 62, §554.64; C66, 71, 73, 75, 77, 79, 81, §554.2709]2008 Acts, ch 1032, §75; 2009 Acts, ch 41, §162Referred to in 554.2703554.2710Seller’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.[C24, 27, 31, 35, 39, §9993, 9999; C46, 50, 54, 58, 62, §554.65, 554.71; C66, 71, 73, 75, 77, 79, 81, §554.2710]Referred to in 554.2706, 554.2707, 554.2708, 554.2709554.2711Buyer’s remedies in general — buyer’s security interest in rejected goods.1.  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 554.2612), the buyer may cancel and whether or not the buyer has done so may in addition to recovering so much of the price as has been paid:a.  “cover” and have damages under section 554.2712 as to all the goods affected whether or not they have been identified to the contract; orb.  recover damages for nondelivery as provided in this Article (section 554.2713).2.  Where the seller fails to deliver or repudiates the buyer may also:a.  if the goods have been identified recover them as provided in this Article (section 554.2502); orb.  in a proper case obtain specific performance or replevy the goods as provided in this Article (section 554.2716).3.  On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in the buyer’s 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 554.2706).[C24, 27, 31, 35, 39, §9998; C46, 50, 54, 58, 62, §554.70; C66, 71, 73, 75, 77, 79, 81, §554.2711]2008 Acts, ch 1032, §76Referred to in 554.2602, 554.2603, 554.2610, 554.2706, 554.2712, 554.9102, 554.9109, 554.9110, 554.9309, 554.9325554.2712“Cover” — buyer’s procurement of substitute goods.1.  After a breach within section 554.2711 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.2.  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 554.2715), but less expenses saved in consequence of the seller’s breach.3.  Failure of the buyer to effect cover within this section does not bar the buyer from any other remedy.[C66, 71, 73, 75, 77, 79, 81, §554.2712]2008 Acts, ch 1032, §77Referred to in 554.2103, 554.2711554.2713Buyer’s damages for nondelivery or repudiation.1.  Subject to the provisions of this Article with respect to proof of market price (section 554.2723), 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 554.2715), but less expenses saved in consequence of the seller’s breach.2.  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.[C24, 27, 31, 35, 39, §9996; C46, 50, 54, 58, 62, §554.68; C66, 71, 73, 75, 77, 79, 81, §554.2713]Referred to in 554.2711, 554.2723554.2714Buyer’s damages for breach in regard to accepted goods.1.  Where the buyer has accepted goods and given notification (section 554.2607, subsection 3) the buyer 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.2.  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.3.  In a proper case any incidental and consequential damages under section 554.2715 may also be recovered.[C24, 27, 31, 35, 39, §9998; C46, 50, 54, 58, 62, §554.70; C66, 71, 73, 75, 77, 79, 81, §554.2714]2008 Acts, ch 1032, §78, 2015 Acts, ch 29, §99554.2715Buyer’s incidental and consequential damages.1.  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.2.  Consequential damages resulting from the seller’s breach includea.  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; andb.  injury to person or property proximately resulting from any breach of warranty.[C24, 27, 31, 35, 39, §9998, 9999; C46, 50, 54, 58, 62, §554.70, 554.71; C66, 71, 73, 75, 77, 79, 81, §554.2715]Referred to in 554.2712, 554.2713, 554.2714554.2716Buyer’s right to specific performance or replevin.1.  Specific performance may be decreed where the goods are unique or in other proper circumstances.2.  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.3.  The buyer has a right of replevin for goods identified to the contract if after reasonable effort the buyer 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. In the case of goods bought for personal, family, or household purposes, the buyer’s right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.[C24, 27, 31, 35, 39, §9995, 9997; C46, 50, 54, 58, 62, §554.67, 554.69; C66, 71, 73, 75, 77, 79, 81, §554.2716]2000 Acts, ch 1149, §145,187Referred to in 554.2402, 554.2711554.2717Deduction of damages from the price.The buyer on notifying the seller of the buyer’s 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.[C24, 27, 31, 35, 39, §9998; C46, 50, 54, 58, 62, §554.70; C66, 71, 73, 75, 77, 79, 81, §554.2717]554.2718Liquidation or limitation of damages — deposits.1.  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.2.  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 the buyer’s payments exceedsa.  the amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with subsection 1, orb.  in the absence of such terms, twenty percent of the value of the total performance for which the buyer is obligated under the contract or five hundred dollars, whichever is smaller.3.  The buyer’s right to restitution under subsection 2 is subject to offset to the extent that the seller establishesa.  a right to recover damages under the provisions of this Article other than subsection 1, andb.  the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.4.  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 2; but if the seller has notice of the buyer’s breach before reselling goods received in part performance, the seller’s resale is subject to the conditions laid down in this Article on resale by an aggrieved seller (section 554.2706).[C66, 71, 73, 75, 77, 79, 81, §554.2718]Referred to in 554.2316, 554.2601, 554.2719554.2719Contractual modification or limitation of remedy.1.  Subject to the provisions of subsections 2 and 3 of this section and of section 554.2718 on liquidation and limitation of damages,a.  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; andb.  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.2.  Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this chapter.3.  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.[C66, 71, 73, 75, 77, 79, 81, §554.2719]2008 Acts, ch 1032, §79Referred to in 554.2316, 554.2601554.2720Effect 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.[C24, 27, 31, 35, 39, §9990; C46, 50, 54, 58, 62, §554.62; C66, 71, 73, 75, 77, 79, 81, §554.2720]554.2721Remedies for fraud.Remedies for material misrepresentation or fraud include all remedies available under this Article for nonfraudulent 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.[C24, 27, 31, 35, 39, §9990; C46, 50, 54, 58, 62, §554.62; C66, 71, 73, 75, 77, 79, 81, §554.2721]554.2722Who 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 contract1.  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;2.  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, the plaintiff’s suit or settlement is, subject to plaintiff’s own interest, as a fiduciary for the other party to the contract;3.  either party may with the consent of the other sue for the benefit of whom it may concern.[C66, 71, 73, 75, 77, 79, 81, §554.2722]2009 Acts, ch 41, §263554.2723Proof of market price — time and place.1.  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 554.2708 or 554.2713) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.2.  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.3.  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 that party has given the other party such notice as the court finds sufficient to prevent unfair surprise.[C66, 71, 73, 75, 77, 79, 81, §554.2723]Referred to in 554.2708, 554.2713554.2724Admissibility of market quotations.If the prevailing price or value of goods regularly bought and sold in an 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 that market are admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility. Reports are also admissible under rule of evidence 5.803(17).[C66, 71, 73, 75, 77, 79, 81, §554.2724]1983 Acts, ch 37, §2554.2725Statute of limitations in contracts for sale.1.  By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.2.  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.3.  Where an action commenced within the time limited by law or by agreement as provided in subsection 1 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 months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.4.  This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this chapter becomes effective.[C66, 71, 73, 75, 77, 79, 81, §554.2725]
Period of limitation, chapter 614
(2A)LEASES
Article on Leases codified as Article 13;94 Acts, ch 1052, §5 – 84
(3)NEGOTIABLE INSTRUMENTSReferred to in 533.314, 554.1204, 554.4102, 554.4107, 554.4203, 554.5110, 554.5116, 554.8103, 554.9331, 554D.118, 668.16
Article 3 takes effect July 1, 1995; 94 Acts,ch 1167, §122; former Article 3 is repealedeffective July 1, 1995; 94 Acts, ch 1167,§121, 122; for law prior to July 1, 1995, see Code 1993
PART 1GENERAL PROVISIONS AND DEFINITIONS554.3101Short title.This Article may be cited as Uniform Commercial Code — Negotiable Instruments.1994 Acts, ch 1167, §10,121,122554.3102Subject matter.1.  This Article applies to negotiable instruments. It does not apply to money, to payment orders governed by Article 12, or to securities governed by Article 8.2.  If there is conflict between this Article and Article 4 or 9, Articles 4 and 9 govern.3.  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.1994 Acts, ch 1167, §11,121,122; 1995 Acts, ch 67, §41554.3103Definitions.1.  In this Article:a.  “Acceptor” means a drawee who has accepted a draft.b.  “Drawee” means a person ordered in a draft to make payment.c.  “Drawer” means a person who signs or is identified in a draft as a person ordering payment.d.  Reserved.e.  “Maker” means a person who signs or is identified in a note as a person undertaking to pay.f.  “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.g.  “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.h.  “Party” means a party to an instrument.i.  “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.j.  “Prove” with respect to a fact means to meet the burden of establishing the fact (section 554.1201, subsection 2, paragraph “h”).k.  “Remitter” means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.2.  Other definitions applying to this Article and the sections in which they appear are:a.  “Acceptance” Section 554.3409.b.  “Accommodated party” Section 554.3419.c.  “Accommodation party” Section 554.3419.d.  “Alteration” Section 554.3407.e.  “Anomalous endorsement” Section 554.3205.f.  “Blank endorsement” Section 554.3205.g.  “Cashier’s check” Section 554.3104.h.  “Certificate of deposit” Section 554.3104.i.  “Certified check” Section 554.3409.j.  “Check” Section 554.3104.k.  “Consideration” Section 554.3303.l.  “Demand draft” Section 554.3104.m.  “Draft” Section 554.3104.n.  “Holder in due course” Section 554.3302.o.  “Incomplete instrument” Section 554.3115.p.  “Endorsement” Section 554.3204.q.  “Endorser” Section 554.3204.r.  “Instrument” Section 554.3104.s.  “Issue” Section 554.3105.t.  “Issuer” Section 554.3105.u.  “Negotiable instrument” Section 554.3104.v.  “Negotiation” Section 554.3201.w.  “Note” Section 554.3104.x.  “Payable at a definite time” Section 554.3108.y.  “Payable on demand” Section 554.3108.z.  “Payable to bearer” Section 554.3109.aa.  “Payable to order” Section 554.3109.ab.  “Payment” Section 554.3602.ac.  “Person entitled to enforce” Section 554.3301.ad.  “Presentment” Section 554.3501.ae.  “Reacquisition” Section 554.3207.af.  “Special endorsement” Section 554.3205.ag.  “Teller’s check” Section 554.3104.ah.  “Transfer of instrument” Section 554.3203.ai.  “Traveler’s check” Section 554.3104.aj.  “Value” Section 554.3303.3.  The following definitions in other Articles apply to this Article:a.  “Bank” Section 554.4105.b.  “Banking day” Section 554.4104.c.  “Clearing house” Section 554.4104.d.  “Collecting bank” Section 554.4105.e.  “Depositary bank” Section 554.4105.f.  “Documentary draft” Section 554.4104.g.  “Intermediary bank” Section 554.4105.h.  “Item” Section 554.4104.i.  “Payor bank” Section 554.4105.j.  “Suspends payments” Section 554.4104.4.  In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.1994 Acts, ch 1167, §12,121,122; 2005 Acts, ch 11, §1; 2007 Acts, ch 41, §25,26Referred to in 554.4104, 554.9102554.3104Negotiable instrument.1.  Except as provided in subsections 3 and 4, “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; andc.  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 an undertaking or power to give, maintain, or protect collateral to secure payment, an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or a waiver of the benefit of any law intended for the advantage or protection of an obligor.2.  “Instrument” means a negotiable instrument.3.  An order that meets all of the requirements of subsection 1, except paragraph “a”, and otherwise falls within the definition of “check” in subsection 6 is a negotiable instrument and a check.4.  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.5.  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.6.  “Check” means a draft, other than a documentary draft, payable on demand and drawn on a bank or 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”.7.  “Cashier’s check” means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.8.  “Teller’s check” means a draft drawn by a bank on another bank, or payable at or through a bank.9.  “Traveler’s check” means an instrument that is payable on demand, is drawn on or payable at or through a bank, is designated by the term “traveler’s check” or by a substantially similar term, and requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.10.  “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.11.a.  “Demand draft” means a writing not signed by a customer as defined in section 554.4104 that is created by a third party under the purported authority of the customer for the purpose of charging the customer’s account with a bank. The writing must contain the customer’s account number and may contain any of the following:(1)  The customer’s printed or typewritten name;(2)  A notation that the customer authorized the draft; or(3)  The statement “no signature required”, “authorized on file”, “signature on file”, or words to that effect.b.  “Demand draft” does not include a check purportedly drawn by and bearing the signature of a fiduciary as defined in section 554.3307.94 Acts, ch 1167, §13, 121, 122, 2005 Acts, ch 11, §2, 2013 Acts, ch 30, §261Referred to in 537.3211, 537.7102, 554.2103, 554.3103, 554.3106, 554.3115, 554.3417, 554.4104, 554.4208, 554.9102, 625.22, 631.14554.3105Issue of instrument.1.  “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.2.  An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance 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.3.  “Issuer” applies to issued and unissued instruments and means a maker or drawer of an instrument.1994 Acts, ch 1167, §14,121,122Referred to in 554.3103554.3106Unconditional promise or order.1.  Except as provided in this section, for the purposes of section 554.3104, subsection 1, a promise or order is unconditional unless it states an express condition to payment, that the promise or order is subject to or governed by another writing, or 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.2.  A promise or order is not made conditional by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration, or because payment is limited to resort to a particular fund or source.3.  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 554.3104, subsection 1. 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.4.  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 554.3104, subsection 1; but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.94 Acts, ch 1167, §15, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3302554.3107Instrument 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.1994 Acts, ch 1167, §16,121,122554.3108Payable on demand or at definite time.1.  A promise or order is “payable on demand” if it states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or does not state any time of payment.2.  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 prepayment, acceleration, extension at the option of the holder, or extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.3.  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.94 Acts, ch 1167, §17, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103554.3109Payable to bearer or to order.1.  A promise or order is payable to bearer if it:a.  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;b.  does not state a payee; orc.  states that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.2.  A promise or order that is not payable to bearer is payable to order if it is payable to the order of an identified person or to an identified person or order. A promise or order that is payable to order is payable to the identified person.3.  An instrument payable to bearer may become payable to an identified person if it is specially endorsed pursuant to section 554.3205, subsection 1. An instrument payable to an identified person may become payable to bearer if it is endorsed in blank pursuant to section 554.3205, subsection 2.94 Acts, ch 1167, §18, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103554.3110Identification of person to whom instrument is payable.1.  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.2.  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.3.  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:a.  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.b.  if an instrument is payable to:(1)  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;(2)  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;(3)  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(4)  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.4.  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.1994 Acts, ch 1167, §19,121,122Referred to in 554.3205, 554.3404554.3111Place of payment.Except as otherwise provided for items in Article 4, 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.1994 Acts, ch 1167, §20,121,122554.3112Interest.1.  Unless otherwise provided in the instrument, an instrument is not payable with interest, and interest on an interest-bearing instrument is payable from the date of the instrument.2.  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.94 Acts, ch 1167, §21, 121, 122, 2013 Acts, ch 30, §261554.3113Date of instrument.1.  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 554.4401, subsection 3, an instrument payable on demand is not payable before the date of the instrument.2.  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.1994 Acts, ch 1167, §22,121,122554.3114Contradictory 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.1994 Acts, ch 1167, §23,121,122554.3115Incomplete instrument.1.  “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.2.  Subject to subsection 3, if an incomplete instrument is an instrument under section 554.3104, 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 554.3104, but, after completion, the requirements of section 554.3104 are met, the instrument may be enforced according to its terms as augmented by completion.3.  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 554.3407.4.  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.1994 Acts, ch 1167, §24,121,122Referred to in 554.3103, 554.3412, 554.3413, 554.3414, 554.3415, 554.4207554.3116Joint and several liability — contribution.1.  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 endorse as joint payees, or anomalous endorsers are jointly and severally liable in the capacity in which they sign.2.  Except as provided in section 554.3419, subsection 5, 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.3.  Discharge of one party having joint and several liability by a person entitled to enforce the instrument does not affect the right under subsection 2 of a party having the same joint and several liability to receive contribution from the party discharged.1994 Acts, ch 1167, §25,121,122554.3117Other 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.1994 Acts, ch 1167, §26,121,122554.3118Accrual of cause of action.1.  A cause of action against a maker or an acceptor accruesa.  in the case of a time instrument on the day after maturity;b.  in the case of a demand instrument upon its date or, if no date is stated, on the date of issue.2.  A cause of action against the obligor of a demand or time certificate of deposit accrues upon demand, but demand on a time certificate may not be made until on or after the date of maturity.3.  A cause of action against a drawer of a draft or an endorser of any instrument accrues upon demand following dishonor of the instrument. Notice of dishonor is a demand.4.  Unless an instrument provides otherwise, interest runs at the rate provided by law for a judgmenta.  in the case of a maker, acceptor or other primary obligor of a demand instrument, from the date of demand;b.  in all other cases from the date of accrual of the cause of action.1994 Acts, ch 1167, §27,121,122554.3119Notice 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 that the person notified may come in and defend and 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.94 Acts, ch 1167, §28, 121, 122, 2013 Acts, ch 30, §261554.3120 through 554.3122 PART 2NEGOTIATION, TRANSFER, AND ENDORSEMENT554.3201Negotiation.1.  “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.2.  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.1994 Acts, ch 1167, §29,121,122Referred to in 554.3103554.3202Negotiation subject to rescission.1.  Negotiation is effective even if obtained from an infant, a corporation exceeding its powers, or a person without capacity; by fraud, duress, or mistake; or in breach of duty or as part of an illegal transaction.2.  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.94 Acts, ch 1167, §30, 121, 122, 2013 Acts, ch 30, §143554.3203Transfer of instrument — rights acquired by transfer.1.  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.2.  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.3.  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.4.  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.1994 Acts, ch 1167, §31,121,122Referred to in 554.3103554.3204Endorsement.1.  “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 negotiating the instrument, restricting payment of the instrument, or 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.2.  “Endorser” means a person who makes an endorsement.3.  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.4.  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.94 Acts, ch 1167, §32, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103554.3205Special endorsement — blank endorsement — anomalous endorsement.1.  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 endorsed, an instrument becomes payable to the identified person and may be negotiated only by the endorsement of that person. The principles stated in section 554.3110 apply to special endorsements.2.  If an endorsement is made by the holder of an instrument and it is not a special endorsement, it is a “blank endorsement.” When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed.3.  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.4.  “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.1994 Acts, ch 1167, §33,121,122Referred to in 554.3103, 554.3109554.3206Restrictive endorsement.1.  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.2.  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.3.  If an instrument bears an endorsement described in section 554.4201, subsection 2, or 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.4.  Except for an endorsement covered by subsection 3, 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:a.  Unless there is notice of breach of fiduciary duty as provided in section 554.3307, 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.b.  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.5.  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 3 or has notice or knowledge of breach of fiduciary duty as stated in subsection 4.6.  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.94 Acts, ch 1167, §34, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.4203554.3207Reacquisition.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.1994 Acts, ch 1167, §35,121,122Referred to in 554.3103554.3208Reacquisition.Repealed by 94 Acts, ch 1167, §121, 122. See §554.3207. PART 3ENFORCEMENT OF INSTRUMENTS554.3301Person entitled to enforce instrument.“Person entitled to enforce” an instrument means the holder of the instrument, a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 554.3309 or 554.3418, subsection 4. 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.94 Acts, ch 1167, §36, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103, 554.3308, 554.4104554.3302Holder in due course.1.  Subject to subsection 3 and section 554.3106, subsection 4, “holder in due course” means the holder of an instrument if:a.  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; andb.  the holder took the instrument for value, in good faith, 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, without notice that the instrument contains an unauthorized signature or has been altered, without notice of any claim to the instrument described in section 554.3306, and without notice that any party has a defense or claim in recoupment described in section 554.3305, subsection 1.2.  Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection 1, 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.3.  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 by legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar proceeding, by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or as the successor in interest to an estate or other organization.4.  If, under section 554.3303, subsection 1, paragraph “a”, 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.5.  If the person entitled to enforce an instrument has only a security interest in the instrument and 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.6.  To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.7.  This section is subject to any law limiting status as a holder in due course in particular classes of transactions.94 Acts, ch 1167, §37, 121, 122, 2013 Acts, ch 30, §261Referred to in 523G.7, 554.3103, 554.4104, 554.4205, 554.4211, 554.9102, 554D.118554.3303Value and consideration.1.  An instrument is issued or transferred for value if:a.  the instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;b.  the transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;c.  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;d.  the instrument is issued or transferred in exchange for a negotiable instrument; ore.  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.2.  “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 1, the instrument is also issued for consideration.1994 Acts, ch 1167, §38,121,122Referred to in 554.3103, 554.3302, 554.5102, 554.9403554.3304Overdue instrument.1.  An instrument payable on demand becomes overdue at the earliest of the following times:a.  on the day after the day demand for payment is duly made;b.  if the instrument is a check, ninety days after its date; orc.  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.2.  With respect to an instrument payable at a definite time the following rules apply:a.  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.b.  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.c.  If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.3.  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.1994 Acts, ch 1167, §39,121,122554.3305Defenses and claims in recoupment.1.  Except as stated in subsection 2, the right to enforce the obligation of a party to pay an instrument is subject to the following:a.  a defense of the obligor based on infancy of the obligor to the extent it is a defense to a simple contract; duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor; 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 discharge of the obligor in insolvency proceedings;b.  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; andc.  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.2.  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 1, paragraph “a”, but is not subject to defenses of the obligor stated in subsection 1, paragraph “b”, or claims in recoupment stated in subsection 1, paragraph “c”, against a person other than the holder.3.  Except as stated in subsection 4, 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 554.3306) 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.4.  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 1 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.94 Acts, ch 1167, §40, 121, 122, 2013 Acts, ch 30, §144Referred to in 554.3302, 554.4207, 554.9403554.3306Claims 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.1994 Acts, ch 1167, §41,121,122Referred to in 554.3302, 554.3305, 554.3602554.3307Notice of breach of fiduciary duty.1.  In this section:a.  “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument.b.  “Represented person” means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph “a” is owed.2.  If an instrument is taken from a fiduciary for payment or collection or for value, the taker has knowledge of the fiduciary status of the fiduciary, and 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 taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.c.  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.d.  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 taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or deposited to an account other than an account of the fiduciary, as such, or an account of the represented person.94 Acts, ch 1167, §42, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3104, 554.3206554.3308Proof of signatures and status as holder in due course.1.  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 554.3402, subsection 1.2.  If the validity of signatures is admitted or proved and there is compliance with subsection 1, a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under section 554.3301, 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.1994 Acts, ch 1167, §43,122Referred to in 554.3309554.3309Enforcement of lost, destroyed, or stolen instrument.1.  A person not in possession of an instrument is entitled to enforce the instrument if:a.  the person seeking to enforce the instrument:(1)  was entitled to enforce the instrument when loss of possession occurred, or(2)  has directly or indirectly acquired ownership of the instrument from a person who was entitled to the instrument when loss of possession occurred;b.  the loss of possession was not the result of a transfer by the person or a lawful seizure; andc.  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.2.  A person seeking enforcement of an instrument under subsection 1 must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, section 554.3308 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.1994 Acts, ch 1167, §44,122; 2005 Acts, ch 11, §3; 2006 Acts, ch 1030, §69Referred to in 554.3301, 554.3312554.3310Effect of instrument on obligation for which taken.1.  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.2.  Unless otherwise agreed and except as provided in subsection 1, 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:a.  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.b.  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.c.  Except as provided in paragraph “d”, 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.d.  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.3.  If an instrument other than one described in subsection 1 or 2 is taken for an obligation, the effect is that stated in subsection 1 if the instrument is one on which a bank is liable as maker or acceptor, or that stated in subsection 2 in any other case.94 Acts, ch 1167, §45, 122, 2013 Acts, ch 30, §261Referred to in 554.2511554.3311Accord and satisfaction by use of instrument.1.  If a person against whom a claim is asserted proves that that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, the amount of the claim was unliquidated or subject to a bona fide dispute, and the claimant obtained payment of the instrument, the following subsections apply.2.  Unless subsection 3 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.3.  Subject to subsection 4, a claim is not discharged under subsection 2 if either of the following applies:a.  The claimant, if an organization, proves that: (1)  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 (2)  the instrument or accompanying communication was not received by that designated person, office, or place.b.  The claimant, whether or not an organization, proves that within ninety 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 “a”, subparagraph (1).4.  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.94 Acts, ch 1167, §46, 122, 2013 Acts, ch 30, §145554.3312Lost, destroyed, or stolen cashier’s check, teller’s check, or certified check.1.  In this section:a.  “Check” means a cashier’s check, teller’s check, or certified check.b.  “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.c.  “Declaration of loss” means a written statement, made under penalty of perjury, to the effect that the declarer lost possession of a check; 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; the loss of possession was not the result of a transfer by the declarer or a lawful seizure; and 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.d.  “Obligated bank” means the issuer of a cashier’s check or teller’s check or the acceptor of a certified check.2.  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 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, the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check, 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 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 the time the claim is asserted, or the ninetieth 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.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.c.  If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check.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 554.4302, subsection 1, paragraph “a”, payment to the claimant discharges all liability of the obligated bank with respect to the check.3.  If the obligated bank pays the amount of a check to a claimant under subsection 2, paragraph “d”, and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to refund the payment to the obligated bank if the check is paid, or pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.4.  If a claimant has the right to assert a claim under subsection 2 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 554.3309.94 Acts, ch 1167, §47, 122, 2013 Acts, ch 30, §146, 261, 2014 Acts, ch 1092, §122PART 4LIABILITY OF PARTIES554.3401Signature.1.  A person is not liable on an instrument unless the person signed the instrument, or the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under section 554.3402.2.  A signature may be made manually or by means of a device or machine, and 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.94 Acts, ch 1167, §48, 121, 122, 2013 Acts, ch 30, §261554.3402Signature by representative.1.  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.2.  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:a.  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.b.  Subject to subsection 3, if the form of the signature does not show unambiguously that the signature is made in a representative capacity or 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.3.  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.94 Acts, ch 1167, §49, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3308, 554.3401554.3403Unauthorized signature.1.  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.2.  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.3.  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.1994 Acts, ch 1167, §50,121,122Referred to in 554.4104554.3404Impostors — fictitious payees.1.  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.2.  If a person whose intent determines to whom an instrument is payable (section 554.3110, subsection 1 or 2) does not intend the person identified as payee to have any interest in the instrument, or 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.3.  Under subsection 1 or 2, an endorsement is made in the name of a payee if it is made in a name substantially similar to that of the payee or the instrument, whether or not endorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.4.  With respect to an instrument to which subsection 1 or 2 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.94 Acts, ch 1167, §51, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3417, 554.4208554.3405Employer’s responsibility for fraudulent endorsement by employee.1.  In this section:a.  “Employee” includes an independent contractor and employee of an independent contractor retained by the employer.b.  “Fraudulent endorsement” means one of the following: (1)  in the case of an instrument payable to the employer, a forged endorsement purporting to be that of the employer; (2)  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.c.  “Responsibility” with respect to instruments means authority to sign or endorse instruments on behalf of the employer; to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition; to prepare or process instruments for issue in the name of the employer; 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 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.2.  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.3.  Under subsection 2, an endorsement is made in the name of the person to whom an instrument is payable if it is made in a name substantially similar to the name of that person or 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.94 Acts, ch 1167, §52, 121, 122, 2013 Acts, ch 30, §147, 261Referred to in 554.3417, 554.4208554.3406Negligence contributing to forged signature or alteration of instrument.1.  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.2.  Under subsection 1, 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.3.  Under subsection 1, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection 2, the burden of proving failure to exercise ordinary care is on the person precluded.1994 Acts, ch 1167, §53,121,122Referred to in 554.3417, 554.4208554.3407Alteration.1.  “Alteration” means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.2.  Except as provided in subsection 3, 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.3.  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 according to its original terms, or in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.94 Acts, ch 1167, §54, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103, 554.3115, 554.3412, 554.3413, 554.3414, 554.3415, 554.4104, 554.4207554.3408Drawee 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.1994 Acts, ch 1167, §55,121,122554.3409Acceptance of draft — certified check.1.  “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.2.  A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.3.  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.4.  “Certified check” means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection 1 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.1994 Acts, ch 1167, §56,121,122Referred to in 554.3103, 554.4104, 554.5102554.3410Acceptance varying draft.1.  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.2.  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.3.  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.1994 Acts, ch 1167, §57,121,122554.3411Refusal to pay cashier’s checks, teller’s checks, and certified checks.1.  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.2.  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.3.  Expenses or consequential damages under subsection 2 are not recoverable if the refusal of the obligated bank to pay occurs because the bank suspends payments, 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, the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or payment is prohibited by law.94 Acts, ch 1167, §58, 121, 122, 2013 Acts, ch 30, §261554.3412Obligation 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 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 if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in sections 554.3115 and 554.3407. The obligation is owed to a person entitled to enforce the instrument or to an endorser who paid the instrument under section 554.3415.94 Acts, ch 1167, §59, 121, 122, 2013 Acts, ch 30, §261554.3413Obligation of acceptor.1.  The acceptor of a draft is obliged to pay the draft 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, if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in sections 554.3115 and 554.3407. 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 554.3414 or 554.3415.2.  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 the certification or acceptance does not state an amount, the amount of the instrument is subsequently raised, and 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.94 Acts, ch 1167, §60, 121, 122, 2013 Acts, ch 30, §261554.3414Obligation of drawer.1.  This section does not apply to cashier’s checks or other drafts drawn on the drawer.2.  If an unaccepted draft is dishonored, the drawer is obliged to pay the draft 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 if the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in sections 554.3115 and 554.3407. The obligation is owed to a person entitled to enforce the draft or to an endorser who paid the draft under section 554.3415.3.  If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.4.  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 554.3415, subsections 1 and 3.5.  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 2 to pay the draft if the draft is not a check. A disclaimer of the liability stated in subsection 2 is not effective if the draft is a check.6.  If a check is not presented for payment or given to a depositary bank for collection within thirty days after its date, the drawee suspends payments after expiration of the thirty-day period without paying the check, and 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.94 Acts, ch 1167, §61, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3413, 554.3503, 554.3605, 554.5108554.3415Obligation of endorser.1.  Subject to subsections 2, 3, and 4 and to section 554.3419, subsection 4, if an instrument is dishonored, an endorser is obliged to pay the amount due on the instrument according to the terms of the instrument at the time it was endorsed, or if the endorser endorsed an incomplete instrument, according to its terms when completed, to the extent stated in sections 554.3115 and 554.3407. 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.2.  If an endorsement states that it is made “without recourse” or otherwise disclaims liability of the endorser, the endorser is not liable under subsection 1 to pay the instrument.3.  If notice of dishonor of an instrument is required by section 554.3503 and notice of dishonor complying with that section is not given to an endorser, the liability of the endorser under subsection 1 is discharged.4.  If a draft is accepted by a bank after an endorsement is made, the liability of the endorser under subsection 1 is discharged.5.  If an endorser of a check is liable under subsection 1 and the check is not presented for payment, or given to a depositary bank for collection, within thirty days after the day the endorsement was made, the liability of the endorser under subsection 1 is discharged.94 Acts, ch 1167, §62, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3412, 554.3413, 554.3414, 554.3503, 554.5108554.3416Transfer warranties.1.  A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that:a.  the warrantor is a person entitled to enforce the instrument;b.  all signatures on the instrument are authentic and authorized;c.  the instrument has not been altered;d.  the instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor;e.  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; andf.  if the instrument is a demand draft, creation of the instrument according to the terms on its face was authorized by the person identified as the drawer.2.  A person to whom the warranties under subsection 1 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.3.  The warranties stated in subsection 1 cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within sixty days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection 2 is discharged to the extent of any loss caused by the delay in giving notice of the claim.4.  A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.5.  If a warranty under subsection 1, paragraph “f”, is not given by a transferor under applicable conflict of laws rules, the warranty is not given to that transferor when that transferor is a transferee.1994 Acts, ch 1167, §63,121,122; 2005 Acts, ch 11, §4,5554.3417Presentment warranties.1.  If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and 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;c.  the warrantor has no knowledge that the signature of the drawer of the draft is unauthorized; andd.  if the draft is a demand draft, the creation of the demand draft according to the terms on its face was authorized by the person identified as the drawer.2.  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.3.  If a drawee asserts a claim for breach of warranty under subsection 1 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 554.3404 or 554.3405 or the drawer is precluded under section 554.3406 or 554.4406 from asserting against the drawee the unauthorized endorsement or alteration.4.  If a dishonored draft is presented for payment to the drawer or an endorser or any other instrument is presented for payment to a party obliged to pay the instrument, and 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.5.  The warranties stated in subsections 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 sixty days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection 2 or 4 is discharged to the extent of any loss caused by the delay in giving notice of the claim.6.  A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.7.  A demand draft is a check as provided in section 554.3104, subsection 6.8.  If a warranty under subsection 1, paragraph “d”, is not given by a transferor under applicable conflict of laws rules, the warranty is not given to that transferor when that transferor is a transferee.94 Acts, ch 1167, §64, 121, 122, 2005 Acts, ch 11, §6, 7, 2013 Acts, ch 30, §261Referred to in 554.3418554.3418Payment or acceptance by mistake.1.  Except as provided in subsection 3, if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that payment of the draft had not been stopped pursuant to section 554.4403 or 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.2.  Except as provided in subsection 3, if an instrument has been paid or accepted by mistake and the case is not covered by subsection 1, the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, recover the payment from the person to whom or for whose benefit payment was made or in the case of acceptance, may revoke the acceptance.3.  The remedies provided by subsection 1 or 2 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 554.3417 or 554.4407.4.  Notwithstanding section 554.4215, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection 1 or 2, 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.94 Acts, ch 1167, §65, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3301554.3419Instruments signed for accommodation.1.  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.”2.  An accommodation party may sign the instrument as maker, drawer, acceptor, or endorser and, subject to subsection 4, 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.3.  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 554.3605, 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.4.  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 execution of judgment against the other party has been returned unsatisfied, the other party is insolvent or in an insolvency proceeding, the other party cannot be served with process, or it is otherwise apparent that payment cannot be obtained from the other party.5.  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.94 Acts, ch 1167, §66, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103, 554.3116, 554.3415, 554.3605554.3420Conversion of instrument.1.  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 the issuer or acceptor of the instrument or a payee or endorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.2.  In an action under subsection 1, the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff’s interest in the instrument.3.  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.94 Acts, ch 1167, §67, 122, 2013 Acts, ch 30, §261Referred to in 554.4203PART 5DISHONOR554.3501Presentment.1.  “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument:a.  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 b.  to accept a draft made to the drawee.2.  The following rules are subject to Article 4, agreement of the parties, and clearing-house rules and the like:a.  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 any one of two or more makers, acceptors, drawees, or other payors.b.  Upon demand of the person to whom presentment is made, the person making presentment must exhibit the instrument; give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so; and sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.c.  Without dishonoring the instrument, the party to whom presentment is made may return the instrument for lack of a necessary endorsement, or 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.d.  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 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.94 Acts, ch 1167, §68, 121, 122, 2013 Acts, ch 30, §148, 149, 2015 Acts, ch 29, §100Referred to in 554.3103, 554.4104, 554.4212554.3502Dishonor.1.  Dishonor of a note is governed by the following rules:a.  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.b.  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.c.  If the note is not payable on demand and paragraph “b” does not apply, the note is dishonored if it is not paid on the day it becomes payable.2.  Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:a.  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 554.4301 or 554.4302, or becomes accountable for the amount of the check under section 554.4302.b.  If a draft is payable on demand and paragraph “a” 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.c.  If a draft is payable on a date stated in the draft, the draft is dishonored if 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 presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment.d.  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.3.  Dishonor of an unaccepted documentary draft occurs according to the rules stated in subsection 2, paragraphs “b”, “c”, and “d”, 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.4.  Dishonor of an accepted draft is governed by the following rules:a.  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.b.  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.5.  In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under section 554.3504, dishonor occurs without presentment if the instrument is not duly accepted or paid.6.  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.94 Acts, ch 1167, §69, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.2103554.3503Notice of dishonor.1.  The obligation of an endorser stated in section 554.3415, subsection 1, and the obligation of a drawer stated in section 554.3414, subsection 4, may not be enforced unless the endorser or drawer is given notice of dishonor of the instrument complying with this section or notice of dishonor is excused under section 554.3504, subsection 2.2.  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.3.  Subject to section 554.3504, subsection 3, with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given 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 by any other person within thirty 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 days following the day on which dishonor occurs.94 Acts, ch 1167, §70, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3415, 554.4104554.3504Excused presentment and notice of dishonor.1.  Presentment for payment or acceptance of an instrument is excused if the person entitled to present the instrument cannot with reasonable diligence make presentment; the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings; by the terms of the instrument presentment is not necessary to enforce the obligation of endorsers or the drawer; 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 the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.2.  Notice of dishonor is excused if by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.3.  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.94 Acts, ch 1167, §71, 121, 122, 2013 Acts, ch 30, §261, 2014 Acts, ch 1092, §123Referred to in 554.3502, 554.3503554.3505Evidence of dishonor.1.  The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:a.  a document regular in form as provided in subsection 2 which purports to be a protest;b.  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;c.  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.2.  A protest is a certificate of dishonor made by a United States consul or vice consul, or a notarial officer as provided in chapter 9B 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.94 Acts, ch 1167, §72, 121, 122, 2012 Acts, ch 1050, §46, 60, 2013 Acts, ch 140, §99Referred to in 9B.5554.3506 through 554.3511 554.3512Holder’s recourse for dishonor.1.  The holder of a dishonored check, draft, or order may assess against the maker of that check, draft, or order a surcharge not to exceed thirty dollars.2.  The surcharge authorized by this section shall not be assessed unless the holder clearly and conspicuously posts a notice at the usual place of payment, or in the billing statement of the holder, stating that a surcharge will be assessed and the amount of the surcharge. However, the surcharge shall not be assessed against the maker if the reason for the dishonor of the check, draft, or order is that the maker has stopped payment pursuant to section 554.4403.1995 Acts, ch 137, §2; 2003 Acts, ch 10, §1Referred to in 331.553, 537.2501, 554.3513554.3513Civil remedy for dishonor.1.  In a civil action against a person who makes a check, draft, or order, which has been dishonored for lack of funds or credit, after having been presented twice, or because the maker has no account with the drawee, the plaintiff shall recover from the defendant total damages equaling three times the face value of the dishonored check, draft, or order, which sum shall include the face value of the check, draft, or order. However, total recovery under this section shall not exceed by more than five hundred dollars the amount of the check, draft, or order and may be awarded only if all of the following apply:a.  The plaintiff made written demand of the defendant for payment of the amount of the check, draft, or order not less than thirty days before commencing the action.b.  The written demand notified the defendant that treble damages would be sought if the face value of the dishonored check was not paid within thirty days of receipt, and was received by the defendant via any of the following methods:(1)  Personal service.(2)  Restricted certified mail.(3)  Regular mail to at least one of the following addresses, supported by an affidavit of service retained by the payee or holder of the dishonored check, which affidavit shall be presumptive evidence of the receipt of the demand by the maker three days from the date of execution of the affidavit:(a)  The address printed or written on the check.(b)  The address given by the drawer at the time of issuance of the check.(c)  The last known address of the drawer.c.  The defendant has failed to tender to the plaintiff, prior to commencement of the action, an amount of money not less than the face value of the dishonored check, draft, or order.d.  The plaintiff clearly and conspicuously posted a notice at the usual place of payment, or in a billing statement of the plaintiff, stating that civil damages pursuant to this section would be sought upon dishonorment.2.  In an action for damages pursuant to subsection 1, if the court or jury determines that the failure of the defendant to satisfy the dishonored check, draft, or order is due to economic hardship, the court or jury may waive all or part of the allowable civil damages. However, if the court or jury waives all or part of the civil damages, the court or jury shall render judgment against the defendant in the amount of the dishonored check, draft, or order and the actual costs incurred by the plaintiff in bringing the action.3.  This section does not apply if the reason for the dishonor of the check, draft, or order is that the maker has stopped payment pursuant to section 554.4403 because of a bona fide dispute between the maker and the holder relating to the consideration for which the check, draft, or order was given.4.  In actions brought pursuant to this section, no additional award pursuant to section 554.3512 or 625.22 shall be made.5.  The plaintiff in a civil action to collect a dishonored check, draft, or order brought before the district court sitting in small claims shall not request or recover punitive or exemplary damages, but may seek the civil damages allowed under this section. The plaintiff in a civil action to collect a dishonored check, draft, or order in the district court not sitting in small claims, may seek punitive or exemplary damages if appropriate under chapter 668A, or civil damages allowed under this section, but not both.6.  A violation of this section is an unlawful practice as provided in section 714.16, subsection 2, paragraph “a”.1995 Acts, ch 137, §3; 2003 Acts, ch 100, §1PART 6DISCHARGE AND PAYMENT554.3601Discharge and effect of discharge.1.  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.2.  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.1994 Acts, ch 1167, §73,121,122554.3602Payment.1.  Subject to subsection 2, an instrument is paid to the extent payment is made by or on behalf of a party obliged to pay the instrument, and 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 554.3306 by another person.2.  The obligation of a party to pay the instrument is not discharged under subsection 1 if:a.  a claim to the instrument under section 554.3306 is enforceable against the party receiving payment and payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or 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; orb.  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.94 Acts, ch 1167, §74, 121, 122, 2013 Acts, ch 30, §261Referred to in 554.3103554.3603Tender of payment.1.  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.2.  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.3.  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.1994 Acts, ch 1167, §75,121,122554.3604Discharge by cancellation or renunciation.1.  A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument 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; or by agreeing not to sue or otherwise renouncing rights against the party by a signed writing.2.  Cancellation or striking out of an endorsement pursuant to subsection 1 does not affect the status and rights of a party derived from the endorsement.94 Acts, ch 1167, §76, 121, 122, 2013 Acts, ch 30, §150Referred to in 554.3605554.3605Discharge of endorsers and accommodation parties.1.  In this section, the term “endorser” includes a drawer having the obligation described in section 554.3414, subsection 4.2.  Discharge, under section 554.3604, 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.3.  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.4.  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.5.  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 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 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.6.  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 5, 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.7.  Under subsection 5 or 6, impairing value of an interest in collateral includes failure to obtain or maintain perfection or recordation of the interest in collateral; release of collateral without substitution of collateral of equal value; 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 failure to comply with applicable law in disposing of collateral.8.  An accommodation party is not discharged under subsection 3, 4, or 5 unless the person entitled to enforce the instrument knows of the accommodation or has notice under section 554.3419, subsection 3, that the instrument was signed for accommodation.9.  A party is not discharged under this section if the party asserting discharge consents to the event or conduct that is the basis of the discharge, or 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 suretyship or impairment of collateral.94 Acts, ch 1167, §77, 121, 122, 2013 Acts, ch 30, §151Referred to in 554.3419554.3606Impairment of recourse or of collateral.Repealed by 94 Acts, ch 1167, §121, 122. See §554.3605. 554.3701 and 554.3801 554.3802 through 554.3806 
(4)BANK DEPOSITS AND COLLECTIONSReferred to in 533.313, 554.1204, 554.3102, 554.3103, 554.3111, 554.3119, 554.3403, 554.3501, 554.5110, 554.5116, 554.12105, 668.16PART 1GENERAL PROVISIONS AND DEFINITIONS554.4101Short title.This Article may be cited as Uniform Commercial Code — Bank Deposits and Collections.[C66, 71, 73, 75, 77, 79, 81, §554.4101]1994 Acts, ch 1167, §78,122554.4102Applicability.1.  To the extent that items within this Article are also within Articles 3 and 8, they are subject to the provisions of those Articles. If there is conflict, this Article governs Article 3, but Article 8 governs this Article.2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4102]1994 Acts, ch 1167, §79,122Referred to in 554.1301554.4103Variation by agreement — measure of damages — action constituting ordinary care.1.  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.2.  Federal reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection 1, whether or not specifically assented to by all parties interested in items handled.3.  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.4.  The specification or approval of certain procedures by this Article is not disapproval of other procedures that may be reasonable under the circumstances.5.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4103]1994 Acts, ch 1167, §80,122554.4104Definitions and index of definitions.1.  In this Article, unless the context otherwise requires:a.  “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.b.  “Afternoon” means the period of a day between noon and midnight.c.  “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 but for the purposes of determining a bank’s midnight deadline, shall not include Saturday, Sunday, or any holiday when the federal reserve banks are not performing check clearing functions.d.  “Clearing house” means an association of banks or other payors regularly clearing items.e.  “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.f.  “Documentary draft” means a draft to be presented for acceptance or payment if specified documents, certificated securities (section 554.8102) or instructions for uncertificated securities (section 554.8102), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft.g.  “Draft” means a draft as defined in section 554.3104 or an item, other than an instrument, that is an order.h.  “Drawee” means a person ordered in a draft to make payment.i.  “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 12 or a credit or debit card slip.j.  “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.k.  “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.l.  “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.2.  Other definitions applying to this Article and the sections in which they appear are:a.  “Agreement for electronic presentment” Section 554.4110b.  “Bank” Section 554.4105c.  “Collecting bank” Section 554.4105d.  “Depositary bank” Section 554.4105e.  “Intermediary bank” Section 554.4105f.  “Payor bank” Section 554.4105g.  “Presenting bank” Section 554.4105h.  “Presentment notice” Section 554.41103.   The following definitions in other Articles apply to this Article:a.  “Acceptance”Section 554.3409b.  “Alteration”Section 554.3407c.  “Cashier’s check”Section 554.3104d.  “Certificate of deposit”Section 554.3104e.  “Certified check”Section 554.3409f.  “Check”Section 554.3104g.  “Control”Section 554.7106h.  “Holder in due course”Section 554.3302i.  “Instrument”Section 554.3104j.  “Notice of dishonor”Section 554.3503k.  “Order”Section 554.3103l.  “Ordinary care”Section 554.3103m.  “Person entitled to enforce”Section 554.3301n.  “Presentment”Section 554.3501o.  “Promise”Section 554.3103p.  “Prove”Section 554.3103q.  “Teller’s check”Section 554.3104r.  “Unauthorized signature”Section 554.34034.  In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.[C66, 71, 73, 75, 77, 79, 81, §554.4104]88 Acts, ch 1102, §1, 91 Acts, ch 222, §1, 94 Acts, ch 1167, §81, 122, 95 Acts, ch 67, §42, 96 Acts, ch 1138, §7, 84, 2007 Acts, ch 30, §45, 46, 62, 2007 Acts, ch 41, §27, 2012 Acts, ch 1023, §145, 157Referred to in 554.3103, 554.3104, 554.9102, 554.12105554.4105“Bank” — “depositary bank” — “intermediary bank” — “collecting bank” — “payor bank” — “presenting bank”.In this Article:1.  “Bank” means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company.2.  “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.3.  “Payor bank” means a bank that is the drawee of the draft.4.  “Intermediary bank” means a bank to which an item is transferred in course of collection except the depositary or payor bank.5.  “Collecting bank” means a bank handling an item for collection except the payor bank.6.  “Presenting bank” means a bank presenting an item except a payor bank.[C66, 71, 73, 75, 77, 79, 81, §554.4105]1994 Acts, ch 1167, §82,122Referred to in 554.3103, 554.4104554.4106Payable through or payable at bank — collecting bank.1.  If an item states that it is “payable through” a bank identified in the item, 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.2.  If an item states that it is “payable at” a bank identified in the item, 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.3.  If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co-drawee or a collecting bank, the bank is a collecting bank.94 Acts, ch 1167, §87, 120, 122, 2013 Acts, ch 30, §261554.4107Separate 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.[C66, 71, 73, 75, 77, 79, 81, §554.4106]1994 Acts, ch 1167, §83,120,122C95, §554.4107554.4108Time of receipt of items.1.  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 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.2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4107]1994 Acts, ch 1167, §84,120,122C95, §554.4108554.4109Delays.1.  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 chapter for a period not exceeding two additional banking days without discharge of drawers or endorsers or liability to its transferor or a prior party.2.  Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this chapter or by instructions is excused if 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.[C66, 71, 73, 75, 77, 79, 81, §554.4108]94 Acts, ch 1167, §85, 120, 122554.410995 Acts, ch 49, §16, 2013 Acts, ch 30, §261554.4110Electronic presentment.1.  “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.2.  Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.3.  If presentment is made by presentment notice, a reference to “item” or “check” in this Article means the presentment notice unless the context otherwise indicates.1994 Acts, ch 1167, §86,122Referred to in 554.4104554.4111Statute 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.2005 Acts, ch 11, §8PART 2COLLECTION OF ITEMS:DEPOSITARY AND COLLECTING BANKS554.4201Status of collecting bank as agent and provisional status of credits — applicability of Article — item endorsed “pay any bank”.1.  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.2.  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:a.  returned to the customer initiating collection; orb.  specially endorsed by a bank to a person who is not a bank.[C66, 71, 73, 75, 77, 79, 81, §554.4201]1994 Acts, ch 1167, §88,122Referred to in 554.3206554.4202Responsibility for collection or return — when action timely.1.  A collecting bank must exercise ordinary care in:a.  presenting an item or sending it for presentment;b.  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;c.  settling for an item when the bank receives final settlement; andd.  notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof.2.  A collecting bank exercises ordinary care under subsection 1 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.3.  Subject to subsection 1, paragraph “a”, 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.[C66, 71, 73, 75, 77, 79, 81, §554.4202]1994 Acts, ch 1167, §89,122554.4203Effect of instructions.Subject to Article 3 concerning conversion of instruments (section 554.3420) and restrictive endorsements (section 554.3206), 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.[C66, 71, 73, 75, 77, 79, 81, §554.4203]1994 Acts, ch 1167, §90,122554.4204Methods of sending and presenting — sending directly to payor bank.1.  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.2.  A collecting bank may send:a.  an item directly to the payor bank;b.  an item to a nonbank payor if authorized by its transferor; andc.  an item other than documentary drafts to any nonbank payor, if authorized by federal reserve regulation or operating circular, clearing-house rule, or the like.3.  Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.[C66, 71, 73, 75, 77, 79, 81, §554.4204]1994 Acts, ch 1167, §91,122554.4205Depositary bank holder of unendorsed item.If a customer delivers an item to a depositary bank for collection:1.  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 554.3302, it is a holder in due course; and2.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4205]1994 Acts, ch 1167, §92,122554.4206Transfer between banks.Any agreed method that identifies the transferor bank is sufficient for the item’s further transfer to another bank.[C66, 71, 73, 75, 77, 79, 81, §554.4206]1994 Acts, ch 1167, §93,122554.4207Transfer warranties.1.  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:a.  the warrantor is a person entitled to enforce the item;b.  all signatures on the item are authentic and authorized;c.  the item has not been altered;d.  the item is not subject to a defense or claim in recoupment (section 554.3305, subsection 1) of any party that can be asserted against the warrantor;e.  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; andf.  if the item is a demand draft, creation of the item according to the terms on its face was authorized by the person identified as the drawer.2.  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 according to the terms of the item at the time it was transferred, or if the transfer was an incomplete item, according to its terms when completed as stated in sections 554.3115 and 554.3407. 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.3.  A person to whom the warranties under subsection 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.4.  The warranties stated in subsection 1 cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within sixty 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.5.  A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.6.  If the warranty under subsection 1, paragraph “f”, is not given by a transferor or collecting bank under applicable conflict of laws rules, the warranty is not given to that transferor when the transferor is a transferee or to any prior collecting bank of that transferee.[C66, 71, 73, 75, 77, 79, 81, §554.4207]94 Acts, ch 1167, §94, 122, 2005 Acts, ch 11, §9, 10, 2013 Acts, ch 30, §261554.4208Presentment warranties.1.  If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and 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: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;c.  the warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized; andd.  if the draft is a demand draft, the creation of the demand draft according to the terms on its face was authorized by the person identified as the drawer.2.  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, breach of warranty is a defense to the obligation of the acceptor, and if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.3.  If a drawee asserts a claim for breach of warranty under subsection 1 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 554.3404 or 554.3405 or the drawer is precluded under section 554.3406 or 554.4406 from asserting against the drawee the unauthorized endorsement or alteration.4.  If 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.5.  The warranties stated in subsections 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 sixty 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.6.  A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.7.  A demand draft is a check as provided in section 554.3104, subsection 6.8.  If a warranty under subsection 1, paragraph “d”, is not given by a transferor under applicable conflict of laws rules, the warranty is not given to that transferor when that transferor is a transferee.94 Acts, ch 1167, §102, 120, 122, 2005 Acts, ch 11, §11, 12, 2013 Acts, ch 30, §261Referred to in 554.4302, 554.4406554.4209Encoding and retention warranties.1.  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.2.  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.3.  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.1994 Acts, ch 1167, §103,120,122554.4210Security interest of collecting bank in items, accompanying documents and proceeds.1.  A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either:a.  in case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;b.  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; orc.  if it makes an advance on or against the item.2.  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.3.  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 possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to Article 9, but:a.  no security agreement is necessary to make the security interest enforceable (section 554.9203, subsection 2, paragraph “c”, subparagraph (1));b.  no filing is required to perfect the security interest; andc.  the security interest has priority over conflicting perfected security interests in the item, accompanying documents, or proceeds.[C66, 71, 73, 75, 77, 79, 81, §554.4208]1994 Acts, ch 1167, §95,120,122C95, §554.42102000 Acts, ch 1149, §146,187; 2007 Acts, ch 30, §45,46,63Referred to in 554.9102, 554.9109, 554.9203, 554.9309, 554.9322554.4211When 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 554.3302 on what constitutes a holder in due course.[S13, §3060-a27; C24, 27, 31, 35, 39, §9487; C46, 50, 54, 58, 62, §541.27; C66, 71, 73, 75, 77, 79, 81, §554.4209]1994 Acts, ch 1167, §96,120,122C95, §554.4211Referred to in 554.5102554.4212Presentment by notice of item not payable by, through, or at a bank; liability of drawer or endorser.1.  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 554.3501 by the close of the bank’s next banking day after it knows of the requirement.2.  If presentment is made by notice and payment, acceptance, or request for compliance with a requirement under section 554.3501 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.[C73, §2094; C97, §3053; S13, §3053; C24, 27, 31, 35, 39, §9545; C46, 50, 54, 58, 62, §541.85; C66, 71, 73, 75, 77, 79, 81, §554.4210]1994 Acts, ch 1167, §97,120,122C95, §554.42121995 Acts, ch 67, §43554.4213Medium and time of settlement by bank.1.  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:a.  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; andb.  the time of settlement is:(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 554.12406, subsection 1 to the person receiving the settlement.2.  If the tender of settlement is not by a medium authorized by subsection 1 or the time of settlement is not fixed by subsection 1, no settlement occurs until the tender of settlement is accepted by the person receiving settlement.3.  If settlement for an item is made by cashier’s check or teller’s check and the person receiving settlement, before its midnight deadline:a.  presents or forwards the check for collection, settlement is final when the check is finally paid; orb.  fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.4.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4211]1994 Acts, ch 1167, §98,120,122C95, §554.4213554.4214Right of charge-back or refund — liability of collecting bank — return of item.1.  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.2.  A collecting bank returns an item when it is sent or delivered to the bank’s customer or transferor or pursuant to its instructions.3.  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 554.4301).4.  The right to charge back is not affected by:a.  previous use of a credit given for the item; orb.  failure by any bank to exercise ordinary care with respect to the item, but a bank so failing remains liable.5.  A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.6.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4212]1994 Acts, ch 1167, §99,120,122C95, §554.4214554.4215Final payment of item by payor bank — when provisional debits and credits become final — when certain credits become available for withdrawal.1.  An item is finally paid by a payor bank when the bank has first done any of the following:a.  paid the item in cash;b.  settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; orc.  made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.2.  If provisional settlement for an item does not become final, the item is not finally paid.3.  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 item by the payor bank.4.  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.5.  Subject to applicable law stating a time for availability of funds and 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.6.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4213]94 Acts, ch 1167, §100, 120, 122554.421595 Acts, ch 49, §17, 95 Acts, ch 67, §44, 2013 Acts, ch 30, §261Referred to in 554.3418554.4216Insolvency and preference.1.  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.2.  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.3.  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.4.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4214]1994 Acts, ch 1167, §101,120,122C95, §554.4216PART 3COLLECTION OF ITEMS:PAYOR BANKS554.4301Deferred posting — recovery of payment by return of items — time of dishonor — return of items by payor bank.1.  If a payor 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 payment settlement if, before it has made final payment and before its midnight deadline, ita.  returns the item; orb.  sends written notice of dishonor or nonpayment if the item is unavailable for return; and the item or notice includes the reason for dishonor or nonpayment.2.  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 1.3.  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.4.  An item is returned:a.  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; orb.  in all other cases, when it is sent or delivered to the bank’s customer or transferor or pursuant to that customer’s or transferor’s instructions.[C66, 71, 73, 75, 77, 79, 81, §554.4301]1994 Acts, ch 1167, §104,122Referred to in 554.3502, 554.4214554.4302Payor bank’s responsibility for late return of item.1.  If an item is presented to and received by a payor bank, the bank is accountable for the amount of:a.  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 pay or return the item or send notice of dishonor until after its midnight deadline; orb.  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.2.  The liability of a payor bank to pay an item pursuant to subsection 1 is subject to defenses based on breach of a presentment warranty (section 554.4208) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.[C66, 71, 73, 75, 77, 79, 81, §554.4302]1994 Acts, ch 1167, §105,122Referred to in 554.3312, 554.3502, 554.4303554.4303When items subject to notice, stop-payment order, legal process, or setoff — order in which items may be charged or certified.1.  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:a.  the bank accepts or certifies the item;b.  the bank pays the item in cash;c.  the bank settles for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement;d.  the bank becomes accountable for the amount of the item under section 554.4302 dealing with the payor bank’s responsibility for late return of items; ore.  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.2.  Subject to subsection 1 items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.[C31, 35, §9266-d1; C39, §9266.1; C46, 50, 54, 58, 62, §528.62; C66, 71, 73, 75, 77, 79, 81, §554.4303]1994 Acts, ch 1167, §106,122Referred to in 554.4401, 554.4403PART 4RELATIONSHIP BETWEEN PAYOR BANKAND ITS CUSTOMER554.4401When bank may charge customer’s account.1.  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.2.  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.3.  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 554.4403, subsection 2, 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 554.4303. 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 554.4402.4.  A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:a.  the original terms of the customer’s altered item; orb.  the terms of the customer’s completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.[C66, 71, 73, 75, 77, 79, 81, §554.4401]94 Acts, ch 1167, §107, 122, 95 Acts, ch 67, §45Referred to in 554.3113554.4402Bank’s liability to customer for wrongful dishonor — time of determining insufficiency of account.1.  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.2.  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.3.  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 purposes of reevaluating the bank’s decision to dishonor the item, the account balance at the time is determinative of whether a dishonor for insufficiency of available funds is wrongful.[C66, 71, 73, 75, 77, 79, 81, §554.4402]1994 Acts, ch 1167, §108,122Referred to in 554.4401, 554.4403554.4403Customer’s right to stop payment — burden of proof of loss.1.  A customer or any person authorized to draw on the account if there is more than one person may stop payment of an 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 554.4303. 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.2.  A stop-payment order is effective for six months, but it lapses after fourteen calendar days if the original order was oral and was not confirmed in writing within that period. A 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.2A.  In addition to a stop-payment order made or renewed in writing as described in subsection 2, an equivalent stop-payment order may also be made or renewed as part of a record that is stored in an electronic medium, and submitted to the bank, which may include delivery via electronic transmission. 3.  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 554.4402.[C31, 35, §9266-d1; C39, §9266.1; C46, 50, 54, 58, 62, §528.62; C66, 71, 73, 75, 77, 79, 81, §554.4403]94 Acts, ch 1167, §109, 122, 2018 Acts, ch 1016, §1Referred to in 537.2501, 554.3418, 554.3512, 554.3513, 554.4401554.4404Bank 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.[C66, 71, 73, 75, 77, 79, 81, §554.4404]554.4405Death or incompetence of customer.1.  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.2.  Even with knowledge, a bank may for ten days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.[S13, §3060-a76; C24, 27, 31, 35, 39, §9536; C46, 50, 54, 58, 62, §541.76; C66, 71, 73, 75, 77, 79, 81, §554.4405]1994 Acts, ch 1167, §110,122554.4406Customer’s duty to discover and report unauthorized signature or alteration.1.  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.2.  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.3.  If a bank sends or makes available a statement of account or items pursuant to subsection 1, 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.4.  If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection 3, the customer is precluded from asserting against the bank:a.  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; andb.  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 sixty days, in which to examine the item or statement of account and notify the bank.5.  If subsection 4 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 3 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 4 does not apply.6.  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 1) 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 554.4208 with respect to the unauthorized signature or alteration to which the preclusion applies.[C66, 71, 73, 75, 77, 79, 81, §554.4406]94 Acts, ch 1167, §111, 122, 2011 Acts, ch 87, §5Referred to in 554.3417, 554.4208554.4407Payor 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 rights1.  of any holder in due course on the item against the drawer or maker;2.  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; and3.  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.[C66, 71, 73, 75, 77, 79, 81, §554.4407]1994 Acts, ch 1167, §112,122; 2009 Acts, ch 41, §263Referred to in 554.3418PART 5COLLECTION OF DOCUMENTARY DRAFTS554.4501Handling 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.[C66, 71, 73, 75, 77, 79, 81, §554.4501]1994 Acts, ch 1167, §113,122554.4502Presentment 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 pay or 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.[C66, 71, 73, 75, 77, 79, 81, §554.4502]1994 Acts, ch 1167, §114,122554.4503Responsibility of presenting bank for documents and goods — report of reasons for dishonor — referee in case of need.1.  Unless otherwise instructed and except as provided in Article 5, a bank presenting a documentary draft:a.  must deliver the documents to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise, only on payment; andb.  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 therefor, and must request instructions.2.  However, the presenting bank is under no obligation with respect to goods represented 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.[S13, §3060-a131, 3138-b40; C24, 27, 31, 35, 39, §8285, 9592; C46, 50, 54, 58, 62, §487.41, 541.132; C66, 71, 73, 75, 77, 79, 81, §554.4503]1994 Acts, ch 1167, §115,122; 2009 Acts, ch 41, §263554.4504Privilege of presenting bank to deal with goods — security interest for expenses.1.  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.2.  For its reasonable expenses incurred by action under subsection 1 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.[C66, 71, 73, 75, 77, 79, 81, §554.4504]1994 Acts, ch 1167, §116,122(4A)FUNDS TRANSFERS
Article on Funds Transfers codified as Article 12;92 Acts, ch 1146, §1 – 38
(5)LETTERS OF CREDITReferred to in 554.1201, 554.1204, 554.4503, 554.7509554.5101Short title.This Article shall be known and may be cited as Uniform Commercial Code — Letters of Credit.[C66, 71, 73, 75, 77, 79, 81, §554.5101]554.5102Definitions.1.  In this Article unless the context otherwise requires:a.  “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.b.  “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.c.  “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.d.  “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.e.  “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.f.  “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 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 section 554.5108, subsection 5, and which is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.g.  “Good faith” means honesty in fact in the conduct or transaction concerned.h.  “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(1)  upon payment,(2)  if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment, or(3)  if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.i.  “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.j.  “Letter of credit” means a definite undertaking that satisfies the requirements of section 554.5104 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.k.  “Nominated person” means a person whom the issuer designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and undertakes by agreement or custom and practice to reimburse.l.  “Presentation” means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.m.  “Presenter” means a person making a presentation as or on behalf of a beneficiary or nominated person.n.  “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.o.  “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.2.  Definitions in other Articles applying to this Article and the sections in which they appear are:a.  “Accept” or “Acceptance” Section 554.3409b.  “Value” Sections 554.3303, 554.42113.  Article 1 contains certain additional general definitions and principles of construction and interpretation applicable throughout this Article.[C66, 71, 73, 75, 77, 79, 81, §554.5102]96 Acts, ch 1026, §1, 28, 2012 Acts, ch 1023, §157, 2013 Acts, ch 30, §261Referred to in 554.5103, 554.5108, 554.9102554.5103Scope.1.  This Article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.2.  The statement of a rule in this Article 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 Article.3.  With the exception of this subsection, subsections 1 and 4, section 554.5102, subsection 1, paragraphs “i” and “j”, section 554.5106, subsection 4, and section 554.5114, subsection 4, and except to the extent prohibited in section 554.1302 and section 554.5117, subsection 4, the effect of this Article 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 Article.4.  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.[C66, 71, 73, 75, 77, 79, 81, §554.5103]1994 Acts, ch 1167, §117,122; 1996 Acts, ch 1026, §2,28; 2007 Acts, ch 41, §28Referred to in 554.5116554.5104Formal requirements.A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated by a signature or in accordance with the agreement of the parties or the standard practice referred to in section 554.5108, subsection 5.[C66, 71, 73, 75, 77, 79, 81, §554.5104]96 Acts, ch 1026, §3, 28, 2012 Acts, ch 1023, §146Referred to in 554.5102, 554.5116554.5105Consideration.Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.[C66, 71, 73, 75, 77, 79, 81, §554.5105]1996 Acts, ch 1026, §4,28554.5106Issuance, amendment, cancellation, and duration.1.  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.2.  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.3.  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.4.  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.[C66, 71, 73, 75, 77, 79, 81, §554.5106]1996 Acts, ch 1026, §5,28Referred to in 554.5103554.5107Confirmer, nominated person, and adviser.1.  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.2.  A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.3.  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.4.  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 3. 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.[C66, 71, 73, 75, 77, 79, 81, §554.5107]1996 Acts, ch 1026, §6,28554.5108Issuer’s rights and obligations.1.  Except as otherwise provided in section 554.5109, an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection 5, appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in section 554.5113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.2.  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:a.  to honor,b.  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, orc.  to give notice to the presenter of discrepancies in the presentation.3.  Except as otherwise provided in subsection 4, 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.4.  Failure to give the notice specified in subsection 2 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 section 554.5109, subsection 1, or expiration of the letter of credit before presentation.5.  An issuer shall observe 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.6.  An issuer is not responsible for:a.  the performance or nonperformance of the underlying contract, arrangement, or transaction,b.  an act or omission of others, orc.  observance or knowledge of the usage of a particular trade other than the standard practice referred to in subsection 5.7.  If an undertaking constituting a letter of credit under section 554.5102, subsection 1, paragraph “j”, contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.8.  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.9.  An issuer that has honored a presentation as permitted or required by this Article:a.  is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds;b.  takes the documents free of claims of the beneficiary or presenter;c.  is precluded from asserting a right of recourse on a draft under sections 554.3414 and 554.3415;d.  except as otherwise provided in sections 554.5110 and 554.5117, 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; ande.  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.[C66, 71, 73, 75, 77, 79, 81, §554.5108]1996 Acts, ch 1026, §7,28Referred to in 554.5102, 554.5104, 554.5112, 554.5113554.5109Fraud and forgery.1.  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:a.  the issuer shall honor the presentation, if honor is demanded by a nominated person who has given value in good faith and without notice of forgery or material fraud, a confirmer who has honored its confirmation in good faith, 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 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; andb.  the issuer, acting in good faith, may honor or dishonor the presentation in any other case.2.  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 may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:a.  the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer;b.  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;c.  all of the conditions to entitle a person to the relief under the law of this state have been met; andd.  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 subsection 1, paragraph “a”.[C66, 71, 73, 75, 77, 79, 81, §554.5109]96 Acts, ch 1026, §8, 28, 2013 Acts, ch 30, §261Referred to in 554.2512, 554.5108, 554.5110, 554.5113554.5110Warranties.1.  If its presentation is honored, the beneficiary warrants:a.  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 section 554.5109, subsection 1; andb.  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.2.  The warranties in subsection 1 are in addition to warranties arising under Articles 3, 4, 7, and 8 because of the presentation or transfer of documents covered by any of those Articles.[C66, 71, 73, 75, 77, 79, 81, §554.5110]1996 Acts, ch 1026, §9,28Referred to in 554.5108554.5111Remedies.1.  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.2.  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.3.  If an adviser or nominated person other than a confirmer breaches an obligation under this Article or an issuer breaches an obligation not covered in subsection 1 or 2, 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 1 and 2.4.  An issuer, nominated person, or adviser who is found liable under subsection 1, 2, or 3 shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date.5.  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 Article.6.  Damages that would otherwise be payable by a party for breach of an obligation under this Article 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.[C66, 71, 73, 75, 77, 79, 81, §554.5111]1996 Acts, ch 1026, §10,28554.5112Transfer of letter of credit.1.  Except as otherwise provided in section 554.5113, 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.2.  Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if:a.  the transfer would violate applicable law; orb.  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 section 554.5108, subsection 5, or is otherwise reasonable under the circumstances.[C66, 71, 73, 75, 77, 79, 81, §554.5112]1996 Acts, ch 1026, §11,28Referred to in 539.1, 539.2554.5113Transfer by operation of law.1.  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.2.  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 5, 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 section 554.5108, subsection 5, or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer.3.  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.4.  Honor of a purported successor’s apparently complying presentation under subsection 1 or 2 has the consequences specified in section 554.5108, subsection 9, 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 554.5109.5.  An issuer whose rights of reimbursement are not covered by subsection 4 or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection 2.6.  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.[C66, 71, 73, 75, 77, 79, 81, §554.5113]1996 Acts, ch 1026, §12,28Referred to in 539.1, 539.2, 554.5108, 554.5112554.5114Assignment of proceeds.1.  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.2.  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.3.  An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.4.  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.5.  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.6.  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 Article 9 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 Article 9 or other law.[C66, 71, 73, 75, 77, 79, 81, §554.5114]1989 Acts, ch 113, §55; 1996 Acts, ch 1026, §13,28Referred to in 539.1, 539.2, 554.5103, 554.9102, 554.9107, 554.9109554.5115Statute of limitations.An action to enforce a right or obligation arising under this Article must be commenced within one year after the expiration date of the relevant letter of credit or one year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.[C66, 71, 73, 75, 77, 79, 81, §554.5115]1996 Acts, ch 1026, §14,28554.5116Choice of law and forum.1.  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 554.5104 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.2.  Unless subsection 1 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.3.  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 this Article would govern the liability of an issuer, nominated person, or adviser under subsection 1 or 2, the relevant undertaking incorporates rules of custom or practice, and there is conflict between this Article and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in section 554.5103, subsection 3.4.  If there is conflict between this Article and Article 3, 4, 9, or 12, this Article governs.5.  The forum for settling disputes arising out of an undertaking within this Article may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection 1.[C66, 71, 73, 75, 77, 79, 81, §554.5116]96 Acts, ch 1026, §15, 28, 97 Acts, ch 23, §69, 2013 Acts, ch 30, §261Referred to in 554.1301, 554.9306554.5117Subrogation of issuer, applicant, and nominated person.1.  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.2.  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 1.3.  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:a.  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;b.  the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; andc.  the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.4.  Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections 1 and 2 do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection 3 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.[C66, 71, 73, 75, 77, 79, 81, §554.5117]1996 Acts, ch 1026, §16,28Referred to in 554.5103, 554.5108554.5118Security interest of issuer or nominated person.1.  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.2.  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 1, the security interest continues and is subject to Article 9, but:a.  a security agreement is not necessary to make the security interest enforceable under section 554.9203, subsection 2, paragraph “c”;b.  if the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; andc.  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.2000 Acts, ch 1149, §147,187Referred to in 554.9102, 554.9109, 554.9203, 554.9309, 554.9322(6)BULK TRANSFERS
Article repealed effective January 1, 1995,by 94 Acts, ch 1121, §17,18;see chapter 684
(7)WAREHOUSE RECEIPTS, BILLS OF LADING,AND OTHER DOCUMENTS OF TITLEReferred to in 203C.19, 427B.1, 554.2403, 554.5110, 554.9331, 554D.118, 578A.2, 809A.16
2007 amendments to this Article apply to a documentof title issued or a bailment that arises on or afterJuly 1, 2007; for law governing a document of titleissued, a bailment that arose, or a cause of actionthat accrued prior to July 1, 2007, see Code 2007;2007 Acts, ch 30, §45,46
PART 1GENERAL554.7101Short title.This Article may be cited as Uniform Commercial Code — Documents of Title.[S13, §3138-b56; C24, 27, 31, 35, 39, §8299; C46, 50, 54, 58, 62, §487.55; C66, 71, 73, 75, 77, 79, 81, §554.7101]2007 Acts, ch 30, §1,45,46554.7102Definitions and index of definitions.1.  In this Article, unless the context otherwise requires:a.  “Bailee” means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them.b.  “Carrier” means a person that issues a bill of lading.c.  “Consignee” means a person named in a bill of lading to which or to whose order the bill promises delivery.d.  “Consignor” means a person named in a bill of lading as the person from which the goods have been received for shipment.e.  “Delivery order” means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts or bills of lading.f.  “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.g.  “Goods” means all things that are treated as movable for the purposes of a contract for storage or transportation.h.  “Issuer” means a bailee that issues a document of title or, in the case of an unaccepted delivery order, the person that orders the possessor of goods to deliver. The term includes a person for which an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, even if the issuer did not receive any goods, the goods were misdescribed, or in any other respect the agent or employee violated the issuer’s instructions.i.  “Person entitled under the document” means the holder, in the case of a negotiable document of title, or the person to which delivery of the goods is to be made by the terms of, or pursuant to instructions in a record under, a nonnegotiable document of title.j.  “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.k.  “Sign” means, with present intent to authenticate or adopt a record:(1)  to execute or adopt a tangible symbol; or(2)  to attach to or logically associate with the record an electronic sound, symbol, or process.l.  “Shipper” means a person that enters into a contract of transportation with a carrier.m.  “Warehouse” means a person engaged in the business of storing goods for hire.2.  Definitions in other Articles applying to this Article and the sections in which they appear are:a.  “Contract for sale” Section 554.2106b.  “Lessee in ordinary course of business” Section 554.13103c.  “Receipt” of goods Section 554.21033.  In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.[R60, §1903; C73, §2180; C97, §3132; S13, §3138-a58, -b52; C24, 27, 31, 35, 39, §8297, 9718, 10005, 10325; C46, 50, 54, 58, 62, §487.54, 542.58, 554.77, 575.1; C66, 71, 73, 75, 77, 79, 81, §554.7102]2007 Acts, ch 30, §2,45,46Referred to in 554.2103, 554.9102554.7103Relation of Article to treaty or statute.1.  This Article is subject to any treaty or statute of the United States or regulatory statute of this state to the extent that the treaty, statute, or regulatory statute is applicable.2.  This Article does not modify or repeal any law prescribing the form or content of a document of title or the services or facilities to be afforded by a bailee, or otherwise regulating a bailee’s business in respects not specifically treated in this Article. However, violation of such a law does not affect the status of a document of title that otherwise is within the definition of a document of title.3.  This Article modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act (15 U.S.C. §7001 et seq.) but does not modify, limit, or supersede §101(c) of that Act (15 U.S.C. §7001(c)) or authorize electronic delivery of any of the notices described in §103(b) of that Act (15 U.S.C. §7003(b)).4.  To the extent there is a conflict between chapter 554D, the Uniform Electronic Transactions Act, and this Article, this Article governs.[C66, 71, 73, 75, 77, 79, 81, §554.7103]2007 Acts, ch 30, §3,45,46Referred to in 554.10103554.7104Negotiable and nonnegotiable document of title.1.  Except as otherwise provided in subsection 3, a document of title is negotiable if by its terms the goods are to be delivered to bearer or to the order of a named person.2.  A document of title other than the one described in subsection 1 is nonnegotiable. A bill of lading that states 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 an order in a record signed by the same or another named person.3.  A document of title is nonnegotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is nonnegotiable.[S13, §3138-a2 – a5, -a7, -b1 – b4, -b7, -b8, -b52; C24, 27, 31, 35, 39, §8246 – 8249, 8253, 8254, 8297, 9662 – 9665, 9667, 9956, 9959, 10005; C46, 50, 54, 58, 62, §487.2 – 487.5, 487.8, 487.9, 487.54, 542.2 – 542.5, 542.7, 554.28, 554.31, 554.77; C66, 71, 73, 75, 77, 79, 81, §554.7104]2007 Acts, ch 30, §4,45,46554.7105Reissuance in alternative medium.1.  Upon request of a person entitled under an electronic document of title, the issuer of the electronic document may issue a tangible document of title as a substitute for the electronic document if:a.  the person entitled under the electronic document surrenders control of the document to the issuer; andb.  the tangible document when issued contains a statement that it is issued in substitution for the electronic document.2.  Upon issuance of a tangible document of title in substitution for an electronic document of title in accordance with subsection 1:a.  the electronic document ceases to have any effect or validity; andb.  the person that procured issuance of the tangible document warrants to all subsequent persons entitled under the tangible document that the warrantor was a person entitled under the electronic document when the warrantor surrendered control of the electronic document to the issuer.3.  Upon request of a person entitled under a tangible document of title, the issuer of the tangible document may issue an electronic document of title as a substitute for the tangible document if:a.  the person entitled under the tangible document surrenders possession of the document to the issuer; andb.  the electronic document when issued contains a statement that it is issued in substitution for the tangible document.4.  Upon issuance of an electronic document of title in substitution for a tangible document of title in accordance with subsection 3:a.  the tangible document ceases to have any effect or validity; andb.  the person that procured issuance of the electronic document warrants to all subsequent persons entitled under the electronic document that the warrantor was a person entitled under the tangible document when the warrantor surrendered possession of the tangible document to the issuer.[C66, 71, 73, 75, 77, 79, 81, §554.7105]2007 Acts, ch 30, §5,45,46Referred to in 554.7305, 554.7402554.7106Control of electronic document of title.1.  A person has control of an electronic document of title if a system employed for evidencing the transfer of interests in the electronic document reliably establishes that person as the person to which the electronic document was issued or transferred.2.  A system satisfies subsection 1, and a person is deemed to have control of an electronic document of title, if the document is created, stored, and assigned in such a manner that:a.  a single authoritative copy of the document exists which is unique, identifiable, and, except as otherwise provided in paragraphs “d”, “e”, and “f”, unalterable;b.  the authoritative copy identifies the person asserting control as:(1)  the person to which the document was issued; or(2)  if the authoritative copy indicates that the document has been transferred, the person to which the document was most recently transferred;c.  the authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;d.  copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;e.  each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; andf.  any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.2007 Acts, ch 30, §6,45,46Referred to in 554.2103, 554.4104, 554.9102, 554.9203, 554.9207, 554.9314, 554.9601PART 2WAREHOUSE RECEIPTS:SPECIAL PROVISIONS554.7201Person that may issue a warehouse receipt — storage under bond.1.  A warehouse receipt may be issued by any warehouse.2.  If 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 is deemed to be a warehouse receipt even if issued by a person that is the owner of the goods and is not a warehouse.[S13, §3138-a1; C24, 27, 31, §9661, 9740; C35, §9661, 9751-g23; C39, §9661, 9751.23; C46, 50, 54, 58, 62, §542.1, 543.20; C66, 71, 73, 75, 77, 79, 81, §554.7201]2007 Acts, ch 30, §7,45,46Referred to in 554.9102554.7202Form of warehouse receipt — effect of omission.1.  A warehouse receipt need not be in any particular form.2.  Unless a warehouse receipt provides for each of the following, the warehouse is liable for damages caused to a person injured by its omission:a.  a statement of the location of the warehouse facility where the goods are stored;b.  the date of issue of the receipt;c.  the unique identification code of the receipt;d.  a statement whether the goods received will be delivered to the bearer, to a named person, or to a named person or its order;e.  the rate of storage and handling charges, unless goods are stored under a field warehousing arrangement, in which case a statement of that fact is sufficient on a nonnegotiable receipt;f.  a description of the goods or the packages containing them;g.  the signature of the warehouse or its agent;h.  if the receipt is issued for goods that the warehouse owns, either solely, jointly, or in common with others, a statement of the fact of that ownership; andi.  a statement of the amount of advances made and of liabilities incurred for which the warehouse claims a lien or security interest, unless the precise amount of advances made or liabilities incurred, at the time of the issue of the receipt, is unknown to the warehouse or to its agent that issued the receipt, in which case a statement of the fact that advances have been made or liabilities incurred and the purpose of the advances or liabilities is sufficient.3.  A warehouse may insert in its receipt any terms that are not contrary to this chapter and do not impair its obligation of delivery under section 554.7403 or its duty of care under section 554.7204. Any contrary provision is ineffective.[S13, §3138-a2, -a7; C24, 27, 31, 35, §975-g19; C39, §9662, 9667, 9751.19; C46, 50, 54, 58, 62, §542.2, 542.7, 543.21; C66, 71, 73, 75, 77, 79, 81, §554.7202]2007 Acts, ch 30, §8,45,46Referred to in 203C.18554.7203Liability 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, that relies upon the description of the goods in the document may recover from the issuer damages caused by the nonreceipt or misdescription of the goods, except to the extent that:1.  the document conspicuously indicates that the issuer does not know whether all or part of the goods in fact were received or conform to the description, such as the case in which 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 words of similar import, if the indication is true; or2.  the party or purchaser otherwise has notice of the nonreceipt or misdescription.[S13, §3138-a20; C24, 27, 31, 35, 39, §9680; C46, 50, 54, 58, 62, §542.20; C66, 71, 73, 75, 77, 79, 81, §554.7203]2007 Acts, ch 30, §9,45,46554.7204Duty of care — contractual limitation of warehouse’s liability.1.  A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.2.  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 beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse’s liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse’s liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.3.  Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement.4.  This section does not modify or repeal any provision under chapter 203, 203C, or 203D.[S13, §3138-a3, -a21, -a24; C24, 27, 31, 35, 39, §9663, 9681, 9684; C46, 50, 54, 58, 62, §542.3, 542.21, 542.24; C66, 71, 73, 75, 77, 79, 81, §554.7204]2007 Acts, ch 30, §10,45,46Referred to in 203C.18, 554.7202554.7205Title under warehouse receipt defeated in certain cases.A buyer in ordinary course of business of fungible goods sold and delivered by a warehouse that is also in the business of buying and selling such goods takes the goods free of any claim under a warehouse receipt even if the receipt is negotiable and has been duly negotiated.[C66, 71, 73, 75, 77, 79, 81, §554.7205]2007 Acts, ch 30, §11,45,46Referred to in 554.7502554.7206Termination of storage at warehouse’s option.1.  A warehouse, by giving notice to the person on whose account the goods are held and any other person known to claim an interest in the goods, may 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 of title or, if a period is not fixed, within a stated period not less than thirty days after the warehouse gives notice. If the goods are not removed before the date specified in the notice, the warehouse may sell them pursuant to section 554.7210.2.  If a warehouse in good faith believes that goods are about to deteriorate or decline in value to less than the amount of its lien within the time provided in subsection 1 and section 554.7210, the warehouse may specify in the notice given under subsection 1 any reasonable shorter time for removal of the goods and, if the goods are not removed, may sell them at public sale held not less than one week after a single advertisement or posting.3.  If, as a result of a quality or condition of the goods of which the warehouse did not have notice at the time of deposit, the goods are a hazard to other property, the warehouse facilities, or other persons, the warehouse may sell the goods at public or private sale without advertisement or posting on reasonable notification to all persons known to claim an interest in the goods. If the warehouse, after a reasonable effort, is unable to sell the goods, it may dispose of them in any lawful manner and does not incur liability by reason of that disposition.4.  A warehouse shall deliver the goods to any person entitled to them under this Article upon due demand made at any time before sale or other disposition under this section.5.  A warehouse may satisfy its lien from the proceeds of any sale or disposition under this section but shall hold the balance for delivery on the demand of any person to which the warehouse would have been bound to deliver the goods.[S13, §3138-a34; C24, 27, 31, §9694; C35, §9694, 9751-g21; C39, §9694, 9751.21; C46, 50, 54, 58, 62, §542.34, 543.23; C66, 71, 73, 75, 77, 79, 81, §554.7206]2007 Acts, ch 30, §12,45,46554.7207Goods must be kept separate — fungible goods.1.  Unless the warehouse receipt provides otherwise, a warehouse shall keep separate the goods covered by each receipt so as to permit at all times identification and delivery of those goods. However, different lots of fungible goods may be commingled.2.  If different lots of fungible goods are commingled, the goods are owned in common by the persons entitled thereto and the warehouse is severally liable to each owner for that owner’s share. If, because of overissue, a mass of fungible goods is insufficient to meet all the receipts the warehouse has issued against it, the persons entitled include all holders to which overissued receipts have been duly negotiated.[S13, §3138-a22, -a23, -a24; C24, 27, 31, 35, 39, §9682 – 9684; C46, 50, 54, 58, 62, §542.22 – 542.24; C66, 71, 73, 75, 77, 79, 81, §554.7207]2007 Acts, ch 30, §13,45,46554.7208Altered warehouse receipts.If a blank in a negotiable tangible warehouse receipt has been filled in without authority, a good-faith purchaser for value and without notice of the lack of authority may treat the insertion as authorized. Any other unauthorized alteration leaves any tangible or electronic warehouse receipt enforceable against the issuer according to its original tenor.[S13, §3138-a13; C24, 27, 31, 35, 39, §9673; C46, 50, 54, 58, 62, §542.13; C66, 71, 73, 75, 77, 79, 81, §554.7208]2007 Acts, ch