HOUSE BILL No. 3029
An Act amending the uniform commercial code; definitions; amending
and repealing the existing section; also repealing K.S.A.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 84-1-201 is hereby amended to read as
1-201. Subject to additional definitions contained in the
ticles of this act which are applicable to specific articles or
and unless the context otherwise requires, in this act:
(1) ``Action'' in the sense of a judicial proceeding includes
ment, counterclaim, set-off, suit in equity and any other
which rights are determined.
(2) ``Aggrieved party'' means a party entitled to resort to a
(3) ``Agreement'' means the bargain of the parties in fact as
their language or by implication from other circumstances
course of dealing or usage of trade or course of performance as
in this act (K.S.A. 84-1-205 and 84-2-208, and amendments
Whether an agreement has legal consequences is determined by the
visions of this act, if applicable; otherwise by the law of
84-1-103 and amendments thereto). (Compare ``Contract.'')
(4) ``Bank'' means any person engaged in the business of
(5) ``Bearer'' means the person in possession of an
ument of title or certificated security payable to bearer or
(6) ``Bill of lading'' means a document evidencing the receipt
for shipment issued by a person engaged in the business of
or forwarding goods, and includes an airbill. ``Airbill'' means a
serving for air transportation as a bill of lading does for marine
transportation, and includes an air consignment note or air
(7) ``Branch'' includes a separately incorporated foreign
branch of a
(8) ``Burden of establishing'' a fact means the burden of
the triers of fact that the existence of the fact is more probable
(9) ``Buyer in ordinary course of business'' means a person
good faith and without knowledge that the sale to the person is in
of the ownership rights or security interest of a third party in
buys in ordinary course from a person in the business of selling
that kind but does not include a pawnbroker. All persons who sell
or the like (including oil and gas) at wellhead or minehead shall
deemed to be persons in the business of selling goods of that kind.
ing'' may be for cash or by exchange of other property or on
unsecured credit and includes receiving goods or documents of title
a preexisting contract for sale but does not include a transfer in
as security for or in total or partial satisfaction of a money
(10) ``Conspicuous'': A term or clause is conspicuous when it
written that a reasonable person against whom it is to operate
have noticed it. A printed heading in capitals (as:
BILL OF LADING) is conspicuous. Language in the body of a form
``conspicuous'' if it is in larger or other contrasting type or
color. But in
a telegram any stated term is ``conspicuous.'' Whether a term or
``conspicuous'' or not is for decision by the court.
(11) ``Contract'' means the total legal obligation which
the parties' agreement as affected by this act and any other
rules of law. (Compare ``Agreement.'')
(12) ``Creditor'' includes a general creditor, a secured
creditor, a lien
creditor and any representative of creditors, including an assignee
benefit of creditors, a trustee in bankruptcy, a receiver in equity
executor or administrator of an insolvent debtor's or assignor's
(13) ``Defendant'' includes a person in the position of
defendant in a
cross-action or counterclaim.
(14) ``Delivery'' with respect to instruments, documents of
tel paper or certificated securities means voluntary transfer of
(15) ``Document of title'' includes bill of lading, dock
receipt, warehouse receipt or order for the delivery of goods, and
any other document which in the regular course of business or
is treated as adequately evidencing that the person in possession
of it is
entitled to receive, hold and dispose of the document and the goods
covers. To be a document of title a document must purport to be
by or addressed to a bailee and purport to cover goods in the
possession which are either identified or are fungible portions of
(16) ``Fault'' means wrongful act, omission or breach.
(17) ``Fungible'' with respect to goods or securities means
securities of which any unit is, by nature or usage of trade, the
of any other like unit. Goods which are not fungible shall be
fungible for the purposes of this act to the extent that under a
agreement or document unlike units are treated as equivalents.
(18) ``Genuine'' means free of forgery or counterfeiting.
(19) ``Good faith'' means honesty in fact in the conduct or
means a person who is in possession of
a document of
title or an instrument or a certificated investment
security drawn, issued
or indorsed to the person or the person's order or to
bearer or in blank
with respect to a negotiable instrument, means the person in
if the instrument is payable to bearer or, in the case of an
payable to an identified person, if the identified person is in
``Holder'' with respect to a document of title means the person
sion if the goods are deliverable to bearer or to the order of
the person in
(21) To ``honor'' is to pay or to accept and pay, or where a
engages to purchase or discount a draft complying with the terms of
(22) ``Insolvency proceedings'' includes any assignment for
efit of creditors or other proceedings intended to liquidate or
the estate of the person involved.
(23) A person is ``insolvent'' who either has ceased to pay
debts in the ordinary course of business or cannot pay the person's
as they become due or is insolvent within the meaning of the
(24) ``Money'' means a medium of exchange authorized or
by a domestic or foreign government
as a part of its
currency and includes
a monetary unit of account established by an intergovernmental
zation or by agreement between two or more nations.
(25) A person has ``notice'' of a fact when:
(a) The person has actual knowledge of it; or
(b) the person has received a notice or notification of it;
(c) from all the facts and circumstances known to the person
time in question the person has reason to know that it exists. A
``knows'' or has ``knowledge'' of a fact when the person has actual
edge of it. ``Discover'' or ``learn'' or a word or phrase of
refers to knowledge rather than to reason to know. The time and
stances under which a notice or notification may cease to be
not determined by this act.
(26) A person ``notifies'' or ``gives'' a notice or
notification to another
by taking such steps as may be reasonably required to inform the
in ordinary course whether or not such other actually comes to know
it. A person ``receives'' a notice or notification when:
(a) It comes to the person's attention; or
(b) it is duly delivered at the place of business through
contract was made or at any other place held out by the person as
place for receipt of such communications.
(27) Notice, knowledge or a notice or notification received by
ganization is effective for a particular transaction from the time
is brought to the attention of the individual conducting that
and in any event from the time when it would have been brought to
individual's attention if the organization had exercised due
organization exercises due diligence if it maintains reasonable
for communicating significant information to the person conducting
transaction and there is reasonable compliance with the routines.
diligence does not require an individual acting for the
communicate information unless such communication is part of the
dividual's regular duties or unless the individual has reason to
the transaction and that the transaction would be materially
(28) ``Organization'' includes a corporation, government or
mental subdivision or agency, business trust, estate, trust,
association, two or more persons having a joint or common interest
any other legal or commercial entity.
(29) ``Party,'' as distinct from ``third party,'' means a
person who has
engaged in a transaction or made an agreement within this act.
(30) ``Person'' includes an individual or an organization.
84-1-102 and amendments thereto.)
(31) ``Presumption'' or ``presumed'' means that the trier of
find the existence of the fact presumed unless and until evidence
troduced which would support a finding of its nonexistence. The
duction of such evidence shall have the effect specified in K.S.A.
and amendments thereto on the burden of establishing the existence
nonexistence of such fact.
(32) ``Purchase'' includes taking by sale, discount,
gage, pledge, lien, issue or reissue, gift or any other voluntary
creating an interest in property.
(33) ``Purchaser'' means a person who takes by purchase.
(34) ``Remedy'' means any remedial right to which an aggrieved
is entitled with or without resort to a tribunal.
(35) ``Representative'' includes an agent, an officer of a
or association, and a trustee, executor or administrator of an
estate or any
other person empowered to act for another.
(36) ``Rights'' includes remedies.
(37) ``Security interest'' means an interest in personal
fixtures which secures payment or performance of an obligation.
retention or reservation of title by a seller of goods
ment or delivery to the buyer (K.S.A. 84-2-401 and amendments
is limited in effect to a reservation of a ``security interest.''
The term also
includes any interest of a buyer of accounts or chattel paper which
subject to article 9. The special property interest of a buyer of
identification of such goods to a contract for sale under K.S.A.
and amendments thereto is not a ``security interest,'' but a buyer
acquire a ``security interest'' by complying with article 9. Unless
signment is intended as security, reservation of title thereunder
is not a
``security interest,'' but a consignment in any event is subject to
visions on consignment sales (K.S.A. 84-2-326 and amendments
Whether a transaction creates a lease or security interest is
by the facts of each case; however, a transaction creates a
if the consideration the lessee is to pay the lessor for the right
sion and use of the goods is an obligation for the term of the
subject to termination by the lessee, and
(a) the original term of the lease is equal to or greater than
maining economic life of the goods,
(b) the lessee is bound to renew the lease for the remaining
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
economic life of the goods for no additional consideration or
additional consideration upon compliance with the lease agreement,
(d) the lessee has an option to become the owner of the goods
additional consideration or nominal additional consideration upon
pliance with the lease agreement.
A transaction does not create a security interest merely because it
(a) the present value of the consideration the lessee is
pay the lessor for the right to possession and use of the goods is
tially 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, or agrees to
insurance, filing, recording, or registration fees, or service or
costs with respect to the goods,
(c) the lessee has an option to renew the lease or to become
of the goods,
(d) 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
the use of the goods for the term of the renewal at the time the
is to be performed, or
(e) the lessee has an option to become the owner of the goods
fixed price that is equal to or greater than the reasonably
market value of the goods at the time the option is to be
For purposes of this subsection (37):
(a) Additional consideration is not nominal if (i) when the
renew the lease is grant to the lessee the rent is stated to be the
market rent for the use of the goods for the term of the renewal
mined at the time the option is to be performed, or (ii) when the
to become the owner of the goods is granted to the lessee the price
stated to be the fair market value of the goods determined at the
the option is to be performed. Additional consideration is nominal
if it is
less than the lessee's reasonably predictable cost of performing
lease agreement if the option is not exercised;
(b) ``Reasonably predictable'' and ``remaining economic life
goods'' are to be determined with reference to the facts and
stances at the time the transaction is entered into; and
(c) ``Present value'' means the amount as of a date certain of
more sums payable in the future, discounted to the date certain.
discount is determined by the interest rate specified by the
parties if the
rate is not manifestly unreasonable at the time the transaction is
into; otherwise, the discount is determined by a commercially
rate that takes into account the facts and circumstances of each
the time the transaction was entered into.
(38) ``Send'' in connection with any writing or notice means
in the mail or deliver for transmission by any other usual means of
munication with postage or cost of transmission provided for and
addressed and in the case of an instrument to an address specified
or otherwise agreed, or if there be none to any address reasonable
the circumstances. The receipt of any writing or notice within the
at which it would have arrived if properly sent has the effect of a
(39) ``Signed'' includes any symbol executed or adopted by a
with present intention to authenticate a writing.
(40) ``Surety'' includes guarantor.
(41) ``Telegram'' includes a message transmitted by radio,
cable, any mechanical method of transmission or the like.
(42) ``Term'' means that portion of an agreement which relates
(43) ``Unauthorized'' signature
indorsement means one made
without actual, implied or apparent authority and includes a
(44) ``Value.'' Except as otherwise provided with respect to
instruments and bank collections (K.S.A. 84-3-303, 84-4-208 and
209, and amendments thereto) a person gives ``value'' for rights if
person acquires them:
(a) In return for a binding commitment to extend credit or for
extension of immediately available credit whether or not drawn upon
whether or not a charge-back is provided for in the event of
in collection; or
(b) as security for or in total or partial satisfaction of a
(c) by accepting delivery pursuant to a preexisting contract
(d) generally, in return for any consideration sufficient to
(45) ``Warehouse receipt'' means a receipt issued by a person
in the business of storing goods for hire.
(46) ``Written'' or ``writing'' includes printing, typewriting
other intentional reduction to tangible form.
Sec. 2. K.S.A. 84-1-201 and 84-1-201a are hereby
Sec. 3. This act shall take effect and be in force from
and after its
publication in the statute book.
Approved May 11, 1998