Commercial Code
Part 1 of 4 · provisions 1–200
This division is known as the Uniform Commercial Code—Leases and may be cited by that name.
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This division is known as the Uniform Commercial Code—Leases and may be cited by that name. This section says the division applies to transactions that create a lease, including hybrid leases, with special rules depending on whether the lease-of-goods aspects predominate. This section defines key terms used in the personal property leases division. A lease under this division is also subject to applicable title-registration laws and consumer law; if those laws conflict with this division, the other law controls. For certain goods with a certificate of title, the effect of compliance or noncompliance is governed by the issuing jurisdiction’s law until surrender of the certificate or four months after removal, and then until another jurisdiction issues a new certificate.
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- 10101. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
This division is known as the Uniform Commercial Code—Leases and may be cited by that name.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10101. This division shall be known and may be cited as the Uniform Commercial Code—Leases. (Repealed and added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 10102. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section says the division applies to transactions that create a lease, including hybrid leases, with special rules depending on whether the lease-of-goods aspects predominate.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10102. (a) This division applies to any transaction, regardless of form, that creates a lease and, in the case of a hybrid lease, it applies to the extent provided in subdivision (b). (b) In a hybrid lease, the following rules apply: (1) If the lease-of-goods aspects do not predominate, the following rules apply: (A) Only the provisions of this division which relate primarily to the lease-of-goods aspects of the transaction apply, and the provisions that relate primarily to the transaction as a whole do not apply. (B) Section 10209 applies if the lease is a finance lease. (C) Section 10407 applies to the promises of the lessee in a finance lease to the extent the promises are consideration for the right to possession and use of the leased goods. (2) If the lease-of-goods aspects predominate, this division applies to the transaction, but does not preclude application in appropriate circumstances of other law to aspects of the lease which do not relate to the lease of goods. (Amended by Stats. 2023, Ch. 210, Sec. 74. (SB 95) Effective January 1, 2024.) - 10103. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section defines key terms used in the personal property leases division.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10103. (a) In this division, unless the context otherwise requires: (1) “Buyer in ordinary course of business” means a person who, in good faith and without knowledge that the sale to it is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind, but does not include a pawnbroker. “Buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt. (2) “Cancellation” occurs when either party puts an end to the lease contract for default by the other party. (3) “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole. (4) “Conforming” goods or performance under a lease contract means goods or performance that are in accordance with the obligations under the lease contract. (5) “Consumer lease” means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose. (6) “Fault” means wrongful act, omission, breach, or default. (7) “Finance lease” means a lease with respect to which (A) the lessor does not select, manufacture, or supply the goods, (B) the lessor acquires the goods or the right to possession and use of the goods in connection with the lease, and (C) one of the following occurs: (i) The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract. (ii) The lessee’s approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract. (iii) The lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods. (iv) The lessor, before the lessee signs the lease contract, informs the lessee in writing (aa) of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person, (bb) that the lessee is entitled under this division to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods, and (cc) that the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. (8) “Goods” means all things that are movable at the time of identification to the lease contract, or are fixtures (Section 10309), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals. (9) “Installment lease contract” means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause “each delivery is a separate lease” or its equivalent. (10) “Lease” means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease. (11) “Lease agreement” means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this division. Unless the context clearly indicates otherwise, the term includes a sublease agreement. (12) “Lease contract” means the total legal obligation that results from the lease agreement as affected by this division and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract. (13) “Leasehold interest” means the interest of the lessor or the lessee under a lease contract. (14) “Lessee” means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee. (15) “Lessee in ordinary course of business” means a person who, in good faith and without knowledge that the lease to it is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods, leases in ordinary course from a person in the business of selling or leasing goods of that kind, but does not include a pawnbroker. “Leasing” may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt. (16) “Lessor” means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor. (17) “Lessor’s residual interest” means the lessor’s interest in the goods after expiration, termination, or cancellation of the lease contract. (18) “Lien” means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest. (19) “Lot” means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract. (20) “Merchant lessee” means a lessee that is a merchant with respect to goods of the kind subject to the lease. (21) “Present value” means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into. (22) “Purchase” includes taking by sale, lease, mortgage, security interest, pledge, gift, or any other voluntary transaction creating an interest in goods. (23) “Sublease” means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease. (24) “Supplier” means a person from whom a lessor buys or leases goods to be leased under a finance lease. (25) “Supply contract” means a contract under which a lessor buys or leases goods to be leased. (26) “Termination” occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default. (27) “Hybrid lease” means a single transaction involving a lease of goods and any of the following: (A) The provision of services. (B) A sale of other goods. (C) A sale, lease, or license of property other than goods. (b) Other definitions applying to this division and the sections in which they appear are: “Accessions.” Subdivision (a) of Section 10310. “Construction mortgage.” Paragraph (4) of subdivision (a) of Section 10309. “Encumbrance.” Paragraph (5) of subdivision (a) of Section 10309. “Fixtures.” Paragraph (1) of subdivision (a) of Section 10309. “Fixture filing.” Paragraph (2) of subdivision (a) of Section 10309. “Purchase money lease.” Paragraph (3) of subdivision (a) of Section 10309. (c) The following definitions in other divisions apply to this division: “Account.” Paragraph (2) of subdivision (a) of Section 9102. “Between merchants.” Subdivision (3) of Section 2104. “Buyer.” Paragraph (a) of subdivision (1) of Section 2103. “Chattel paper.” Paragraph (11) of subdivision (a) of Section 9102. “Consumer goods.” Paragraph (23) of subdivision (a) of Section 9102. “Document.” Paragraph (30) of subdivision (a) of Section 9102. “Entrusting.” Subdivision (3) of Section 2403. “General intangible.” Paragraph (42) of subdivision (a) of Section 9102. “Instrument.” Paragraph (47) of subdivision (a) of Section 9102. “Merchant.” Subdivision (1) of Section 2104. “Mortgage.” Paragraph (55) of subdivision (a) of Section 9102. “Pursuant to commitment.” Paragraph (69) of subdivision (a) of Section 9102. “Receipt of goods.” Paragraph (c) of subdivision (1) of Section 2103. “Sale.” Subdivision (1) of Section 2106. “Sale on approval.” Section 2326. “Sale or return.” Section 2326. “Seller.” Paragraph (d) of subdivision (1) of Section 2103. (d) In addition, Division 1 contains general definitions and principles of construction and interpretation applicable throughout this division. (Amended by Stats. 2023, Ch. 210, Sec. 75. (SB 95) Effective January 1, 2024.) - 10104. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease under this division is also subject to applicable title-registration laws and consumer law; if those laws conflict with this division, the other law controls.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10104. (a) A lease, although subject to this division, is also subject to any applicable: (1) Certificate of title statute of this state, including the provisions of the Vehicle Code that require registration of a vehicle or boat and provisions of the Health and Safety Code that require registration of a mobilehome or commercial coach. (2) Certificate of title statute of another jurisdiction (Section 10105). (3) Consumer law of this state, both decisional and statutory, including, to the extent that they apply to a consumer lease transaction, Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code, Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code, and Part 4 (commencing with Section 1725) of Division 3 of the Civil Code. (b) In case of conflict between this division, other than Section 10105, subdivision (c) of Section 10304, and subdivision (c) of Section 10305, and a law referred to in subdivision (a), that law controls. (c) Failure to comply with an applicable law has only the effect specified therein. (Amended by Stats. 1991, Ch. 111, Sec. 4. Effective July 15, 1991.) - 10105. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
For certain goods with a certificate of title, the effect of compliance or noncompliance is governed by the issuing jurisdiction’s law until surrender of the certificate or four months after removal, and then until another jurisdiction issues a new certificate.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10105. Subject to the provisions of subdivision (c) of Section 10304 and subdivision (c) of Section 10305, with respect to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until the earlier of (1) surrender of the certificate, or (2) four months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction. (Amended by Stats. 1991, Ch. 111, Sec. 5. Effective July 15, 1991.) - 10106. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
In a consumer lease, certain choice-of-law and forum-selection choices are not enforceable if they point away from specified California-connected locations.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10106. (a) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within 30 days thereafter, in which the goods are to be used, or in which the lease is executed by the lessee, the choice is not enforceable. (b) If the judicial forum chosen by the parties to a consumer lease is in a county other than the county in which the lessee in fact signed the lease, the county in which the lessee resides at the commencement of the action, the county in which the lessee resided at the time the lease contract became enforceable, or the county in which the goods are permanently stored, the choice is not enforceable. (Amended by Stats. 1991, Ch. 111, Sec. 6. Effective July 15, 1991.) - 10107. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
An aggrieved party may waive or renounce a claim or right from an alleged default or breach of warranty, if done in a signed record that the party delivers.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 1. General Provisions [10101 - 10107] ( Chapter 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10107. Any claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a waiver or renunciation in a signed record delivered by the aggrieved party. (Amended by Stats. 2023, Ch. 210, Sec. 76. (SB 95) Effective January 1, 2024.) - 10201. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease contract is generally unenforceable unless it fits a small-payment exception or there is a signed record showing the deal, the goods leased, and the lease term.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10201. (a) A lease contract is not enforceable by way of action or defense unless: (1) In a lease contract that is not a consumer lease, the total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars ($1,000); or (2) There is a record, signed by the party against whom enforcement is sought or by that party’s authorized agent, sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the lease term. (b) Any description of leased goods or of the lease term is sufficient and satisfies paragraph (2) of subdivision (a), whether or not it is specific, if it reasonably identifies what is described. (c) A record is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under paragraph (2) of subdivision (a) beyond the lease term and the quantity of goods shown in the record. (d) A lease contract that does not satisfy the requirements of subdivision (a), but which is valid in other respects, is enforceable: (1) If the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor’s business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement; (2) If the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this provision beyond the quantity of goods admitted; or (3) With respect to goods that have been received and accepted by the lessee. (e) The lease term under a lease contract referred to in subdivision (d) is: (1) If there is a record signed by the party against whom enforcement is sought or by that party’s authorized agent specifying the lease term, the term so specified; (2) If the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court a lease term, the term so admitted; or (3) A reasonable lease term. (Amended by Stats. 2023, Ch. 210, Sec. 77. (SB 95) Effective January 1, 2024.) - 10202. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A final written agreement term may not be contradicted by prior or contemporaneous oral agreements, but it may be explained or supplemented in limited ways.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10202. Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: (a) By course of dealing or usage of trade or by course of performance; and (b) By evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement. (Amended by Stats. 2023, Ch. 210, Sec. 78. (SB 95) Effective January 1, 2024.) - 10204. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease contract can be formed by any agreement showing assent, including conduct by both parties.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10204. (a) A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a lease contract. (b) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined. (c) Although one or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy. (Amended by Stats. 1991, Ch. 111, Sec. 8. Effective July 15, 1991.) - 10205. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A merchant’s signed offer to lease goods that is promised to stay open cannot be revoked for lack of consideration during the stated time, a reasonable time if none is stated, and never for more than three months. A term of assurance on the offeree’s form must be separately signed by the offeror.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10205. An offer by a merchant to lease goods to or from another person in a signed record that by its terms gives assurance it will be held open is not revocable, for lack of consideration, during the time stated or, if no time is stated, for a reasonable time, but in no event may the period of irrevocability exceed three months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. (Amended by Stats. 2023, Ch. 210, Sec. 79. (SB 95) Effective January 1, 2024.) - 10206. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
An offer to make a lease contract is generally treated as allowing acceptance in any reasonable way and by any reasonable medium. If performance is a reasonable way to accept, the offeror may treat the offer as lapsed if acceptance is not notified within a reasonable time.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10206. (a) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. (b) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. (Amended by Stats. 1991, Ch. 111, Sec. 10. Effective July 15, 1991.) - 10208. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section says a lease modification can be binding without consideration, limits changes to signed-record terms in signed lease agreements, lets a noncompliant attempted change act as a waiver, and allows a waiver to be retracted with reasonable notice unless retraction would be unjust.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10208. (a) An agreement modifying a lease contract needs no consideration to be binding. (b) A signed lease agreement that excludes modification or rescission except by a signed record may not be otherwise modified or rescinded, but, except as between merchants, such a requirement on a form supplied by a merchant must be separately signed by the other party. (c) Although an attempt at modification or rescission does not satisfy the requirements of subdivision (b), it may operate as a waiver. (d) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver. (Amended by Stats. 2023, Ch. 210, Sec. 80. (SB 95) Effective January 1, 2024.) - 10209. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A finance-lease lessee gets the benefit of supplier promises and warranties tied to the supply contract, subject to the contract terms and defenses, and keeps other rights against the supplier.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10209. (a) The benefit of a supplier’s promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of any third party provided in connection with or as part of the supply contract, extends to the lessee to the extent of the lessee’s leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom. (b) The extension of the benefit of a supplier’s promises and of warranties to the lessee (subdivision (a) of Section 10209) does not: (1) modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise, or (2) impose any duty or liability under the supply contract on the lessee. (c) Any modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission. (d) In addition to the extension of the benefit of the supplier’s promises and of warranties to the lessee under subdivision (a), the lessee retains all rights that the lessee may have against the supplier which arise from an agreement between the lessee and the supplier or under other law. (Amended by Stats. 1991, Ch. 111, Sec. 13. Effective July 15, 1991.) - 10210. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessor creates an express warranty when its factual affirmation, promise, description, sample, or model becomes part of the bargain and relates to the goods.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10210. (a) Express warranties by the lessor are created as follows: (1) Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise. (2) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description. (3) Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model. (b) It is not necessary to the creation of an express warranty that the lessor use formal words, such as “warrant” or “guarantee,” or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor’s opinion or commendation of the goods does not create a warranty. (Amended by Stats. 1991, Ch. 111, Sec. 14. Effective July 15, 1991.) - 10211. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section implies warranties in lease contracts about title and infringement claims, and it requires a lessee who provides specifications to protect the lessor and supplier against infringement claims arising from those specifications.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10211. (a) There is in a lease contract a warranty that for the lease term no person holds a claim to or interest in the goods that arose from an act or omission of the lessor, other than a claim by way of infringement or the like, which will interfere with the lessee’s enjoyment of its leasehold interest. (b) Except in a finance lease there is in a lease contract by a lessor who is a merchant regularly dealing in goods of the kind a warranty that the goods are delivered free of the rightful claim of any person by way of infringement or the like. (c) A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and the supplier harmless against any claim by way of infringement or the like that arises out of compliance with the specifications. (Amended by Stats. 1991, Ch. 111, Sec. 15. Effective July 15, 1991.) - 10212. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease may include an implied warranty that the goods are merchantable, unless the lease is a finance lease and the lessor is a merchant for those goods.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10212. (a) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind. (b) Goods to be merchantable must be at least such as: (1) Pass without objection in the trade under the description in the lease agreement; (2) In the case of fungible goods, are of fair average quality within the description; (3) Are fit for the ordinary purposes for which goods of that type are used; (4) Run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved; (5) Are adequately contained, packaged, and labeled as the lease agreement may require; and (6) Conform to any promises or affirmations of fact made on the container or label. (c) Other implied warranties may arise from course of dealing or usage of trade. (Amended by Stats. 1991, Ch. 111, Sec. 16. Effective July 15, 1991.) - 10213. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
In a non-finance lease, the lease contract includes an implied warranty that the goods will be fit for the lessor-known purpose if the lessor knows that purpose and knows the lessee is relying on the lessor’s skill or judgment.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10213. Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose. (Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 10214. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section sets rules for how lease terms can create, limit, or exclude warranties, including implied warranties and warranty disclaimers.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10214. (a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty must be construed wherever reasonable as consistent with each other; but, subject to the provisions of Section 10202 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable. (b) Subject to subdivision (c), to exclude or modify the implied warranty of merchantability or any part of it the language must mention “merchantability,” be by a writing, and be conspicuous. Subject to subdivision (c), to exclude or modify any implied warranty of fitness the exclusion must be by a writing and be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it is in writing, is conspicuous and states, for example, “There is no warranty that the goods will be fit for a particular purpose.” (c) Notwithstanding subdivision (b), but subject to subdivision (d), (1) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” or “with all faults,” or by other language that in common understanding calls the lessee’s attention to the exclusion of warranties and makes plain that there is no implied warranty, if in writing and conspicuous; (2) If the lessee before entering into the lease contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed; and (3) An implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade. (d) To exclude or modify a warranty against interference or against infringement (Section 10211) or any part of it, the language must be specific, be by a writing, and be conspicuous, unless the circumstances, including course of performance, course of dealing, or usage of trade, give the lessee reason to know that the goods are being leased subject to a claim or interest of any person. (Amended by Stats. 1991, Ch. 111, Sec. 17. Effective July 15, 1991.) - 10215. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
Warranties are to be read together and cumulatively; if that is unreasonable, the parties’ intention decides which warranty controls.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10215. Warranties, whether express or implied, must be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply: (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. (Amended by Stats. 1991, Ch. 111, Sec. 18. Effective July 15, 1991.) - 10217. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
The parties may agree on when and how goods are identified as the goods covered by a lease contract. If they do not expressly agree, the statute gives default identification times based on the kind of goods.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10217. Identification of goods as goods to which a lease contract refers may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs: (1) When the lease contract is made, if the lease contract is for a lease of goods that are existing and identified; (2) When the goods are shipped, marked, or otherwise designated by the lessor as goods to which the lease contract refers, if the lease contract is for a lease of goods that are not existing and identified; or (3) When the young are conceived, if the lease contract is for a lease of unborn young of animals. (Amended by Stats. 1991, Ch. 111, Sec. 19. Effective July 15, 1991.) - 10218. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section gives a lessee an insurable interest when identified goods are linked to the lease contract, allows the lessor to substitute goods in limited circumstances, preserves the lessor’s insurable interest until certain events occur, and lets the parties agree who must buy insurance and who receives the proceeds.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10218. (a) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them. (b) If a lessee has an insurable interest only by reason of the lessor’s identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified. (c) Notwithstanding a lessee’s insurable interest under subdivisions (a) and (b), the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee. (d) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law. (e) The parties by agreement may determine that one or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance. (Amended by Stats. 1991, Ch. 111, Sec. 20. Effective July 15, 1991.) - 10219. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section allocates risk of loss between lessor and lessee, with a special rule for finance leases and several timing rules for when risk passes.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10219. (a) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee. (b) Subject to the provisions of this division on the effect of default on risk of loss (Section 10220), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply: (1) If the lease contract requires or authorizes the goods to be shipped by carrier (A) And it does not require delivery at a particular destination, the risk of loss passes to the lessee when the goods are duly delivered to the carrier; but (B) If it does require delivery at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the lessee when the goods are there duly so tendered as to enable the lessee to take delivery. (2) If the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee’s right to possession of the goods. (3) In any case not within paragraph (1) or (2), the risk of loss passes to the lessee on the lessee’s receipt of the goods if the lessor, or, in the case of a finance lease, the supplier, is a merchant; otherwise the risk passes to the lessee on tender of delivery. (Amended by Stats. 1991, Ch. 111, Sec. 21. Effective July 15, 1991.) - 10220. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section allocates risk of loss under a lease when the time for passing risk is not stated.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10220. (a) Where risk of loss is to pass to the lessee and the time of passage is not stated: (1) If a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection, the risk of their loss remains with the lessor, or, in the case of a finance lease, the supplier, until cure or acceptance. (2) If the lessee rightfully revokes acceptance, he or she, to the extent of any deficiency in his or her effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning. (b) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of any deficiency in his or her effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time. (Amended by Stats. 1991, Ch. 111, Sec. 22. Effective July 15, 1991.) - 10221. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
If identified goods under a lease are damaged or lost before delivery or before risk of loss passes to the lessee, the lease may be avoided; if the loss is partial, the lessee may inspect and may either avoid the lease or, except in a finance lease, accept the goods with a rent allowance.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 2. Formation and Construction of Lease Contract [10201 - 10221] ( Chapter 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10221. If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor, or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee pursuant to the lease agreement or Section 10219, then: (1) If the loss is total, the lease contract is avoided; and (2) If the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his or her option either treat the lease contract as avoided or, except in a finance lease, accept the goods with due allowance from the rent payable for the balance of the lease term for the deterioration or the deficiency in quantity but without further right against the lessor. (Amended by Stats. 1991, Ch. 111, Sec. 23. Effective July 15, 1991.) - 10301. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease contract is effective and enforceable according to its terms, unless this division provides otherwise.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10301. Except as otherwise provided in this division, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods, and against creditors of the parties. (Amended by Stats. 1991, Ch. 111, Sec. 24. Effective July 15, 1991.) - 10302. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section says the division applies broadly to lease goods, regardless of who holds title or possession, unless another rule in the division says otherwise.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10302. Except as otherwise provided in this division, each provision of this division applies whether the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third party has possession of the goods, notwithstanding any statute or rule of law that possession or the absence of possession is fraudulent. (Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 10303. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section limits how lease agreements can block transfers and sets rules for default, enforcement, and remedies when a transfer occurs.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10303. (a) As used in the section, “creation of a security interest” includes the sale of a lease contract that is subject to Division 9 (commencing with Section 9101), Secured Transactions, by reason of paragraph (3) of subdivision (a) of Section 9109. (b) Except as provided in subdivision (c) and Section 9407, a provision in a lease agreement which (1) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor’s residual interest in the goods, or (2) makes such a transfer an event of default, gives rise to the rights and remedies provided in subdivision (d), but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective. (c) A provision in a lease agreement which (1) prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor’s due performance of the transferor’s entire obligation, or (2) makes such a transfer an event of default, is not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract within the purview of subdivision (d). (d) Subject to subdivision (c) and Section 9407: (1) If a transfer is made which is made an event of default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies described in subdivision (b) of Section 10501. (2) If paragraph (1) is not applicable and if a transfer is made that (A) is prohibited under a lease agreement or (B) materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, (C) the transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer and (D) a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer. (e) A transfer of “the lease” or of “all my rights under the lease,” or a transfer in similar general terms, is a transfer of rights and, unless the language or the circumstances, as in a transfer for security, indicate the contrary, the transfer is a delegation of duties by the transferor to the transferee. Acceptance by the transferee constitutes a promise by the transferee to perform those duties. The promise is enforceable by either the transferor or the other party to the lease contract. (f) Unless otherwise agreed by the lessor and the lessee, a delegation of performance does not relieve the transferor as against the other party of any duty to perform or of any liability for default. (g) In a consumer lease, to prohibit the transfer of an interest of a party under the lease contract or to make a transfer an event of default, the language must be specific, by a writing, and conspicuous. (Amended by Stats. 1999, Ch. 991, Sec. 37. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.) - 10304. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section sets out when a later lessee can obtain rights in leased goods and when the lease takes subject to, or free of, an existing lease contract.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10304. (a) Subject to Section 10303, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and, except as provided in subdivision (b) of this section and subdivision (d) of Section 10527, takes subject to the existing lease contract. A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set forth in the preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that power even though: (1) The lessor’s transferor was deceived as to the identity of the lessor; (2) The delivery was in exchange for a check which is later dishonored; (3) It was agreed that the transaction was to be a “cash sale”; or (4) The delivery was procured through fraud punishable as larcenous under the criminal law. (b) A subsequent lessee in the ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor’s and the existing lessee’s rights to the goods, and takes free of the existing lease contract. (c) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute. (Amended by Stats. 1991, Ch. 111, Sec. 26. Effective July 15, 1991.) - 10305. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section says who can obtain rights in leased goods when a lessee transfers them, and when a buyer or sublessee takes free of the existing lease contract.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10305. (a) Subject to the provisions of Section 10303, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer, and, except as provided in subdivision (b) of this section and subdivision (d) of Section 10511, takes subject to the existing lease contract. A lessee with a voidable leasehold interest has power to transfer a good leasehold interest to a good faith buyer for value or a good faith sublessee for value, but only to the extent set forth in the preceding sentence. When goods have been delivered under a transaction of lease the lessee has that power even though: (1) The lessor was deceived as to the identity of the lessee; (2) The delivery was in exchange for a check which is later dishonored; or (3) The delivery was procured through fraud punishable as larcenous under the criminal law. (b) A buyer in the ordinary course of business or a sublessee in the ordinary course of business from a lessee who is a merchant dealing in goods of that kind to whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the lessor’s and lessee’s rights to the goods, and takes free of the existing lease contract. (c) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute. (Amended by Stats. 1991, Ch. 111, Sec. 27. Effective July 15, 1991.) - 10306. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lien for services or materials furnished to leased goods can take priority over the lessor’s or lessee’s interest, unless another statute or rule of law provides otherwise.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10306. If a person in the ordinary course of his or her business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this division unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise. (Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 10307. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
In general, creditors and lessees take their interests subject to the lease contract, with specified exceptions.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10307. (a) Except as otherwise provided in Section 10306, a creditor of a lessee takes subject to the lease contract. (b) Except as otherwise provided in subdivision (c) and in Sections 10306 and 10308, a creditor of a lessor takes subject to the lease contract unless the creditor holds a lien that attached to the goods before the lease contract became enforceable. (c) Except as otherwise provided in Sections 9317, 9321, and 9323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor. (Amended by Stats. 1999, Ch. 991, Sec. 38. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.) - 10308. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A creditor may void certain lease-related transactions when retention of possession is fraudulent or void, subject to stated good-faith and commercial-course exceptions.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10308. (a) A creditor of a lessor in possession of goods subject to a lease contract may treat the lease contract as void if as against the creditor retention of possession by the lessor is fraudulent or void under any statute or rule of law, but retention of possession in good faith and current course of trade by the lessor for a commercially reasonable time after the lease contract becomes enforceable is not fraudulent or void. (b) Nothing in this division impairs the rights of creditors of a lessor if the lease contract is made under circumstances which under any statute or rule of law apart from this division would constitute the transaction a fraudulent transfer or voidable preference. (c) A creditor of a seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor retention of possession by the seller is fraudulent under any statute or rule of law, but retention of possession of the goods pursuant to a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods is not fraudulent if the buyer bought for value and in good faith. (Amended by Stats. 1991, Ch. 111, Sec. 29. Effective July 15, 1991.) - 10309. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section defines several lease-and-fixture terms and sets priority rules for fixture leases against real estate interests, including when removal is allowed and when reimbursement is required.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10309. (a) In this section: (1) Goods are “fixtures” when they become so related to particular real estate that an interest in them arises under real estate law; (2) A “fixture filing” is the filing, in the office where a record of a mortgage on the real estate would be recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of subdivisions (a) and (b) of Section 9502; (3) A lease is a “purchase money lease” unless the lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable; (4) A mortgage is a “construction mortgage” to the extent it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates; and (5) “Encumbrance” includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests. (b) Under this division a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this division of ordinary building materials incorporated into an improvement on land. (c) This division does not prevent creation of a lease of fixtures pursuant to real estate law. (d) The interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if: (1) The lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, a fixture filing covering the fixtures is filed before the goods become fixtures or within 20 days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate; (2) A fixture filing covering the fixtures is filed before the interest of the encumbrancer or owner is of record, the lessor’s interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate; (3) The fixtures are readily removable factory or office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease; (4) The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable; (5) The encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures; or (6) The lessee has a right to remove the goods as against the encumbrancer or owner. If the lessee’s right to remove terminates, the priority of the interest of the lessor continues for a reasonable time. (e) Notwithstanding paragraph (1) of subdivision (d) but otherwise subject to subdivision (d), the interest of a lessor of fixtures, including the lessor’s residual interest, is subordinate to the conflicting interest of an encumbrancer of the real estate under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent given to refinance a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this priority to the same extent as the encumbrancer of the real estate under the construction mortgage. (f) In cases not within the preceding subdivisions, priority between the interest of a lessor of fixtures, including the lessor’s residual interest, and the conflicting interest of an encumbrancer or owner of the real estate who is not the lessee is determined by the priority rules governing conflicting interests in real estate. (g) If the interest of a lessor of fixtures, including the lessor’s residual interest, has priority over all conflicting interests of all owners and encumbrancers of the real estate, the lessor or the lessee may (1) on default, expiration, termination, or cancellation of the lease agreement but subject to the lease agreement and this division, or (2) if necessary to enforce other rights and remedies of the lessor or lessee under this division, remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate, but the lessor or lessee must reimburse any encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real estate caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation. (Amended by Stats. 1999, Ch. 991, Sec. 39. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.) - 10310. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section defines when goods become “accessions” and sets priority rules for a lessor’s or lessee’s interest in those goods versus other interests in the whole.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10310. (a) Goods are “accessions” when they are installed in or affixed to other goods. (b) The interest of a lessor or a lessee under a lease contract entered into before the goods became accessions is superior to all interests in the whole except as stated in subdivision (d). (c) The interest of a lessor or a lessee under a lease contract entered into at the time or after the goods became accessions is superior to all subsequently acquired interests in the whole except as stated in subdivision (d) but is subordinate to interests in the whole existing at the time the lease contract was made unless the holders of such interests in the whole have in writing consented to the lease or disclaimed an interest in the goods as part of the whole. (d) The interest of a lessor or a lessee under a lease contract described in subdivision (b) or (c) is subordinate to the interest of: (1) A buyer in the ordinary course of business or a lessee in the ordinary course of business of any interest in the whole acquired after the goods became accessions; or (2) A creditor with a security interest in the whole perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract. (e) When under subdivision (b) or subdivisions (c) and (d) a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee may (1) on default, expiration, termination, or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this division, or (2) if necessary to enforce his or her other rights and remedies under this division, remove the goods from the whole, free and clear of all interests in the whole, but he or she must reimburse any holder of an interest in the whole who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation. (Amended by Stats. 1991, Ch. 111, Sec. 31. Effective July 15, 1991.) - 10311. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A person entitled to priority may subordinate that priority by agreement.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 3. Effect of Lease Contract [10301 - 10311] ( Chapter 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10311. Nothing in this division prevents subordination by agreement by any person entitled to priority. (Added by Stats. 1991, Ch. 111, Sec. 32. Effective July 15, 1991.) - 10401. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease contract requires each party not to impair the other party’s expected performance, lets an insecure party demand written adequate assurance, and allows a temporary suspension of performance if commercially reasonable until assurance is received.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10401. (a) A lease contract imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. (b) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable the insecure party may suspend any performance for which he or she has not already received the agreed return. (c) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed 30 days after receipt of a demand by the other party. (d) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards. (e) Acceptance of any nonconforming delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance. (Amended by Stats. 1991, Ch. 111, Sec. 33. Effective July 15, 1991.) - 10402. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
If a non-consumer lease is repudiated before performance is due and the loss would substantially impair the lease’s value, the aggrieved party may wait for performance, demand assurance, use default remedies, suspend performance, and, if the aggrieved party is the lessor, take the specified goods-related actions.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10402. (a) If either party repudiates a lease contract, other than a consumer lease, with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may: (1) For a commercially reasonable time, await retraction of repudiation and performance by the repudiating party; (2) Make demand pursuant to Section 10401 and await assurance of future performance adequate under the circumstances of the particular case; or (3) Resort to any right or remedy upon default under the lease contract or this division, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party’s performance and assurance and has urged retraction. In addition, whether or not the aggrieved party is pursuing one of the foregoing remedies, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed in accordance with the provisions of this division on the lessor’s right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods (Section 10524). (b) The rights and remedies of the parties to a consumer lease in connection with a repudiation of that lease shall be determined under other laws, and this section shall not affect the applicability or interpretation of those laws. (Amended by Stats. 1991, Ch. 111, Sec. 34. Effective July 15, 1991.) - 10403. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
A repudiating party may retract a repudiation before its next performance is due, unless the aggrieved party has already canceled, materially changed position, or otherwise treated the repudiation as final.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10403. (a) Until the repudiating party’s next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has canceled the lease contract or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final. (b) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance demanded under Section 10401. (c) Retraction reinstates a repudiating party’s rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation. (Amended by Stats. 1991, Ch. 111, Sec. 35. Effective July 15, 1991.) - 10404. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
If agreed delivery facilities or carrier arrangements fail without fault of the lessee, lessor, or supplier, a commercially reasonable substitute must be used. If payment terms fail because of government regulation, the lessor may stop delivery unless the lessee offers a commercially equivalent payment method, and in some cases the lessee’s payment discharges the obligation.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10404. (a) If without fault of the lessee, the lessor, and the supplier, the agreed berthing, loading, or unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable, but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted. (b) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation: (1) The lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent; and (2) If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee’s obligation unless the regulation is discriminatory, oppressive, or predatory. (Amended by Stats. 1991, Ch. 111, Sec. 36. Effective July 15, 1991.) - 10405. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
If performance becomes impracticable or is affected by compliance with a governmental regulation or order, delay or nondelivery is not a default if the lessor or supplier gives seasonable notice and, when needed, allocates deliveries fairly.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10405. Subject to Section 10404 on substituted performance, the following rules apply: (1) Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with paragraphs (2) and (3) is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid. (2) If the causes mentioned in paragraph (1) affect only part of the lessor’s or the supplier’s capacity to perform, he or she shall allocate production and deliveries among his or her customers but at his or her option may include regular customers not then under contract for sale or lease as well as his or her own requirements for further manufacture. He or she may so allocate in any manner that is fair and reasonable. (3) The lessor seasonably shall notify the lessee and in the case of a finance lease the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under paragraph (2), of the estimated quota thus made available for the lessee. (Amended by Stats. 1991, Ch. 111, Sec. 37. Effective July 15, 1991.) - 10406. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
After certain delay notices, the lessee may terminate the lease or, except in a finance lease, modify it by taking the available quota in substitution.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10406. (a) If the lessee receives notification of a material or indefinite delay or an allocation justified under Section 10405, the lessee may by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 10510): (1) Terminate the lease contract (subdivision (b) of Section 10505); or (2) Except in a finance lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor. (b) If, after receipt of a notification from the lessor under Section 10405, the lessee fails so to modify the lease agreement within a reasonable time not exceeding 30 days, the lease contract lapses with respect to any deliveries affected. (Amended by Stats. 1991, Ch. 111, Sec. 38. Effective July 15, 1991.) - 10407. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. )
In a non-consumer finance lease, the lessee’s promises become irrevocable and independent when the lessee accepts the goods.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 4. Performance of Leased Contract: Repudiated, Substituted, and Excused [10401 - 10407] ( Chapter 4 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10407. (a) In the case of a finance lease that is not a consumer lease the lessee’s promises under the lease contract become irrevocable and independent upon the lessee’s acceptance of the goods. (b) A promise that has become irrevocable and independent under subdivision (a): (1) Is effective and enforceable between the parties, and by or against third parties including assignees of the parties; and (2) Is not subject to cancellation, termination, modification, repudiation, excuse, or substitution without the consent of the party to whom the promise runs. (c) This section does not affect the validity under any other law of a covenant in any lease contract making the lessee’s promises irrevocable and independent upon the lessee’s acceptance of the goods. (Amended by Stats. 1991, Ch. 111, Sec. 39. Effective July 15, 1991.) - 10501. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
If the lessor or lessee is in default, the enforcing party gets the rights and remedies allowed by this division and the lease agreement, and may enforce the lease by judgment, self-help, or other judicial, nonjudicial, administrative, or arbitration procedures.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10501. (a) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this division. (b) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this division and, except as limited by this division, as provided in the lease agreement. (c) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement may reduce the party’s claim to judgment, or otherwise enforce the lease contract by self-help or any available judicial procedure or nonjudicial procedure, including administrative proceeding, arbitration, or the like, in accordance with this division. (d) Except as otherwise provided in subdivision (a) of Section 1305 or this division or the lease agreement, the rights and remedies referred to in subdivisions (b) and (c) are cumulative. (e) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this chapter as to the goods, or under other applicable law as to both the real property and the goods in accordance with that party’s rights and remedies in respect of the real property, in which case this chapter does not apply. (Amended by Stats. 2006, Ch. 254, Sec. 66. Effective January 1, 2007.) - 10502. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessor or lessee in default generally does not get notice of default or enforcement from the other party, unless the division or the lease agreement says otherwise.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10502. Except as otherwise provided in this division or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement. (Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 10503. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lease agreement may add or change default remedies and damages limits, unless the division says otherwise.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10503. (a) Except as otherwise provided in this division, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this division and may limit or alter the measure of damages recoverable under this division. (b) Resort to a remedy provided under this division or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, remedy may be had as provided in this division. (c) Consequential damages may be liquidated under Section 10504, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. Limitation, alteration, or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation, alteration, or exclusion of damages where the loss is commercial is not prima facie unconscionable. (d) Rights and remedies on default by the lessor or the lessee with respect to any obligation or promise collateral or ancillary to the lease contract are not impaired by this division. (Amended by Stats. 1991, Ch. 111, Sec. 41. Effective July 15, 1991.) - 10504. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
The lease may liquidate damages for default or other acts or omissions if it complies with Civil Code Section 1671. If it does not, other remedies apply, and the lessee may be entitled to restitution in some cases.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10504. (a) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to the lessor’s residual interest, may be liquidated in the lease agreement subject to and in compliance with Section 1671 of the Civil Code. (b) If the lease agreement provides for liquidation of damages, and such provision does not comply with subdivision (a), remedy may be had as provided in this division. (c) If the lessor justifiably withholds or stops delivery of goods because of the lessee’s default or insolvency (Section 10525 or 10526), the lessee is entitled to restitution of any amount by which the sum of his or her payments exceeds: (1) The amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages in accordance with subdivision (a); or (2) In the absence of those terms, 20 percent of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or five hundred dollars ($500). (d) A lessee’s right to restitution under subdivision (c) is subject to offset to the extent the lessor establishes: (1) A right to recover damages under the provisions of this division other than subdivision (a); and (2) The amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract. (Amended by Stats. 1991, Ch. 111, Sec. 42. Effective July 15, 1991.) - 10505. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section says that canceling or terminating a lease generally ends remaining mutual obligations, but certain rights and remedies survive.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10505. (a) On cancellation of the lease contract, all obligations that are still executory on both sides are discharged, but any right based on prior default or performance survives, and the canceling party also retains any remedy for default of the whole lease contract or any unperformed balance. (b) On termination of the lease contract, all obligations that are still executory on both sides are discharged but any right based on prior default or performance survives. (c) Unless the contrary intention clearly appears, expressions of “cancellation,” “rescission,” or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for an antecedent default. (d) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this division for default. (e) Neither rescission nor a claim for rescission of the lease contract nor rejection or return of the goods may bar or be deemed inconsistent with a claim for damages or other right or remedy. (Amended by Stats. 1991, Ch. 111, Sec. 43. Effective July 15, 1991.) - 10506. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
Claims for default, warranty breach, or indemnity under a lease contract must be started within four years after accrual; in non-consumer leases, the original contract may shorten that period to at least one year.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10506. (a) An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four years after the cause of action accrued. In a lease contract that is not a consumer lease, by the original lease contract the parties may reduce the period of limitation to not less than one year. (b) A cause of action for default accrues when the act or omission on which the default or breach of warranty is based is or should have been discovered by the aggrieved party, or when the default occurs, whichever is later. A cause of action for indemnity accrues when the act or omission on which the claim for indemnity is based is or should have been discovered by the indemnified party, whichever is later. (c) If an action commenced within the time limited by subdivision (a) is so terminated as to leave available a remedy by another action for the same default or breach of warranty or indemnity, the other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute. (d) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action that have accrued before the operative date of this division. (Amended by Stats. 1991, Ch. 111, Sec. 44. Effective July 15, 1991.) - 10507. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. )
Market-rent damages for personal property leases are measured using rent for the goods over a lease term matching the remaining lease term, with substitute rent evidence allowed when direct evidence is not readily available.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 1. In General [10501 - 10507] ( Article 1 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10507. (a) Damages based on market rent (Section 10519 or 10528) are determined according to the rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times specified in Sections 10519 and 10528. (b) If evidence of rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times or places described in this division is not readily available, the rent prevailing within any reasonable time before or after the time described or at any other place or for a different lease term which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the difference, including the cost of transporting the goods to or from the other place. (c) Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this division offered by one party is not admissible unless and until he or she has given the other party notice the court finds sufficient to prevent unfair surprise. (d) If the prevailing rent or value of any goods regularly leased in any established market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of that market are admissible in evidence. The circumstances of the preparation of the report may be shown to affect its weight but not its admissibility. (Amended by Stats. 1991, Ch. 111, Sec. 45. Effective July 15, 1991.) - 10508. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
If the lessor defaults, the lessee may cancel, recover payments, cover and seek damages, recover identified goods in some cases, and use other contract remedies.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10508. (a) If a lessor fails to deliver the goods in conformity to the lease contract (Section 10509) or repudiates the lease contract (Section 10402), or a lessee rightfully rejects the goods (Section 10509) or justifiably revokes acceptance of the goods (Section 10517), then with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 10510), the lessor is in default under the lease contract and the lessee may: (1) Cancel the lease contract (subdivision (a) of Section 10505); (2) Recover so much of the rent and security as has been paid and is just under the circumstances; (3) Cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (Sections 10518 and 10520), or recover damages for nondelivery (Sections 10519 and 10520); (4) Exercise any other rights or pursue any other remedies provided in the lease contract. (b) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also: (1) If the goods have been identified, recover them (Section 10522); or (2) In a proper case, obtain specific performance or replevy the goods (Section 10521). (c) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease, and in subdivision (c) of Section 10519. (d) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages(subdivision (d) of Section 10519). (e) On rightful rejection or justifiable revocation of acceptance, a lessee has a security interest in goods in the lessee’s possession or control for any rent and security that has been paid and any expenses reasonably incurred in their inspection, receipt, transportation, and care and custody, and may hold those goods and dispose of them in good faith and in a commercially reasonable manner, subject to subdivision (e) of Section 10527. (f) Subject to the provisions of Section 10407, a lessee, on notifying the lessor of the lessee’s intention to do so, may deduct all or any part of the damages resulting from any default under the lease contract from any part of the rent still due under the same lease contract. (Amended by Stats. 1991, Ch. 111, Sec. 46. Effective July 15, 1991.) - 10509. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
If leased goods or delivery do not conform to the lease contract, the lessee may reject them, accept them, or accept some commercial units and reject the rest.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10509. (a) Subject to the provisions of Section 10510 on default in installment lease contracts, if the goods or the tender or delivery fail in any respect to conform to the lease contract, the lessee may reject or accept the goods or accept any commercial unit or units and reject the rest of the goods. (b) Rejection of goods is ineffective unless it is within a reasonable time after tender or delivery of the goods and the lessee seasonably notifies the lessor. (Amended by Stats. 1991, Ch. 111, Sec. 47. Effective July 15, 1991.) - 10510. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee may reject a nonconforming delivery in an installment lease contract, but must accept it if the seller gives adequate assurance of cure and the defect is not covered by subdivision (b).
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10510. (a) Under an installment lease contract, a lessee may reject any delivery that is nonconforming if the nonconformity substantially impairs the value of that delivery and cannot be cured or the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subdivision (b) and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery. (b) Whenever nonconformity or default with respect to one or more deliveries substantially impairs the value of the installment lease contract as a whole there is a default with respect to the whole. But, the aggrieved party reinstates the installment lease contract as a whole if the aggrieved party accepts a nonconforming delivery without seasonably notifying of cancellation or brings an action with respect only to past deliveries or demands performance as to future deliveries. (Amended by Stats. 1991, Ch. 111, Sec. 48. Effective July 15, 1991.) - 10511. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A merchant lessee must follow reasonable instructions about rejected goods or, if no instructions are given, make reasonable efforts to sell, lease, or otherwise dispose of them when they are likely to lose value quickly.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10511. (a) Subject to any security interest of a lessee (subdivision (e) of Section 10508), if a lessor or a supplier has no agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in his or her possession or control, shall follow any reasonable instructions received from the lessor or the supplier with respect to the goods. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor’s account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming. (b) If a merchant lessee (subdivision (a)) or any other lessee (Section 10512) disposes of goods, he or she is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses include no disposition commission, to such commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding 10 percent of the gross proceeds. (c) In complying with this section or Section 10512, the lessee is held only to good faith. Good faith conduct hereunder is neither acceptance or conversion nor the basis of an action for damages. (d) A purchaser who purchases in good faith from a lessee pursuant to this section or Section 10512 takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one or more of the requirements of this division. (Amended by Stats. 1991, Ch. 111, Sec. 49. Effective July 15, 1991.) - 10512. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
After rejecting goods in its possession, the lessee must keep them with reasonable care and available to the lessor or supplier for a reasonable time.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10512. (a) Except as otherwise provided with respect to goods that threaten to decline in value speedily (Section 10511) and subject to any security interest of a lessee (subdivision (e) of Section 10508): (1) The lessee, after rejection of goods in the lessee’s possession, shall hold them with reasonable care at the lessor’s or the supplier’s disposition for a reasonable time after the lessee’s seasonable notification of rejection; (2) If the lessor or the supplier gives no instructions within a reasonable time after notification of rejection, the lessee may store the rejected goods for the lessor’s or the supplier’s account or ship them to the lessor or the supplier or dispose of them for the lessor’s or the supplier’s account with reimbursement in the manner provided in Section 10511; but (3) The lessee has no further obligations with regard to goods rightfully rejected. (b) Action by the lessee pursuant to subdivision (a) is not acceptance or conversion. (Amended by Stats. 1991, Ch. 111, Sec. 50. Effective July 15, 1991.) - 10513. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
If a lessor’s or supplier’s nonconforming tender or delivery is rejected, they may notify the lessee that they intend to cure and may make a conforming delivery within the lease contract time, or get a further reasonable time to substitute a conforming tender in the stated case.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10513. (a) If any tender or delivery by the lessor or the supplier is rejected because it is nonconforming and the time for performance has not yet expired, the lessor or the supplier may seasonably notify the lessee of the lessor’s or the supplier’s intention to cure and may then make a conforming delivery within the time provided in the lease contract. (b) If the lessee rejects a nonconforming tender that the lessor or the supplier had reasonable grounds to believe would be acceptable with or without money allowance, the lessor or the supplier may have a further reasonable time to substitute a conforming tender if he or she seasonably notifies the lessee. (Amended by Stats. 1991, Ch. 111, Sec. 51. Effective July 15, 1991.) - 10514. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee may lose the ability to rely on a defect if the defect was not specifically stated when rejecting goods, or if rights were not reserved when paying against documents.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10514. (a) In rejecting goods, a lessee’s failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default: (1) If, stated seasonably, the lessor or the supplier could have cured it (Section 10513); or (2) Between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely. (b) A lessee’s failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents. (Amended by Stats. 2006, Ch. 254, Sec. 67. Effective January 1, 2007.) - 10515. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
Acceptance of leased goods happens after the lessee has a reasonable chance to inspect them and either signals acceptance, keeps the goods despite nonconformity, or does not make an effective rejection.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10515. (a) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and (1) The lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or (2) The lessee fails to make an effective rejection of the goods (subdivision (b) of Section 10509). (b) Acceptance of a part of any commercial unit is acceptance of that entire unit. (Amended by Stats. 1991, Ch. 111, Sec. 53. Effective July 15, 1991.) - 10516. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee must pay rent for accepted goods and give timely notice of defaults or infringement litigation to the lessor and, if any, the supplier.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10516. (a) A lessee must pay rent for any goods accepted in accordance with the lease contract, with due allowance for goods rightfully rejected or not delivered. (b) A lessee’s acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, other than a consumer lease in which the supplier assisted in the preparation of the lease contract or participated in negotiating the terms of the lease contract with the lessor, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it. In any other case, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair any other remedy provided by this division or the lease agreement for nonconformity. (c) If a tender has been accepted: (1) Within a reasonable time after the lessee discovers or should have discovered any default, the lessee shall notify the lessor and the supplier, if any, or be barred from any remedy against the party not notified; (2) Within a reasonable time after the lessee receives notice of litigation for infringement or the like (Section 10211) the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and (3) The burden is on the lessee to establish any default. (d) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over the following apply: (1) The lessee may give the lessor or the supplier, or both, written notice of the litigation. If the notice states that the person notified may come in and defend and that if the person notified does not do so that person will be bound in any action against that person by the lessee by any determination of fact common to the two litigations, then unless the person notified after seasonable receipt of the notice does come in and defend that person is so bound. (2) The lessor or the supplier may demand in writing that the lessee turn over control of the litigation including settlement if the claim is one for infringement or the like (Section 10211) or else be barred from any remedy over. If the demand states that the lessor or the supplier agrees to bear all expense and to satisfy any adverse judgment, then unless the lessee after seasonable receipt of the demand does turn over control the lessee is so barred. (e) Subdivisions (c) and (d) apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (Section 10211). (f) Subdivision (c) shall not apply to a consumer lease. (Amended by Stats. 1991, Ch. 111, Sec. 54. Effective July 15, 1991.) - 10517. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee may revoke acceptance of leased goods in several situations, but must do so within a reasonable time and notify the lessor.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10517. (a) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if the lessee has accepted it: (1) Except in the case of a finance lease, on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or (2) Without discovery of the nonconformity if the lessee’s acceptance was reasonably induced either by the lessor’s assurances or, except in the case of a finance lease, by the difficulty of discovery before acceptance. (b) A lessee may revoke acceptance of a lot or commercial unit if the lessor defaults under the lease contract and the default substantially impairs the value of that lot or commercial unit to the lessee. (c) If the lease agreement so provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor. (d) Revocation of acceptance must occur within a reasonable time after the lessee discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by the nonconformity. Revocation is not effective until the lessee notifies the lessor. (e) A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them. (Amended by Stats. 1991, Ch. 111, Sec. 55. Effective July 15, 1991.) - 10518. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee may cover after a lessor’s default and may recover specified damages, subject to stated exceptions.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10518. (a) After a default by a lessor under the lease contract of the type described in subdivision (a) of Section 10508, or, if agreed, after other default by the lessor, the lessee may cover by making any purchase or lease of or contract to purchase or lease goods in substitution for those due from the lessor. (b) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 10504) or otherwise determined pursuant to agreement of the parties (Sections 1302 and 10503), if a lessee’s cover is by a lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages (1) the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement, and (2) any incidental or consequential damages, less expenses saved in consequence of the lessor’s default. (c) If a lessee’s cover is by lease agreement that for any reason does not qualify for treatment under subdivision (b), or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and Section 10519 governs. (Amended by Stats. 2006, Ch. 254, Sec. 68. Effective January 1, 2007.) - 10519. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section sets the damages measure for a lessor’s default, buyer rejection or revocation, and breach of warranty under a personal property lease.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10519. (a) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 10504) or otherwise determined pursuant to agreement of the parties (Sections 1302 and 10503), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under subdivision (b) of Section 10518, or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default. (b) Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival. (c) Except as otherwise agreed, if the lessee has accepted goods and given notification (subdivision (c) of Section 10516), the measure of damages for nonconforming tender or delivery or other default by a lessor is the loss resulting in the ordinary course of events from the lessor’s default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default. (d) Except as otherwise agreed, the measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default or breach of warranty. (Amended by Stats. 2006, Ch. 254, Sec. 69. Effective January 1, 2007.) - 10520. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section defines incidental and consequential damages that may result from a lessor’s default.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10520. (a) Incidental damages resulting from a lessor’s default include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses, or commissions in connection with effecting cover, and any other reasonable expense incident to the default. (b) Consequential damages resulting from a lessor’s default include: (1) Any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (2) Injury to person or property proximately resulting from any breach of warranty. (Amended by Stats. 1991, Ch. 111, Sec. 58. Effective July 15, 1991.) - 10521. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee may seek certain possessory remedies for identified goods if cover cannot reasonably be obtained, and a court may order specific performance in proper circumstances.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10521. (a) Specific performance may be decreed if the goods are unique or in other proper circumstances. (b) A decree for specific performance may include any terms and conditions as to payment of the rent, damages, or other relief that the court deems just. (c) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing. (Amended by Stats. 1991, Ch. 111, Sec. 59. Effective July 15, 1991.) - 10522. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessee may recover identified leased goods from the lessor if the lessee has paid rent and security, tenders any unpaid amount, the goods conform to the lease contract, and the lessor becomes insolvent within 10 days after the first installment is received.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 2. Default by Lessor [10508 - 10522] ( Article 2 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10522. (a) Subject to subdivision (b) and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract (Section 10217) on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within 10 days after receipt of the first installment of rent and security. (b) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract. (Amended by Stats. 1991, Ch. 111, Sec. 60. Effective July 15, 1991.) - 10523. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
If a lessee defaults, the lessor may cancel the lease and use several other contract or statutory remedies.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10523. (a) If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (Section 10510), the lessee is in default under the lease contract and the lessor may: (1) Cancel the lease contract (subdivision (a) of Section 10505); (2) Proceed respecting goods not identified to the lease contract (Section 10524); (3) Withhold delivery of the goods and take possession of goods previously delivered (Section 10525); (4) Stop delivery of the goods by any bailee (Section 10526); (5) Dispose of the goods and recover damages (Section 10527), or retain the goods and recover damages (Section 10528), or in a proper case recover rent (Section 10529); (6) Exercise any other rights or pursue any other remedies provided in the lease contract. (b) If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under subdivision (a), the lessor may recover the loss resulting in the ordinary course of events from the lessee’s default as determined in any reasonable manner, together with incidental damages, less expenses saved in consequence of the lessee’s default. (c) If a lessee is otherwise in default under a lease contract, the lessor may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease. In addition, unless otherwise provided in the lease contract: (1) If the default substantially impairs the value of the lease contract to the lessor, the lessor may exercise the rights and pursue the remedies provided in subdivisions (a) and (b); or (2) If the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in subdivision (b). (Amended by Stats. 1991, Ch. 111, Sec. 61. Effective July 15, 1991.) - 10524. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
After a lessee default, the lessor may identify conforming goods to the lease and dispose of certain intended goods; if goods are unfinished, the lessor or supplier may finish, identify, stop manufacture, or otherwise reasonably dispose of them.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10524. (a) After a default by the lessee under the lease contract of the type described in subdivision (a) of, or paragraph (1) of subdivision (c) of, Section 10523 or, if agreed, after other default by the lessee, the lessor may: (1) Identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor’s or the supplier’s possession or control; and (2) Dispose of goods (subdivision (a) of Section 10527) that demonstrably have been intended for the particular lease contract even though those goods are unfinished. (b) If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor or the supplier may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell, or otherwise dispose of the goods for scrap or salvage value or proceed in any other reasonable manner. (Amended by Stats. 1991, Ch. 111, Sec. 62. Effective July 15, 1991.) - 10525. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessor may refuse delivery if the lessee is insolvent, and after certain defaults the lessor may take possession of the goods and use specified self-help or court remedies.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10525. (a) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods. (b) After a default by the lessee under the lease contract of the type described in subdivision (a) of, or paragraph (1) of subdivision (c) of, Section 10523 or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract so provides, the lessor may require the lessee to assemble the goods and make them available to the lessor at a place to be designated by the lessor which is reasonably convenient to both parties. Without removal, the lessor may render unusable any goods employed in trade or business, and may dispose of goods on the lessee’s premises (Section 10527). (c) The lessor may proceed under subdivision (b) without judicial process if it can be done without breach of the peace or the lessor may proceed by action. (Amended by Stats. 1991, Ch. 111, Sec. 63. Effective July 15, 1991.) - 10526. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessor may stop delivery of leased goods in certain insolvency or default situations, and must notify the bailee to do so; after notice, the bailee must hold and deliver the goods as directed by the lessor.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10526. (a) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload, or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security, or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods. (b) In pursuing its remedies under subdivision (a), the lessor may stop delivery until: (1) Receipt of the goods by the lessee; (2) Acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or (3) Such an acknowledgment to the lessee by a carrier via reshipment or as a warehouse. (c) (1) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods. (2) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages. (3) 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. (Amended by Stats. 2006, Ch. 254, Sec. 70. Effective January 1, 2007.) - 10527. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
After certain lessee defaults, the lessor may dispose of the goods and may recover specified damages; a good-faith purchaser or lessee from the lessor takes the goods free of the original lease, and a lessee who rejected or revoked acceptance must account for any excess over its security interest.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10527. (a) After a default by a lessee under the lease contract of the type described in subdivision (a) of, or paragraph (1) of subdivision (c) of, Section 10523 or after the lessor refuses to deliver or takes possession of goods (Section 10525 or 10526), or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale, or otherwise. (b) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 10504) or otherwise determined pursuant to agreement of the parties (Sections 1302 and 10503), if the disposition is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages (1) accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement, (2) the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement, and (3) any incidental damages allowed under Section 10530, less expenses saved in consequence of the lessee’s default. (c) If the lessor’s disposition is by lease agreement that for any reason does not qualify for treatment under subdivision (b), or is by sale or otherwise, the lessor may recover from the lessee as if the lessor had elected not to dispose of the goods and Section 10528 governs. (d) A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one or more of the requirements of this division. (e) The lessor is not accountable to the lessee for any profit made on any disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee’s security interest (subdivision (e) of Section 10508). (Amended by Stats. 2006, Ch. 254, Sec. 71. Effective January 1, 2007.) - 10528. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
A lessor may recover specified damages from a lessee after certain defaults, subject to lease terms and other agreement-based adjustments.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10528. (a) Except as otherwise provided with respect to damages liquidated in the lease agreement (Section 10504) or otherwise determined pursuant to agreement of the parties (Sections 1302 and 10503), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under subdivision (b) of Section 10527, or is by sale or otherwise, the lessor may recover from the lessee as damages for a default of the type described in subdivision (a) of, or paragraph (1) of subdivision (c) of, Section 10523, or, if agreed, for other default of the lessee, (1) accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor, (2) the present value as of the date determined under paragraph (1) of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located computed for the same lease term, and (3) any incidental damages allowed under Section 10530, less expenses saved in consequence of the lessee’s default. (b) If the measure of damages provided in subdivision (a) is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under Section 10530, due allowance for costs reasonably incurred and due credit for payments or proceeds of disposition. (Amended by Stats. 2006, Ch. 254, Sec. 72. Effective January 1, 2007.) - 10529. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
After a lessee’s default, the lessor may recover specified damages, must hold certain goods for the remaining lease term unless the goods are disposed of, and may dispose of the goods before judgment collection.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10529. (a) After default by the lessee under the lease contract of the type described in subdivision (a) of, or paragraph (1) of subdivision (c) of, Section 10523 or, if agreed, after other default by the lessee, if the lessor complies with subdivision (b), the lessor may recover from the lessee as damages: (1) For goods accepted by the lessee and not repossessed by or tendered to the lessor, and for conforming goods lost or damaged after risk of loss passes to the lessee (Section 10219), (A) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (B) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (C) any incidental damages allowed under Section 10530, less expenses saved in consequence of the lessee’s default; and (2) For goods identified to the lease contract where the lessor has never delivered the goods or has taken possession of them or the lessee has tendered them to the lessor, if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that effort will be unavailing, (A) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (B) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (C) any incidental damages allowed under Section 10530, less expenses saved in consequence of the lessee’s default. (b) Except as provided in subdivision (c), the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor’s control. (c) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to subdivision (a). If the disposition is before the end of the remaining lease term of the lease agreement, the lessor’s recovery against the lessee for damages is governed by Section 10527 or 10528, and the lessor will cause an appropriate credit to be provided against a judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to Section 10527 or 10528. (d) Payment of the judgment for damages obtained pursuant to subdivision (a) entitles the lessee to the use and possession of the goods not then disposed of for the remaining lease term of and in accordance with the lease agreement. (e) After default by the lessee under the lease contract of the type described in subdivision (a) of, or paragraph (1) of subdivision (c) of, Section 10523 or, if agreed, after other default by the lessee, a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for nonacceptance under Section 10527 or 10528. (Amended by Stats. 1991, Ch. 111, Sec. 67. Effective July 15, 1991.) - 10530. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
An aggrieved lessor may treat certain commercially reasonable post-default costs as incidental damages.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10530. Incidental damages to an aggrieved lessor include any commercially reasonable charges, expenses, or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the lessee’s default, in connection with return or disposition of the goods, or otherwise resulting from the default. (Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 10531. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
If a third party injures goods identified to a lease contract, the lessor has a right to sue, and the lessee may also sue if specific interest or risk-of-loss conditions are met.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10531. (a) If a third party so deals with goods that have been identified to a lease contract as to cause actionable injury to a party to the lease contract (1) the lessor has a right of action against the third party, and (2) the lessee also has a right of action against the third party if the lessee: (A) Has a security interest in the goods; (B) Has an insurable interest in the goods; or (C) Bears the risk of loss under the lease contract or has since the injury assumed that risk as against the lessor and the goods have been converted or destroyed. (b) If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the lease contract and there is no arrangement between them for disposition of the recovery, his or her suit or settlement, subject to his or her own interest, is as a fiduciary for the other party to the lease contract. (c) Either party with the consent of the other may sue for the benefit of whom it may concern. (Amended by Stats. 1991, Ch. 111, Sec. 68. Effective July 15, 1991.) - 10532. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. )
The lessor may recover an amount from the lessee to fully compensate for loss of or damage to the lessor’s residual interest in the goods caused by the lessee’s default.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 5. Default [10501 - 10532] ( Chapter 5 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## ARTICLE 3. Default by Lessee [10523 - 10532] ( Article 3 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10532. In addition to any other recovery permitted by this division or other law, the lessor may recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor’s residual interest in the goods caused by the default of the lessee. (Amended by Stats. 1991, Ch. 111, Sec. 69. Effective July 15, 1991.) - 10600. Verify source ↗
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 6. Transition Provisions [10600- 10600.] ( Chapter 6 added by Stats. 1988, Ch. 1359, Sec. 5. )
This section says the division applies to lease contracts first made or first effective on or after January 1, 1990.
## Commercial Code - COM ## DIVISION 10. PERSONAL PROPERTY LEASES [10101 - 10600] ( Division 10 repealed and added by Stats. 1988, Ch. 1359, Sec. 5. ) ## CHAPTER 6. Transition Provisions [10600- 10600.] ( Chapter 6 added by Stats. 1988, Ch. 1359, Sec. 5. ) ## 10600. This division shall apply to all lease contracts that are first made or that first become effective between the parties on or after January 1, 1990. This division shall not apply to any lease contract first made or that first became effective between the parties prior to January 1, 1990, or to any extension, amendment, modification, renewal, or supplement of or to the lease contract, unless the parties thereto specifically agree in writing that the lease contract, as extended, amended, modified, renewed, or supplemented, shall be governed by this division. (Added by Stats. 1988, Ch. 1359, Sec. 5. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 1101. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This code may be cited as the Uniform Commercial Code.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1101. This code may be cited as the Uniform Commercial Code. (Amended by Stats. 2006, Ch. 254, Sec. 6. Effective January 1, 2007.) - 1102. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This division applies to a transaction only to the extent the transaction is governed by another division of the code.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1102. This division applies to a transaction to the extent that it is governed by another division of this code. (Repealed and added by Stats. 2006, Ch. 254, Sec. 8. Effective January 1, 2007.) - 1103. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This provision says the code should be interpreted and applied broadly to further its purposes, and that general law and equity principles supplement it unless the code displaces them.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1103. (a) This code shall be liberally construed and applied to promote its underlying purposes and policies, which are: (1) to simplify, clarify, and modernize the law governing commercial transactions; (2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) to make uniform the law among the various jurisdictions. (b) Unless displaced by the particular provisions of this code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions. (Amended by Stats. 2006, Ch. 254, Sec. 9. Effective January 1, 2007.) - 1104. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section says the code should be treated as a general, unified act, and its parts should not be considered impliedly repealed by later legislation if that can reasonably be avoided.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1104. This code 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. (Enacted by Stats. 1963, Ch. 819.) - 1105. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
If one provision or application of the code is invalid, the rest of the code still applies when it can function without the invalid part.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1105. If any provision or clause of this code or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the code which can be given effect without the invalid provision or application, and to this end the provisions of this code are severable. (Added by renumbering Section 1108 by Stats. 2006, Ch. 254, Sec. 14. Effective January 1, 2007.) - 1106. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section says that, unless the statutory context requires otherwise, singular words include the plural, plural words include the singular, and words of one gender refer to other genders.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1106. In this code, unless the statutory context otherwise requires: (1) words in the singular number include the plural, and those in the plural include the singular; and (2) words of any gender also refer to any other gender. (Added by Stats. 2006, Ch. 254, Sec. 12. Effective January 1, 2007.) - 1108. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This chapter overrides the federal Electronic Signatures in Global and National Commerce Act, but it does not override Section 7001(c) and does not authorize electronic delivery of the notices listed in Section 7003(b).
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, Construction, Application and Subject Matter of the Code [1101 - 1108] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 1108. This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., except that nothing in this chapter modifies, limits, or supersedes Section 7001(c) of that act or authorizes electronic delivery of any of the notices described in Section 7003(b) of that act. (Added by Stats. 2006, Ch. 254, Sec. 15. Effective January 1, 2007.) - 11101. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
This section says Division 11 may be cited as Uniform Commercial Code—Funds Transfers.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11101. This division may be cited as Uniform Commercial Code—Funds Transfers. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11102. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
This division applies to funds transfers defined in Section 11104, unless Section 11108 provides otherwise.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11102. Except as otherwise provided in Section 11108, this division applies to funds transfers defined in Section 11104. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11103. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines key funds-transfer terms like payment order, beneficiary, beneficiary’s bank, receiving bank, and sender.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11103. (a) In this division: (1) “Payment order” means an instruction of a sender to a receiving bank, transmitted orally or in a record, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if all of the following apply: (i) The instruction does not state a condition to payment to the beneficiary other than time of payment. (ii) The receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender. (iii) The instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank. (2) “Beneficiary” means the person to be paid by the beneficiary’s bank. (3) “Beneficiary’s bank” means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account. (4) “Receiving bank” means the bank to which the sender’s instruction is addressed. (5) “Sender” means the person giving the instruction to the receiving bank. (b) If an instruction complying with paragraph (1) of subdivision (a) is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment. (c) A payment order is issued when it is sent to the receiving bank. (Amended by Stats. 2023, Ch. 210, Sec. 81. (SB 95) Effective January 1, 2024.) - 11104. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines key terms used in the funds transfer division.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11104. In this division: (a) “Funds transfer” means the series of transactions, beginning with the originator’s payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment order. A funds transfer is completed by acceptance by the beneficiary’s bank of a payment order for the benefit of the beneficiary of the originator’s payment order. (b) “Intermediary bank” means a receiving bank other than the originator’s bank or the beneficiary’s bank. (c) “Originator” means the sender of the first payment order in a funds transfer. (d) “Originator’s bank” means (i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11105. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines key terms used in the funds transfer division.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11105. (a) In this division: (1) “Authorized account” means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account. (2) “Bank” means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company. A branch or separate office of a bank is a separate bank for purposes of this division. (3) “Customer” means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders. (4) “Funds-transfer business day” of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders. (5) “Funds-transfer system” means a wire transfer network, automated clearinghouse, or other communication system of a clearinghouse or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed. (6) [Reserved] (7) “Prove” with respect to a fact means to meet the burden of establishing the fact under subdivision (8) of Section 1201. (b) Other definitions applying to this division and the sections in which they appear are: Acceptance: Section 11209. Beneficiary: Section 11103. Beneficiary’s bank: Section 11103. Executed: Section 11301. Execution date: Section 11301. Funds transfer: Section 11104. Funds-transfer system rule: Section 11501. Intermediary bank: Section 11104. Originator: Section 11104. Originator’s bank: Section 11104. Payment by beneficiary’s bank to beneficiary: Section 11405. Payment by originator to beneficiary: Section 11406. Payment by sender to receiving bank: Section 11403. Payment date: Section 11401. Payment order: Section 11103. Receiving bank: Section 11103. Security procedure: Section 11201. Sender: Section 11103. (c) The following definitions in Division 4 (commencing with Section 4101) apply to this division: Clearinghouse: Section 4104. Item: Section 4104. Suspends payments: Section 4104. (d) In addition, Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division. (Amended by Stats. 2006, Ch. 254, Sec. 73. Effective January 1, 2007.) - 11106. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
A receiving bank may set cutoff times for processing payment orders and related cancellations or amendments, and may treat items received late as received at the start of the next funds-transfer business day.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11106. (a) The time of receipt of a payment order or communication canceling or amending a payment order is determined by the rules applicable to receipt of a notice stated in Section 1202. A receiving bank may fix a cutoff time or times on a funds-transfer business day for the receipt and processing of payment orders and communications canceling or amending payment orders. Different cutoff times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cutoff time may apply to senders generally or different cutoff times may apply to different senders or categories of payment orders. If a payment order or communication canceling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cutoff time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day. (b) If this division refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this division. (Amended by Stats. 2006, Ch. 254, Sec. 74. Effective January 1, 2007.) - 11107. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
Federal Reserve Board regulations and Federal Reserve Bank operating circulars override any conflicting part of this division, but only to the extent of the conflict.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11107. 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 division to the extent of the inconsistency. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11108. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. )
This section limits when the division applies to funds transfers and gives priority to the federal act if there is a conflict.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 1. Subject Matter and Definitions [11101 - 11108] ( Chapter 1 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11108. (a) Except as provided in subdivision (b), this division does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. Sec. 1693 et seq.) as amended from time to time. (b) This division shall apply to a funds transfer that is a remittance transfer as defined in Section 1693o-1 of Title 15 of the United States Code, as amended from time to time, unless the remittance transfer is an electronic fund transfer as defined in Section 1693a of Title 15 of the United States Code, as amended from time to time. (c) In a funds transfer pursuant to this division, if there is an inconsistency between the applicable provision of this division and the federal act, the applicable provisions of the federal act shall control to the extent of the inconsistency. (Amended by Stats. 2012, Ch. 392, Sec. 1. (SB 708) Effective January 1, 2013.) - 11201. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines “security procedure” for payment orders and says certain simple checks are not enough by themselves to count as one.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11201. “Security procedure” means a procedure established by agreement of a customer and a receiving bank for the purpose of (i) verifying that a payment order or communication amending or canceling a payment order is that of the customer, or (ii) detecting error in the transmission or the content of the payment order or communication. A security procedure may impose an obligation on the receiving bank or the customer and may require the use of algorithms or other codes, identifying words, numbers, symbols, sounds, biometrics, encryption, callback procedures, or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer or requiring a payment order to be sent from a known email address, IP address, or telephone number is not by itself a security procedure. (Amended by Stats. 2023, Ch. 210, Sec. 82. (SB 95) Effective January 1, 2024.) - 11202. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
This section says when a payment order counts as the sender’s authorized order, when it can be treated as the customer’s order under a security procedure, and when the bank does not have to follow certain customer instructions.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11202. (a) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency. (b) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if (i) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and (ii) the bank proves that it accepted the payment order in good faith and in compliance with the bank’s obligations under the security procedure and any agreement or instruction of the customer, evidenced by a record, restricting acceptance of payment orders issued in the name of the customer. The bank is not required to follow an instruction that violates an agreement with the customer, evidenced by a record, or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted. (c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving banks similarly situated. A security procedure is deemed to be commercially reasonable if (i) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer, and (ii) the customer expressly agreed in a record to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the bank’s obligations under the security procedure chosen by the customer. (d) The term “sender” in this division includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subdivision (a), or it is effective as the order of the customer under subdivision (b). (e) This section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders. (f) Except as provided in this section and in paragraph (1) of subdivision (a) of Section 11203, rights and obligations arising under this section or Section 11203 may not be varied by agreement. (Amended by Stats. 2023, Ch. 210, Sec. 83. (SB 95) Effective January 1, 2024.) - 11203. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
A receiving bank may, by express written agreement, limit its ability to enforce or keep payment on a payment order. It may not enforce or retain payment if the customer proves the order was not caused by specified trusted or unauthorized access persons.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11203. (a) If an accepted payment order is not, under subdivision (a) of Section 11202, an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to subdivision (b) of Section 11202, the following rules apply: (1) By express agreement evidenced by a record, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order. (2) The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by a person (i) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure, or (ii) who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault. Information includes any access device, computer software, or the like. (b) This section applies to amendments of payment orders to the same extent it applies to payment orders. (Amended by Stats. 2023, Ch. 210, Sec. 84. (SB 95) Effective January 1, 2024.) - 11204. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
If a receiving bank accepts an unauthorized or otherwise unenforceable payment order, it must refund the customer’s payment and pay interest, subject to a customer notice-and-care exception.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11204. (a) If a receiving bank accepts a payment order issued in the name of its customer as sender which is (i) not authorized and not effective as the order of the customer under Section 11202, or (ii) not enforceable, in whole or in part, against the customer under Section 11203, the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund. However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding 90 days after the date the customer received notification from the bank that the order was accepted or that the customer’s account was debited with respect to the order. The bank is not entitled to any recovery from the customer on account of a failure by the customer to give notification as stated in this section. (b) Reasonable time under subdivision (a) may be fixed by agreement as stated in subdivision (b) of Section 1302, but the obligation of a receiving bank to refund payment as stated in subdivision (a) may not otherwise be varied by agreement. (Amended by Stats. 2006, Ch. 254, Sec. 75. Effective January 1, 2007.) - 11205. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
This section allocates responsibility for erroneous payment orders sent under a security procedure, limits the sender’s payment obligation in some cases, and gives the receiving bank recovery rights in others.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11205. (a) If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order (i) erroneously instructed payment to a beneficiary not intended by the sender, (ii) erroneously instructed payment in an amount greater than the amount intended by the sender, or (iii) was an erroneously transmitted duplicate of a payment order previously sent by the sender, the following rules apply: (1) If the sender proves that the sender or a person acting on behalf of the sender pursuant to Section 11206 complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in paragraphs (2) and (3). (2) If the funds transfer is completed on the basis of an erroneous payment order described in clause (i) or (iii) of this subdivision, the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution. (3) If the funds transfer is completed on the basis of a payment order described in clause (ii) of this subdivision, the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender. In that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution. (b) If (i) the sender of an erroneous payment order described in subdivision (a) is not obliged to pay all or part of the order, and (ii) the sender receives notification from the receiving bank that the order was accepted by the bank or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding 90 days, after the bank’s notification was received by the sender. If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender’s order. (c) This section applies to amendments to payment orders to the same extent it applies to payment orders. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11206. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
A funds-transfer system receiving a payment order is treated as the sender’s agent for transmitting it to the bank, and the sender’s terms control if there is a mismatch; this section does not apply to Federal Reserve Banks’ funds-transfer systems.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11206. (a) If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other third-party communication system for transmittal to the bank, the system is deemed to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system. This section does not apply to a funds-transfer system of the Federal Reserve Banks. (b) This section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11207. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
Rules for payment orders with mismatched or unidentifiable beneficiary details.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11207. (a) Subject to subdivision (b), if, in a payment order received by the beneficiary’s bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur. (b) If a payment order received by the beneficiary’s bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply: (1) Except as otherwise provided in subdivision (c), if the beneficiary’s bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary’s bank need not determine whether the name and number refer to the same person. (2) If the beneficiary’s bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary’s bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur. (c) If (i) a payment order described in subdivision (b) is accepted, (ii) the originator’s payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary’s bank pays the person identified by number as permitted by paragraph (1) of subdivision (b), the following rules apply: (1) If the originator is a bank, the originator is obliged to pay its order. (2) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator’s bank proves that the originator, before acceptance of the originator’s order, had notice that payment of a payment order issued by the originator might be made by the beneficiary’s bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator’s bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a record stating the information to which the notice relates. (d) In a case governed by paragraph (1) of subdivision (b), if the beneficiary’s bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows: (1) If the originator is obliged to pay its payment order as stated in subdivision (c), the originator has the right to recover. (2) If the originator is not a bank and is not obliged to pay its payment order, the originator’s bank has the right to recover. (Amended by Stats. 2023, Ch. 210, Sec. 85. (SB 95) Effective January 1, 2024.) - 11208. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
This section lets a receiving bank rely on an identifying number or, in some cases, a name when processing a payment order, and it requires the sender to cover resulting loss and expenses in specified situations.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11208. (a) This subdivision applies to a payment order identifying an intermediary bank or the beneficiary’s bank only by an identifying number. (1) The receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank and need not determine whether the number identifies a bank. (2) The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order. (b) This subdivision applies to a payment order identifying an intermediary bank or the beneficiary’s bank both by name and an identifying number if the name and number identify different persons. (1) If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, when it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order. (2) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary’s bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by paragraph (1) of subdivision (b), as though the sender were a bank. Proof of notice may be made by any admissible evidence. The receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a record stating the information to which the notice relates. (3) Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, at the time it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person. (4) If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender’s payment order is a breach of the obligation stated in paragraph (1) of subdivision (a) of Section 11302. (Amended by Stats. 2023, Ch. 210, Sec. 86. (SB 95) Effective January 1, 2024.) - 11209. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
This section says when a payment order is accepted by a receiving bank or beneficiary’s bank, and when acceptance cannot happen.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11209. (a) Subject to subdivision (d), a receiving bank other than the beneficiary’s bank accepts a payment order when it executes the order. (b) Subject to subdivisions (c) and (d), a beneficiary’s bank accepts a payment order at the earliest of the following times: (1) When the bank (i) pays the beneficiary as stated in subdivision (a) or (b) of Section 11405, or (ii) notifies the beneficiary of receipt of the order or that the account of the beneficiary has been credited with respect to the order unless the notice indicates that the bank is rejecting the order or that funds with respect to the order may not be withdrawn or used until receipt of payment from the sender of the order. (2) When the bank receives payment of the entire amount of the sender’s order pursuant to paragraph (1) or (2) of subdivision (a) of Section 11403. (3) The opening of the next funds-transfer business day of the bank following the payment date of the order if, at that time, the amount of the sender’s order is fully covered by a withdrawable credit balance in an authorized account of the sender or the bank has otherwise received full payment from the sender, unless the order was rejected before that time or is rejected within (i) one hour after that time, or (ii) one hour after the opening of the next business day of the sender following the payment date if that time is later. If notice of rejection is received by the sender after the payment date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the payment date to the day the sender receives notice or learns that the order was not accepted, counting that day as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest payable is reduced accordingly. (c) Acceptance of a payment order cannot occur before the order is received by the receiving bank. Acceptance does not occur under paragraph (2) or (3) of subdivision (b) if the beneficiary of the payment order does not have an account with the receiving bank, the account has been closed, or the receiving bank is not permitted by law to receive credits for the beneficiary’s account. (d) A payment order issued to the originator’s bank cannot be accepted until the payment date if the bank is the beneficiary’s bank, or the execution date if the bank is not the beneficiary’s bank. If the originator’s bank executes the originator’s payment order before the execution date or pays the beneficiary of the originator’s payment order before the payment date and the payment order is subsequently canceled pursuant to subdivision (b) of Section 11211, the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11210. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
The receiving bank can reject a payment order by giving the sender notice, and rejection timing depends on whether the notice method is reasonable. If the bank fails to execute a covered order and no rejection notice is received on the execution date, the bank must pay interest to the sender. Acceptance and rejection block later inconsistent actions.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11210. (a) A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally or in a record. A notice of rejection need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order. Rejection is effective when the notice is given if transmission is by a means that is reasonable in the circumstances. If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received. If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order, (i) any means complying with the agreement is reasonable and (ii) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means. (b) This subdivision applies if a receiving bank other than the beneficiary’s bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order. If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is canceled pursuant to subdivision (d) of Section 11211 or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly. (c) If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments. (d) Acceptance of a payment order precludes a later rejection of the order. Rejection of a payment order precludes a later acceptance of the order. (Amended by Stats. 2023, Ch. 210, Sec. 87. (SB 95) Effective January 1, 2024.) - 11211. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
This section governs when a sender may cancel or amend a payment order, and when those changes become effective.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11211. (a) A communication of the sender of a payment order canceling or amending the order may be transmitted to the receiving bank orally or in a record. If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified pursuant to the security procedure or the bank agrees to the cancellation or amendment. (b) Subject to subdivision (a), a communication by the sender canceling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order. (c) After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank. (1) With respect to a payment order accepted by a receiving bank other than the beneficiary’s bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made. (2) With respect to a payment order accepted by the beneficiary’s bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a payment order (i) that is a duplicate of a payment order previously issued by the sender, (ii) that orders payment to a beneficiary not entitled to receive payment from the originator, or (iii) that orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator. If the payment order is canceled or amended, the beneficiary’s bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution. (d) An unaccepted payment order is canceled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date or payment date of the order. (e) A canceled payment order cannot be accepted. If an accepted payment order is canceled, the acceptance is nullified and no person has any right or obligation based on the acceptance. Amendment of a payment order is deemed to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time. (f) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank’s agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney’s fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment. (g) A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order. (h) A funds-transfer system rule is not effective to the extent it conflicts with paragraph (2) of subdivision (c). (Amended by Stats. 2023, Ch. 210, Sec. 88. (SB 95) Effective January 1, 2024.) - 11212. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. )
A receiving bank is liable if it fails to accept a payment order it was expressly agreed to accept; otherwise it has no duty to accept the order or act on it before acceptance, except as provided by the division or express agreement.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 2. Issue and Acceptance of Payment Order [11201 - 11212] ( Chapter 2 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11212. If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this division, but does not otherwise have any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this division or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in Section 11209, and liability is limited to that provided in this division. A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this division or by express agreement. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11301. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines when a payment order is “executed” and what counts as its “execution date.”
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11301. (a) A payment order is “executed” by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank. A payment order received by the beneficiary’s bank can be accepted but cannot be executed. (b) “Execution date” of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender’s order. The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received. If the sender’s instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11302. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. )
A receiving bank that accepts a payment order must execute it according to the sender’s instructions, subject to specified exceptions, and it may not take its charges out of the payment amount unless the sender instructs it to do so.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11302. (a) Except as provided in subdivisions (b) to (d), inclusive, if the receiving bank accepts a payment order pursuant to subdivision (a) of Section 11209, the bank has the following obligations in executing the order: (1) The receiving bank is obliged to issue, on the execution date, a payment order complying with the sender’s order and to follow the sender’s instructions concerning (i) any intermediary bank or funds-transfer system to be used in carrying out the funds transfer, or (ii) the means by which payment orders are to be transmitted in the funds transfer. If the originator’s bank issues a payment order to an intermediary bank, the originator’s bank is obliged to instruct the intermediary bank according to the instruction of the originator. An intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts. (2) If the sender’s instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct any intermediary bank accordingly. If a sender’s instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment date or as soon thereafter as is feasible. (b) Unless otherwise instructed, a receiving bank executing a payment order may (i) use any funds-transfer system if use of that system is reasonable in the circumstances, and (ii) issue a payment order to the beneficiary’s bank or to an intermediary bank through which a payment order conforming to the sender’s order can expeditiously be issued to the beneficiary’s bank if the receiving bank exercises ordinary care in the selection of the intermediary bank. A receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer. (c) Unless paragraph (2) of subdivision (a) applies or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first-class mail or by any means reasonable in the circumstances. If the receiving bank is instructed to execute the sender’s order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by the means stated or by any means as expeditious as the means stated. (d) Unless instructed by the sender, (i) the receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender’s order by issuing a payment order in an amount equal to the amount of the sender’s order less the amount of the charges, and (ii) may not instruct a subsequent receiving bank to obtain payment of its charges in the same manner. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11303. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. )
This section gives a receiving bank and an erroneous-order issuer limited rights to payment or recovery when payment orders are issued for the wrong amount or to the wrong beneficiary, and it says the sender and prior senders are not obliged to pay in the specified error case.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11303. (a) A receiving bank that (i) executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender’s order, or (ii) issues a payment order in execution of the sender’s order and then issues a duplicate order, is entitled to payment of the amount of the sender’s order under subdivision (c) of Section 11402 if that subdivision is otherwise satisfied. The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution. (b) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender’s order is entitled to payment of the amount of the sender’s order under subdivision (c) of Section 11402 if (i) that subdivision is otherwise satisfied and (ii) the bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the sender’s order. If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. This subdivision does not apply if the receiving bank executes the sender’s payment order by issuing a payment order in an amount less than the amount of the sender’s order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender. (c) If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender’s order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued. The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11304. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. )
If a sender is told by the receiving bank that an order was executed or the sender’s account was debited, the sender must use ordinary care to check whether the order was executed erroneously and notify the bank of the relevant facts within 90 days.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11304. If the sender of a payment order that is erroneously executed as stated in Section 11303 receives notification from the receiving bank that the order was executed or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding 90 days after the notification from the bank was received by the sender. If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under subdivision (d) of Section 11402 for the period before the bank learns of the execution error. The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this section. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11305. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. )
A receiving bank that improperly executes or fails to execute a payment order can owe interest, expenses, and some damages; extra damages are limited by agreement or by the section’s exceptions.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 3. Execution of Sender’s Payment Order by Receiving Bank [11301 - 11305] ( Chapter 3 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11305. (a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of Section 11302 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the improper execution. Except as provided in subdivision (c), additional damages are not recoverable. (b) If execution of a payment order by a receiving bank in breach of Section 11302 results in (i) noncompletion of the funds transfer, (ii) failure to use an intermediary bank designated by the originator, or (iii) issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by subdivision (a), resulting from the improper execution. Except as provided in subdivision (c), additional damages are not recoverable. (c) In addition to the amounts payable under subdivisions (a) and (b), damages, including consequential damages, are recoverable to the extent provided in an express agreement of the receiving bank, evidenced by a record. (d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express agreement of the receiving bank, evidenced by a record, but are not otherwise recoverable. (e) Reasonable attorney’s fees are recoverable if demand for compensation under subdivision (a) or (b) is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under subdivision (d) and the agreement does not provide for damages, reasonable attorney’s fees are recoverable if demand for compensation under subdivision (d) is made and refused before an action is brought on the claim. (f) Except as stated in this section, the liability of a receiving bank under subdivisions (a) and (b) may not be varied by agreement. (Amended by Stats. 2023, Ch. 210, Sec. 89. (SB 95) Effective January 1, 2024.) - 11401. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines the “payment date” for a payment order and says it can be set by the sender, but not earlier than when the beneficiary’s bank receives the order; otherwise, it is the receipt day.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11401. “Payment date” of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary’s bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary’s bank and, unless otherwise determined, is the day the order is received by the beneficiary’s bank. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11402. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. )
This section sets when a sender must pay a payment order, when payment is due, when a bank must refund overpayment, and when certain rights cannot be changed by agreement.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11402. (a) This section is subject to Sections 11205 and 11207. (b) With respect to a payment order issued to the beneficiary’s bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order. (c) This subdivision is subject to subdivision (e) and to Section 11303. With respect to a payment order issued to a receiving bank other than the beneficiary’s bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender’s order. Payment by the sender is not due until the execution date of the sender’s order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary’s bank of a payment order instructing payment to the beneficiary of that sender’s payment order. (d) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in Sections 11204 and 11304, interest is payable on the refundable amount from the date of payment. (e) If a funds transfer is not completed as stated in subdivision (c) and an intermediary bank is obliged to refund payment as stated in subdivision (d) but is unable to do so because it is not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in paragraph (1) of subdivision (a) of Section 11302, to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in subdivision (d). (f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subdivision (c) or to receive refund under subdivision (d) may not be varied by agreement. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11403. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. )
This section says when payment of the sender’s obligation to the receiving bank is treated as made, depending on how the transfer is settled.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11403. (a) Payment of the sender’s obligation under Section 11402 to pay the receiving bank occurs as follows: (1) If the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a Federal Reserve Bank or through a funds-transfer system. (2) If the sender is a bank and the sender (i) credited an account of the receiving bank with the sender, or (ii) caused an account of the receiving bank in another bank to be credited, payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact. (3) If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account. (b) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender’s obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subdivision has been exercised. (c) If two banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under Section 11402 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff, each bank has made payment to the other. (d) In a case not covered by subdivision (a), the time when payment of the sender’s obligation under subdivision (b) or (c) of Section 11402 occurs is governed by applicable principles of law that determine when an obligation is satisfied. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11404. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. )
If a beneficiary’s bank accepts a payment order, it must pay the beneficiary and may have to notify the beneficiary; failures can trigger interest, damages, and attorney’s fees.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11404. (a) Subject to subdivision (e) of Section 11211, and subdivisions (d) and (e) of Section 11405, if a beneficiary’s bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment. (b) If a payment order accepted by the beneficiary’s bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first-class mail or any other means reasonable in the circumstances. If the bank fails to give the required notice, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. No other damages are recoverable. Reasonable attorney’s fees are also recoverable if demand for interest is made and refused before an action is brought on the claim. (c) The right of a beneficiary to receive payment and damages as stated in subdivision (a) may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subdivision (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11405. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. )
This section says when a beneficiary’s bank payment obligation is treated as paid, when provisional payments may be used, when refund rights apply, and when settlement failure cancels acceptance and excuses senders.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11405. (a) If the beneficiary’s bank credits an account of the beneficiary of a payment order, payment of the bank’s obligation under subdivision (a) of Section 11404 occurs when and to the extent (i) the beneficiary is notified of the right to withdraw the credit, (ii) the bank lawfully applies the credit to a debt of the beneficiary, or (iii) funds with respect to the order are otherwise made available to the beneficiary by the bank. (b) If the beneficiary’s bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank’s obligation under subdivision (a) of Section 11404 occurs is governed by principles of law that determine when an obligation is satisfied. (c) Except as stated in subdivisions (d) and (e), if the beneficiary’s bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable. (d) A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary’s bank of the payment order it accepted. A beneficiary’s bank that makes a payment that is provisional under the rule is entitled to refund from the beneficiary if (i) the rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated, (ii) the beneficiary, the beneficiary’s bank and the originator’s bank agreed to be bound by the rule, and (iii) the beneficiary’s bank did not receive payment of the payment order that it accepted. If the beneficiary is obliged to refund payment to the beneficiary’s bank, acceptance of the payment order by the beneficiary’s bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under Section 11406. (e) This subdivision applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that (i) nets obligations multilaterally among participants, and (ii) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one or more participants that do not meet their settlement obligations. If the beneficiary’s bank in the funds transfer accepts a payment order and the system fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer, (i) the acceptance by the beneficiary’s bank is nullified and no person has any right or obligation based on the acceptance, (ii) the beneficiary’s bank is entitled to recover payment from the beneficiary, (iii) no payment by the originator to the beneficiary occurs under Section 11406, and (iv) subject to subdivision (e) of Section 11402, each sender in the funds transfer is excused from its obligation to pay its payment order under subdivision (c) of Section 11402 because the funds transfer has not been completed. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11406. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. )
An originator must pay the beneficiary when the beneficiary’s bank accepts the payment order, and the payment amount is capped at the originator’s order amount.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 4. Payment [11401 - 11406] ( Chapter 4 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11406. (a) Subject to subdivision (e) of Section 11211 and subdivisions (d) and (e) of Section 11405, the originator of a funds transfer pays the beneficiary of the originator’s payment order (i) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary’s bank in the funds transfer and (ii) in an amount equal to the amount of the order accepted by the beneficiary’s bank, but not more than the amount of the originator’s order. (b) If payment under subdivision (a) is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless (i) the payment under subdivision (a) was made by a means prohibited by the contract of the beneficiary with respect to the obligation, (ii) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary’s bank, notified the originator of the beneficiary’s refusal of the payment, (iii) funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary, and (iv) the beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract. If payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary’s bank under subdivision (a) of Section 11404. (c) For the purpose of determining whether discharge of an obligation occurs under subdivision (b), if the beneficiary’s bank accepts a payment order in an amount equal to the amount of the originator’s payment order less charges of one or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator’s order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges. (d) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11501. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
A party to a funds transfer may vary its rights and obligations by agreement, unless another rule in this division provides otherwise.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11501. (a) Except as otherwise provided in this division, the rights and obligations of a party to a funds transfer may be varied by agreement of the affected party. (b) “Funds-transfer system rule” means a rule of an association of banks (i) governing transmission of payment orders by means of a funds-transfer system of the association or rights and obligations with respect to those orders, or (ii) to the extent the rule governs rights and obligations between banks that are parties to a funds transfer in which a Federal Reserve Bank, acting as an intermediary bank, sends a payment order to the beneficiary’s bank. Except as otherwise provided in this division, a funds-transfer system rule governing rights and obligations between participating banks using the system may be effective even if the rule conflicts with this division and indirectly affects another party to the funds transfer who does not consent to the rule. A funds-transfer system rule may also govern rights and obligations of parties other than participating banks using the system to the extent stated in subdivision (c) of Section 11404, subdivision (d) of Section 11405, and subdivision (c) of Section 11507. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11502. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
This section defines “creditor process” and limits how banks may respond when a payment order and creditor process overlap.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11502. (a) As used in this section, “creditor process” means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account. (b) This subdivision applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order. (c) If a beneficiary’s bank has received a payment order for payment to the beneficiary’s account in the bank, the following rules apply: (1) The bank may credit the beneficiary’s account. The amount credited may be set off against an obligation owed by the beneficiary to the bank or may be applied to satisfy creditor process served on the bank with respect to the account. (2) The bank may credit the beneficiary’s account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal. (3) If creditor process with respect to the beneficiary’s account has been served and the bank has had a reasonable opportunity to act on it, the bank may not reject the payment order except for a reason unrelated to the service of process. (d) Creditor process with respect to a payment by the originator to the beneficiary pursuant to a funds transfer may be served only on the beneficiary’s bank with respect to the debt owed by that bank to the beneficiary. Any other bank served with the creditor process is not obliged to act with respect to the process. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11503. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
A court may restrain certain payment-order and funds-transfer actions for proper cause and in compliance with applicable law, but may not otherwise restrain those actions.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11503. For proper cause and in compliance with applicable law, a court may restrain (i) a person from issuing a payment order to initiate a funds transfer, (ii) an originator’s bank from executing the payment order of the originator, or (iii) the beneficiary’s bank from releasing funds to the beneficiary or the beneficiary from withdrawing the funds. A court may not otherwise restrain a person from issuing a payment order, paying or receiving payment of a payment order, or otherwise acting with respect to a funds transfer. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11504. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
A receiving bank may charge a sender’s account in any sequence when it has multiple payment orders or payment orders and other items payable from that account. Credits made to an account are applied or withdrawn first in the order they were first made.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11504. (a) If a receiving bank has received more than one payment order of the sender or one or more payment orders and other items that are payable from the sender’s account, the bank may charge the sender’s account with respect to the various orders and items in any sequence. (b) In determining whether a credit to an account has been withdrawn by the holder of the account or applied to a debt of the holder of the account, credits first made to the account are first withdrawn or applied. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11505. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
If a customer gets notice identifying a payment order, the customer must object to the bank within one year or lose the ability to argue the bank may not keep the payment.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11505. If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer’s objection to the payment within one year after the notification was received by the customer. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11506. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
This section lets the sender and receiving bank set interest by agreement, or by funds-transfer system rule if the payment order moves through such a system. If neither applies, the statute gives a formula for calculating interest, and it reduces the interest if the receiving bank must refund an uncompleted transfer without fault.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11506. (a) If, under this division, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined (i) by agreement of the sender and receiving bank, or (ii) by a funds-transfer system rule if the payment order is transmitted through a funds-transfer system. (b) If the amount of interest is not determined by an agreement or rule as stated in subdivision (a), the amount is calculated by multiplying the applicable federal funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable federal funds rate is the average of the federal funds rates published by the Federal Reserve Bank of New York for each of the days for which interest is payable divided by 360. The federal funds rate for any day on which a published rate is not available is the same as the published rate for the next preceding day for which there is a published rate. If a receiving bank that accepted a payment order is required to refund payment to the sender of the order because the funds transfer was not completed, but the failure to complete was not due to any fault by the bank, the interest payable is reduced by a percentage equal to the reserve requirement on deposits of the receiving bank. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 11507. Verify source ↗
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. )
This section sets default and optional choice-of-law rules for funds transfers and payment orders.
## Commercial Code - COM ## DIVISION 11. FUNDS TRANSFERS [11101 - 11507] ( Division 11 added by Stats. 1990, Ch. 125, Sec. 2. ) ## CHAPTER 5. Miscellaneous Provisions [11501 - 11507] ( Chapter 5 added by Stats. 1990, Ch. 125, Sec. 2. ) ## 11507. (a) The following rules apply unless the affected parties otherwise agree or subdivision (c) applies: (1) The rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located. (2) The rights and obligations between the beneficiary’s bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary’s bank is located. (3) The issue of when payment is made pursuant to a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary’s bank is located. (b) If the parties described in each paragraph of subdivision (a) have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction. (c) A funds-transfer system rule may select the law of a particular jurisdiction to govern (i) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system, or (ii) the rights and obligations of some or all parties to a funds transfer any part of which is carried out by means of the system. A choice of law made pursuant to clause (i) is binding on participating banks. A choice of law made pursuant to clause (ii) is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system. The law of a jurisdiction selected pursuant to this subdivision may govern, whether or not that law bears a reasonable relation to the matter in issue. (d) In the event of inconsistency between an agreement under subdivision (b) and a choice-of-law rule under subdivision (c), the agreement under subdivision (b) prevails. (e) If a funds transfer is made by use of more than one funds-transfer system and there is inconsistency between choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction that has the most significant relationship to the matter in issue. (Added by Stats. 1990, Ch. 125, Sec. 2.) - 1201. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
This section defines many commercial law terms used in the code, such as action, agreement, bank, good faith, and person.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 1201. (a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other divisions of this code that apply to particular divisions or chapters thereof, have the meanings stated. (b) Subject to definitions contained in other divisions of this code that apply to particular divisions or chapters thereof: (1) “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, suit in equity, and any other proceeding in which rights are determined. (2) “Aggrieved party” means a party entitled to pursue a remedy. (3) “Agreement,” 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 1303. (4) “Bank” means a person engaged in the business of banking, and includes a savings bank, savings and loan association, credit union, and trust company. (5) “Bearer” means a person in possession of a negotiable instrument, document of title, or certificated security that is payable to bearer or endorsed in blank. (6) “Bill of lading” means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods. (7) “Branch” includes a separately incorporated foreign branch of a bank. (8) “Burden of establishing” a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence. (9) “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Division 2 (commencing with Section 2101) 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. (10) “Conspicuous,” with reference to a term, means so written, displayed, or presented that, based on the totality of the circumstances, a reasonable person against whom it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. (11) [Reserved] (12) “Contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties’ agreement as determined by this code and as supplemented by any other applicable laws. (13) “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. (14) “Defendant” includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim. (15) “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 an authoritative tangible copy of a record evidencing chattel paper, means voluntary transfer of possession. (16) “Document of title” includes a bill of lading, dock warrant, dock receipt, warehouse receipt, or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers. To be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass. (17) “Fault” means a default, breach, or wrongful act or omission. (18) “Fungible goods” means: (A) Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or (B) Goods that by agreement are treated as equivalent. (19) “Genuine” means free of forgery or counterfeiting. (20) “Good faith,” except as otherwise provided in Division 5 (commencing with Section 5101), means honesty in fact and the observance of reasonable commercial standards of fair dealing. (21) “Holder” means: (A) the person in possession of a negotiable instrument that is payable either to bearer or, to an identified person that is the person in possession; (B) the person in possession of a document of title if the goods are deliverable either to bearer or to the order of the person in possession; or (C) the person in control, other than pursuant to subdivision (g) of Section 7106, of a negotiable electronic document of title. (22) “Insolvency proceeding” includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved. (23) “Insolvent” means: (A) having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute; (B) being unable to pay debts as they become due; or (C) being insolvent within the meaning of federal bankruptcy law. (24) “Money” means a medium of exchange that is 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. The term does not include an electronic record that is a medium of exchange recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by the government. (25) “Organization” means a person other than an individual. (26) “Party,” as distinguished from “third party,” means a person that has engaged in a transaction or made an agreement subject to this code. (27) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. The term includes a protected series, however denominated, of an entity if the protected series is established under law other than this code that limits, or limits if conditions specified under the law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series. (28) “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. (29) “Purchase” means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property. (30) “Purchaser” means a person that takes by purchase. (31) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. (32) “Remedy” means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal. (33) “Representative” means 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. (34) “Right” includes remedy. (35) “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 Division 9 (commencing with Section 9101). “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 2401, but a buyer may also acquire a “security interest” by complying with Division 9 (commencing with Section 9101). Except as otherwise provided in Section 2505, the right of a seller or lessor of goods under Division 2 (commencing with Section 2101) or Division 10 (commencing with Section 10101) 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 Division 9 (commencing with Section 9101). The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 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 1203. (36) “Send,” in connection with a record or notification, means: (A) to deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or (B) to cause the record or notification to be received within the time it would have been received if properly sent under subparagraph (A). (37) “Sign” means, with present intent to authenticate or adopt a record: (A) execute or adopt a tangible symbol; or (B) attach to or logically associate with the record an electronic symbol, sound, or process. “Signed,” “signing,” and “signature” have corresponding meanings. (38) “Spouse” includes “registered domestic partner,” as required by Section 297.5 of the Family Code. (39) “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. (40) “Surety” includes a guarantor or other secondary obligor. (41) “Term” means a portion of an agreement that relates to a particular matter. (42) “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery. (43) “Warehouse receipt” means a receipt issued by a person engaged in the business of storing goods for hire. (44) “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning. (45) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. (Amended by Stats. 2023, Ch. 210, Sec. 1. (SB 95) Effective January 1, 2024.) - 1202. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
This section defines when a person has notice, knows something, gives notice, or receives notice, and sets special timing rules for organizations.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 1202. (a) Subject to subdivision (f), a person has “notice” of a fact if the person: (1) has actual knowledge of it; (2) has received a notice or notification of it; or (3) from all the facts and circumstances known to the person at the time in question, has reason to know that it exists. (b) “Knowledge” means actual knowledge. “Knows” has a corresponding meaning. (c) “Discover,” “learn,” or words of similar import refer to knowledge rather than to reason to know. (d) A person “notifies” or “gives” a notice or notification to another person by taking 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. (e) Subject to subdivision (f), a person “receives” a notice or notification when: (1) it comes to that person’s attention; or (2) 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. (f) Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual’s attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual’s regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information. (Added by Stats. 2006, Ch. 254, Sec. 18. Effective January 1, 2007.) - 1203. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
This section explains when a lease-like transaction is treated as a lease or as a security interest, and it defines when certain lease terms count as nominal.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 1203. (a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case. (b) A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and: (1) the original term of the lease is equal to or greater than the remaining economic life of the goods; (2) the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods; (3) the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or (4) the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement. (c) A transaction in the form of a lease does not create a security interest merely because: (1) 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; (2) the lessee assumes risk of loss of the goods; (3) the lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs; (4) the lessee has an option to renew the lease or to become the owner of the goods; (5) the lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or (6) 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. (7) in the case of a motor vehicle, as defined in Section 415 of the Vehicle Code, or a trailer, as defined in Section 630 of that code, that is not to be used primarily for personal, family, or household purposes, that the amount of rental payments may be increased or decreased by reference to the amount realized by the lessor upon sale or disposition of the vehicle or trailer. Nothing in this paragraph affects the application or administration of the Sales and Use Tax Law (Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code). (d) Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if: (1) when the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or (2) 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. (e) The “remaining economic life of the goods” and “reasonably predictable” fair market rent, fair market value, or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into. (Added by Stats. 2006, Ch. 254, Sec. 20. Effective January 1, 2007.) - 1204. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A person gives value for rights when acquiring them in one of four listed ways, unless another division provides otherwise.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 1204. Except as otherwise provided in Divisions 3, 4, 5, 6, and 12, 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 chargeback is provided for in the event of difficulties in collection; (2) as security for, or in total or partial satisfaction of, a preexisting claim; (3) by accepting delivery under a preexisting contract for purchase; or (4) in return for any consideration sufficient to support a simple contract. (Amended by Stats. 2023, Ch. 210, Sec. 2. (SB 95) Effective January 1, 2024.) - 1205. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
This section explains how to judge whether a required time is reasonable and when an action counts as being taken “seasonably.”
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 1205. (a) Whether a time for taking an action required by this code is reasonable depends on the nature, purpose, and circumstances of the action. (b) An action is taken “seasonably” if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time. (Added by renumbering Section 1204 by Stats. 2006, Ch. 254, Sec. 21. Effective January 1, 2007.) - 1206. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
When this code creates a presumption, the trier of fact must treat the presumed fact as true unless evidence is introduced supporting its nonexistence.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. General Definitions and Principles of Interpretation [1201 - 1206] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 1206. Whenever this code creates a “presumption” with respect to a fact, or provides that a fact is “presumed,” the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence. (Repealed and added by Stats. 2006, Ch. 254, Sec. 25. Effective January 1, 2007.) - 12101. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
This section says the division may be cited as Uniform Commercial Code—Controllable Electronic Records.
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12101. This division may be cited as Uniform Commercial Code—Controllable Electronic Records. (Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.) - 12102. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
This section defines key terms used in Division 12, including “controllable electronic record,” “qualifying purchaser,” “transferable record,” and “value.”
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12102. (a) In this division, the following definitions apply: (1) “Controllable electronic record” means a record stored in an electronic medium that can be subjected to control under Section 12105. The term does not include a controllable account, a controllable payment intangible, a deposit account, an electronic copy of a record evidencing chattel paper, an electronic document of title, electronic money, investment property, or a transferable record. (2) “Qualifying purchaser” means a purchaser of a controllable electronic record or an interest in a controllable electronic record that obtains control of the controllable electronic record for value, in good faith, and without notice of a claim of a property right in the controllable electronic record. (3) “Transferable record” has the meaning provided for that term in either of the following: (A) Paragraph (1) of subsection (a) of Section 7021 of Title 15 of the United States Code. (B) Subsection (a) of Section 16 of the Uniform Electronic Transactions Act of any state whose law is applicable. (4) “Value” has the meaning provided in subdivision (a) of Section 3303, as if references in that subdivision to an “instrument” were references to a controllable account, controllable electronic record, or controllable payment intangible. (b) The definitions in Division 9 (commencing with Section 9101) of “account debtor,” “controllable account,” “controllable payment intangible,” “chattel paper,” “deposit account,” “electronic money,” and “investment property” apply to this division. (c) Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division. (Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.) - 12103. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
If this division conflicts with Division 9, Division 9 controls. Transactions covered by this division are also subject to consumer rules, credit-related statutes or regulations, and consumer-protection laws.
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12103. (a) If there is conflict between this division and Division 9 (commencing with Section 9101), Division 9 governs. (b) A transaction subject to this division is subject to all of the following: (1) Any applicable rule of law that establishes a different rule for consumers. (2) Any other statute or regulation that regulates the rates, charges, agreements, and practices for loans, credit sales, or other extensions of credit. (3) Any consumer-protection statute or regulation. (Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.) - 12104. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
This section sets how rights in controllable electronic records, controllable accounts, and controllable payment intangibles are treated, including when a purchaser becomes a qualifying purchaser and when claims do or do not follow the transferred right.
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12104. (a) This section applies to the acquisition and purchase of rights in a controllable account or controllable payment intangible, including the rights and benefits under subdivisions (c), (d), (e), (g), and (h) of a purchaser and qualifying purchaser, in the same manner this section applies to a controllable electronic record. (b) To determine whether a purchaser of a controllable account or a controllable payment intangible is a qualifying purchaser, the purchaser obtains control of the account or payment intangible if it obtains control of the controllable electronic record that evidences the account or payment intangible. (c) Except as provided in this section, law other than this division determines whether a person acquires a right in a controllable electronic record and the right the person acquires. (d) A purchaser of a controllable electronic record acquires all rights in the controllable electronic record that the transferor had or had power to transfer, except that a purchaser of a limited interest in a controllable electronic record acquires rights only to the extent of the interest purchased. (e) A qualifying purchaser acquires its rights in the controllable electronic record free of a claim of a property right in the controllable electronic record. (f) Except as provided in subdivisions (a) and (e) for a controllable account and a controllable payment intangible or law other than this division, a qualifying purchaser takes a right to payment, right to performance, or other interest in property evidenced by the controllable electronic record subject to a claim of a property right in the right to payment, right to performance, or other interest in property. (g) An action may not be asserted against a qualifying purchaser based on both a purchase by the qualifying purchaser of a controllable electronic record and a claim of a property right in another controllable electronic record, whether the action is framed in conversion, replevin, constructive trust, equitable lien, or other theory. (h) Filing of a financing statement under Division 9 (commencing with Section 9101) is not notice of a claim of a property right in a controllable electronic record. (Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.) - 12105. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
This section defines when a person has control of a controllable electronic record.
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12105. (a) A person has control of a controllable electronic record if the electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded, satisfies each of the following conditions: (1) It gives the person both of the following: (A) Power to avail itself of substantially all the benefit from the electronic record. (B) Exclusive power, subject to subdivision (b), to do both of the following: (i) Prevent others from availing themselves of substantially all the benefit from the electronic record. (ii) Transfer control of the electronic record to another person or cause another person to obtain control of another controllable electronic record as a result of the transfer of the electronic record. (2) It enables the person readily to identify itself in any way, including by name, identifying number, cryptographic key, office, or account number, as having the powers specified in paragraph (1). (b) Subject to subdivision (c), a power is exclusive under clauses (i) and (ii) of subparagraph (B) of paragraph (1) of subdivision (a) even if either of the following is true: (1) The controllable electronic record, a record attached to or logically associated with the electronic record, or a system in which the electronic record is recorded limits the use of the electronic record or has a protocol programmed to cause a change, including a transfer or loss of control or a modification of benefits afforded by the electronic record. (2) The power is shared with another person. (c) A power of a person is not shared with another person under paragraph (2) of subdivision (b) and the person’s power is not exclusive if each of the following conditions is satisfied: (1) The person can exercise the power only if the power also is exercised by the other person. (2) Either of the following is true: (A) The other person can exercise the power without exercise of the power by the person. (B) The other person is the transferor to the person of an interest in the controllable electronic record or a controllable account or controllable payment intangible evidenced by the controllable electronic record. (d) If a person has the powers specified in clauses (i) and (ii) of subparagraph (B) of paragraph (1) of subdivision (a), the powers are presumed to be exclusive. (e) A person has control of a controllable electronic record if another person, other than the transferor to the person of an interest in the controllable electronic record or a controllable account or controllable payment intangible evidenced by the controllable electronic record, satisfies either of the following conditions: (1) The other person has control of the electronic record and acknowledges that it has control on behalf of the person. (2) The other person obtains control of the electronic record after having acknowledged that it will obtain control of the electronic record on behalf of the person. (f) A person that has control under this section is not required to acknowledge that it has control on behalf of another person. (g) If a person acknowledges that it has or will obtain control on behalf of another person, unless the person otherwise agrees or law other than this division or Division 9 (commencing with Section 9101) otherwise provides, the person does not owe any duty to the other person and is not required to confirm the acknowledgment to any other person. (Amended by Stats. 2024, Ch. 80, Sec. 27. (SB 1525) Effective January 1, 2025.) - 12106. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
An account debtor on a controllable account or controllable payment intangible may pay the controller or, in some cases, a former controller, but must follow a valid transfer notice and proof rules.
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12106. (a) An account debtor on a controllable account or controllable payment intangible may discharge its obligation by paying either of the following: (1) The person having control of the controllable electronic record that evidences the controllable account or controllable payment intangible. (2) Except as provided in subdivision (b), a person that formerly had control of the controllable electronic record. (b) Subject to subdivision (d), the account debtor shall not discharge its obligation by paying a person that formerly had control of the controllable electronic record if the account debtor receives a notification that meets all of the following: (1) Is signed by a person that formerly had control or the person to which control was transferred. (2) Reasonably identifies the controllable account or controllable payment intangible. (3) Notifies the account debtor that control of the controllable electronic record that evidences the controllable account or controllable payment intangible was transferred. (4) Identifies the transferee, in any reasonable way, including by name, identifying number, cryptographic key, office, or account number. (5) Provides a commercially reasonable method by which the account debtor is to pay the transferee. (c) After receipt of a notification that complies with subdivision (b), the account debtor may discharge its obligation by paying in accordance with the notification and shall not discharge the obligation by paying a person that formerly had control. (d) Subject to subdivision (h), notification is ineffective under subdivision (b) if any of the following apply: (1) Unless, before the notification is sent, the account debtor and the person that, at that time, had control of the controllable electronic record that evidences the controllable account or controllable payment intangible agree in a signed record to a commercially reasonable method by which a person may furnish reasonable proof that control has been transferred. (2) To the extent an agreement between the account debtor and seller of a payment intangible limits the account debtor’s duty to pay a person other than the seller and the limitation is effective under law other than this division. (3) At the option of the account debtor, if the notification notifies the account debtor to do any of the following: (A) Divide the payment. (B) Make less than the full amount of an installment or other periodic payment. (C) Pay any part of a payment by more than one method or to more than one person. (e) Subject to subdivision (h), if requested by the account debtor, the person giving the notification under subdivision (b) seasonably shall furnish reasonable proof, using the method in the agreement referred to in paragraph (1) of subdivision (d), that control of the controllable electronic record has been transferred. Unless the person complies with the request, the account debtor may discharge its obligation by paying a person that formerly had control, even if the account debtor has received a notification under subdivision (b). (f) A person furnishes reasonable proof under subdivision (e) that control has been transferred if the person demonstrates, using the method in the agreement referred to in paragraph (1) of subdivision (d), that the transferee has the power to do all of the following: (1) Avail itself of substantially all the benefit from the controllable electronic record. (2) Prevent others from availing themselves of substantially all the benefit from the controllable electronic record. (3) Transfer the powers specified in paragraphs (1) and (2) to another person. (g) Subject to subdivision (h), an account debtor may not waive or vary its rights under paragraph (1) of subdivision (d) or under subdivision (e), or its option under paragraph (3) of subdivision (d). (h) This section is subject to law other than this division which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes. (Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.) - 12107. Verify source ↗
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. )
This section says which jurisdiction’s local law governs matters covered by the division for controllable electronic records, including fallback rules and special rules for certain records.
## Commercial Code - COM ## DIVISION 12. CONTROLLABLE ELECTRONIC RECORDS [12101 - 12107] ( Division 12 added by Stats. 2023, Ch. 210, Sec. 90. ) ## 12107. (a) Except as provided in subdivision (b), the local law of a controllable electronic record’s jurisdiction governs a matter covered by this division. (b) For a controllable electronic record that evidences a controllable account or controllable payment intangible, the local law of the controllable electronic record’s jurisdiction governs a matter covered by Section 12106 unless an effective agreement determines that the local law of another jurisdiction governs. (c) The following rules determine a controllable electronic record’s jurisdiction under this section: (1) If the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily available for review, expressly provides that a particular jurisdiction is the controllable electronic record’s jurisdiction for purposes of this division or this code, that jurisdiction is the controllable electronic record’s jurisdiction. (2) If paragraph (1) does not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that a particular jurisdiction is the controllable electronic record’s jurisdiction for purposes of this division or this code, that jurisdiction is the controllable electronic record’s jurisdiction. (3) If paragraphs (1) and (2) do not apply and the controllable electronic record, or a record attached to or logically associated with the controllable electronic record and readily available for review, expressly provides that the controllable electronic record is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record’s jurisdiction. (4) If paragraphs (1) to (3), inclusive, do not apply and the rules of the system in which the controllable electronic record is recorded are readily available for review and expressly provide that the controllable electronic record or the system is governed by the law of a particular jurisdiction, that jurisdiction is the controllable electronic record’s jurisdiction. (5) If paragraphs (1) to (4), inclusive, do not apply, the controllable electronic record’s jurisdiction is the District of Columbia. (d) If paragraph (5) of subdivision (c) and Article 12 is not in effect in the District of Columbia without material modification, the governing law for a matter covered by this division is the law of the District of Columbia as though Article 12 were in effect in the District of Columbia without material modification. In this subdivision, “Article 12” means Article 12 of Uniform Commercial Code Amendments (2022). (e) To the extent subdivisions (a) and (b) provide that the local law of the controllable electronic record’s jurisdiction governs a matter covered by this division, that law governs even if the matter or a transaction to which the matter relates does not bear any relation to the controllable electronic record’s jurisdiction. (f) The rights acquired under Section 12104 by a purchaser or qualifying purchaser are governed by the law applicable under this section at the time of purchase. (Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.) - 1301. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
This section lets parties to a qualifying multi-state or international transaction choose whether California law or the other jurisdiction’s law governs their rights and duties, unless another rule in the section controls.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1301. (a) Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation, the parties may agree that the law either of this state or of the other state or nation shall govern their rights and duties. (b) In the absence of an agreement effective under subdivision (a), and except as provided in subdivision (c), this code applies to transactions bearing an appropriate relation to this state. (c) If one of the following provisions specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified: (1) Section 2402. (2) Section 4102. (3) Section 5116. (4) Section 6103. (5) Section 8110. (6) Sections 9301 to 9307, inclusive. (7) Sections 10105 and 10106. (8) Section 11507. (9) Section 12107. (Amended by Stats. 2023, Ch. 210, Sec. 3. (SB 95) Effective January 1, 2024.) - 1302. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
Parties may change many code effects by agreement, but they cannot disclaim the code’s duties of good faith, diligence, reasonableness, and care.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1302. (a) Except as otherwise provided in subdivision (b) or elsewhere in this code, the effect of provisions of this code may be varied by agreement. (b) The obligations of good faith, diligence, reasonableness, and care prescribed by this code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever this code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement. (c) The presence of certain provisions of this code of the phrase “unless otherwise agreed,” or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section. (Added by Stats. 2006, Ch. 254, Sec. 30. Effective January 1, 2007.) - 1303. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
This section defines course of performance, course of dealing, and usage of trade, and explains how they are used to interpret agreements.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1303. (a) A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) 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. (b) A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. (c) 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. (d) A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance. (e) Except as otherwise provided in subdivision (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable: (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; (3) course of dealing prevails over usage of trade. (f) Subject to Section 2209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance. (g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party. (Added by renumbering Section 1205 by Stats. 2006, Ch. 254, Sec. 23. Effective January 1, 2007.) - 1304. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
Contracts and duties within this code must be performed and enforced in good faith.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1304. Every contract or duty within this code imposes an obligation of good faith in its performance and enforcement. (Added by renumbering Section 1203 by Stats. 2006, Ch. 254, Sec. 19. Effective January 1, 2007.) - 1305. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
This section says remedies under the code should be administered liberally, but consequential, special, and penal damages are not allowed unless another code provision or rule of law specifically allows them.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1305. (a) The remedies provided by this code shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in this code or by other rule of law. (b) Any right or obligation declared by this code is enforceable by action unless the provision declaring it specifies a different and limited effect. (Added by renumbering Section 1106 by Stats. 2006, Ch. 254, Sec. 11. Effective January 1, 2007.) - 1306. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
A claim or right from an alleged breach may be discharged, in whole or in part, without consideration if the aggrieved party agrees in a signed record.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1306. 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 a signed record. (Amended by Stats. 2023, Ch. 210, Sec. 4. (SB 95) Effective January 1, 2024.) - 1307. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
Certain third-party documents required or authorized by a contract may be used as evidence in actions arising from that contract, and such documents may carry presumptions of authenticity and truth.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1307. (1) 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 admissible as evidence of the facts stated in the document by the third party in any action arising out of the contract that authorized or required the document. (2) In any action arising out of the contract that authorized or required the document referred to in subdivision (1): (a) A document in due form purporting to be the document referred to in subdivision (1) is presumed to be authentic and genuine. The presumption is a presumption affecting the burden of producing evidence. (b) If the document is found to be authentic and genuine, the facts stated in the document by the third party are presumed to be true. The presumption is a presumption affecting the burden of proof. (Added by renumbering Section 1202 by Stats. 2006, Ch. 254, Sec. 17. Effective January 1, 2007.) - 1308. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
A party can reserve its rights while performing, promising performance, or accepting performance, and words like “without prejudice” or “under protest” are enough.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1308. (a) 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. (b) Subdivision (a) does not apply to an accord and satisfaction. (Added by renumbering Section 1207 by Stats. 2006, Ch. 254, Sec. 26. Effective January 1, 2007.) - 1309. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
A party may accelerate payment or performance, or demand collateral, only if it honestly believes payment or performance is at risk.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1309. A term providing that one party or that party’s successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure,” or words of similar import, means that the party has power to 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. (Added by renumbering Section 1208 by Stats. 2006, Ch. 254, Sec. 27. Effective January 1, 2007.) - 1310. Verify source ↗
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. )
A creditor may, by agreement, subordinate its right to performance of an obligation.
## Commercial Code - COM ## DIVISION 1. GENERAL PROVISIONS [1101 - 1310] ( Division 1 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. Territorial Applicability and General Rules [1301 - 1310] ( Chapter 3 added by Stats. 2006, Ch. 254, Sec. 30. ) ## 1310. 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. (Added by renumbering Section 1209 by Stats. 2006, Ch. 254, Sec. 28. Effective January 1, 2007.) - 13101. Verify source ↗
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. )
This code becomes effective on January 1, 1965, and applies to transactions entered into and events occurring after that date.
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. ) ## 13101. This code shall become effective on January 1, 1965. It applies to transactions entered into and events occurring after that date. (Added by Stats. 1988, Ch. 1359, Sec. 8. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 13102. Verify source ↗
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. )
Pre-1965 transactions and their resulting rights, duties, and interests stay valid, and certain security interests continue only for limited periods unless a secured party files a proper continuation statement.
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. ) ## 13102. Transactions validly entered into before January 1, 1965, and the rights, duties, and interests flowing from them remain valid thereafter and may be terminated, completed, consummated, or enforced as required or permitted by any statute or other law amended or repealed by this act as though such repeal or amendment had not occurred; provided, however, that the perfection of a security interest (other than a security interest (i) in a motor vehicle or vessel required to be registered under the Vehicle Code unless such vehicle or vessel is inventory or (ii) in personal property, including fixtures, which constitutes a portion of the properties included in an agreement which is a mortgage or deed of trust of both real and personal property made to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or made by a public utility as defined in the Public Utilities Code), as defined in this code (Section 1201), and however denominated in any law repealed by this act, (a) Which was perfected on or before January 1, 1965, by a filing or recording under a law repealed by this act and requiring a further filing or recording to continue its perfection, continues until and will lapse on the date provided by the law so repealed for such further filing or recording. (b) Which was perfected on or before January 1, 1965, by a filing or recording under a law repealed by this act and requiring no further filing or recording to continue its perfection, continues until and will lapse 12 months after January 1, 1965. (c) Which was perfected on or before January 1, 1965, without any filing or recording, but with respect to which a financing statement is required to be filed in order for it to be perfected under this code, continues until and will lapse 12 months after January 1, 1965; unless, in each case, a continuation statement is filed by the secured party within 12 months before the perfection of the security interest would otherwise lapse. Any such continuation statement must be signed by the secured party, identify the original security agreement, however denominated, state the office where and the date when last filed or refiled, or recorded or rerecorded, and the filing number or recordation data and further state that the original security agreement is still effective. Subdivision (1) of Section 9501 determines the proper place to file such a continuation statement. Except as herein specified the provisions of Sections 9515 and 9522 apply to such a continuation statement. (Amended by Stats. 1999, Ch. 991, Sec. 40. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.) - 13103. Verify source ↗
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. )
This section repeals prior laws that conflict with this act, except as stated in the next section.
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. ) ## 13103. Except as provided in the following section, all acts and parts of acts inconsistent with this act are hereby repealed. (Added by Stats. 1988, Ch. 1359, Sec. 8. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 13105. Verify source ↗
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. )
Certain financing-statement filings must be made with the county recorder or the Secretary of State, and some related documents are ineffective if not filed with the Secretary of State.
## Commercial Code - COM ## DIVISION 13. EFFECTIVE DATE AND REPEALER [13101 - 13105] ( Division 13 added by Stats. 1988, Ch. 1359, Sec. 8. ) ## 13105. (1) A financing statement or a continuation thereof, properly filed and effective pursuant to Section 9401 as it existed prior to January 1, 1971, remains valid and effective after January 1, 1971, until expiration of the usual five-year period from date of filing. Any termination, release, assignment, or amendment of the financing statement prior to expiration of the five-year period of effectiveness shall be filed, as previously required, with the county recorder who has filed the financing statement. (2) After January 1, 1971, any continuation of a financing statement which had been properly filed with a county recorder prior to January 1, 1971, and which now would be required to be filed with the Secretary of State, shall be filed with the Secretary of State in accordance with Sections 9515 and 9516. The continuation statement shall be accompanied by a certified copy of the entire record of the county recorder related to the financing statement. After filing of the continuation statement with the Secretary of State, any termination, release, assignment, amendment, or continuation of the financing statement shall also be filed with the Secretary of State and any documents affecting the financing statement that are not filed with the Secretary of State shall not be effective. (Amended by Stats. 1999, Ch. 991, Sec. 41. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.) - 14101. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
The amendments to this code from the 1973–74 Regular Session became effective at 12:01 a.m. on January 1, 1976.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14101. The amendments to this code, as adopted by the Legislature at the 1973–74 Regular Session, shall become effective at 12:01 a.m. on January 1, 1976. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14102. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
Division 13 continues to apply to this code, and the pre-1976 code is treated as one continuous statute with the 1973–74 amended version for that purpose.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14102. The provisions of Division 13 shall continue to apply to this code, as amended by the Legislature at the 1973–74 Regular Session, and for this purpose this code as it existed prior to January 1, 1976, and this code, as amended by the Legislature at the 1973–74 Regular Session, shall be considered one continuous statute. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14103. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
Certain transactions entered into between January 1, 1965 and January 1, 1976 remain valid, and related security interests stay perfected under the stated transition rules.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14103. Transactions validly entered into after January 1, 1965, and before January 1, 1976, and which were subject to the provisions of this code and which would be subject to this code as amended by the Legislature at the 1973–74 Regular Session if they had been entered into after January 1, 1976, and the rights, duties, and interests flowing from the transactions remain valid after January 1, 1976, and may be terminated, completed, consummated, or enforced as required or permitted by this code as amended by the Legislature at the 1972 Regular Session. Security interests arising out of these transactions which are perfected on January 1, 1976, shall remain perfected until they lapse as provided in this code as amended by the Legislature at the 1973–74 Regular Session, and may be continued as permitted by this code as amended by the Legislature at the 1973–74 Regular Session, except as stated in Section 14105. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14104. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
An unperfected pre-1976 security interest may be treated as perfected on January 1, 1975 if later-amended law allowed perfection without filing or allowed filing in the place where an earlier filing failed.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14104. A security interest for the perfection of which filing or the taking of possession was required under this code and which attached prior to January 1, 1976, but was not perfected shall be deemed perfected on January 1, 1975, if this code as amended by the Legislature at the 1973–74 Regular Session permits perfection without filing or authorizes filing in the office or offices where a prior ineffective filing was made. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14105. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
Old financing statements filed before January 1, 1976 can stay effective under this section, and some can be continued; if a new filing office is required, a new financing statement must be filed there.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14105. (1) A financing statement or continuation statement filed prior to January 1, 1976, which shall not have lapsed prior to January 1, 1976, shall remain effective for the period provided in this code as it existed prior to January 1, 1976, but not less than five years after the filing. (2) With respect to any collateral acquired by the debtor subsequent to January 1, 1976, any effective financing statement or continuation statement described in this section shall apply only if the filing or filings are in the office or offices that would be appropriate to perfect the security interests in the new collateral under this code as amended by the Legislature at the 1973–74 Regular Session. (3) The effectiveness of any financing statement or continuation statement filed prior to January 1, 1976, may be continued by a continuation statement as permitted by this code as amended by the Legislature at the 1973–74 Regular Session, except that if this code, as amended by the Legislature at the 1973–74 Regular Session, requires a filing in an office where there was no previous financing statement, a new financing statement conforming to Section 14106 shall be filed in that office. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14106. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
This section lets certain existing security interests keep their perfection and priority for a transition period, and allows a financing statement to be filed before lapse.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14106. (1) If a security interest is perfected or has priority on January 1, 1976, as to all persons or as to certain persons without any filing or recording, and if the filing of a financing statement would be required for the perfection or priority of the security interest against those persons under this code, as amended by the Legislature at the 1973–74 Regular Session, the perfection and priority rights of the security interest continue until January 1, 1979. The perfection will then lapse unless a financing statement is filed as provided in subdivision (4) or unless the security interest is perfected otherwise than by filing. (2) If a security interest is perfected on January 1, 1976, under a law other than this code which requires no further filing, refiling or recording to continue its perfection, perfection continues until and will lapse January 1, 1979, unless a financing statement is filed as provided in subdivision (4) or unless the security interest is perfected otherwise than by filing, or unless under Section 9311 the other law continues to govern filing. (3) If a security interest is perfected by a filing, refiling or recording under a law repealed by this code as amended by the Legislature at the 1973–74 Regular Session which required further filing, refiling or recording to continue its perfection, perfection continues and will lapse on the date provided by the law so repealed for a further filing, refiling, or recording unless a financing statement is filed as provided in subdivision (4) or unless the security interest is perfected otherwise than by filing. (4) A financing statement may be filed within six months before the perfection of a security interest would otherwise lapse. Any such financing statement may be signed by either the debtor or the secured party. It must identify the security agreement, statement, or notice (however denominated in any statute or other law repealed or modified by this code as amended by the Legislature at the 1973–74 Regular Session), state the office where and the date when the last filing, refiling, or recording, if any, was made with respect thereto, and the filing number, if any, was made with respect thereto, and the filing number, if any, or book and page, if any, of recording and further state that the security agreement, statement, or notice, however denominated, in another filing office under this code or under any statute or other law repealed or modified by this code as amended by the Legislature at the 1973–74 Regular Session is still effective. Section 9501 and Sections 9301, 9303, 9304, 9305, 9306, 9307, 9316, and 9337 determine the proper place to file such a financing statement. Except as specified in this subdivision, the provisions of Sections 9515 and 9522 for continuation statements apply to such a financing statement. (Amended by Stats. 1999, Ch. 991, Sec. 42. Effective January 1, 2000. Operative July 1, 2001, by Sec. 75 of Ch. 991.) - 14107. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
For priority questions, the pre-1976 version of the code applies if the parties’ positions were fixed before January 1, 1976; otherwise, priority is determined under the code as amended by the 1973–74 Regular Session, subject to any other provision in this division.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14107. Except as otherwise provided in this division, this code as it existed prior to January 1, 1976, shall apply to any questions of priority if the positions of the parties were fixed prior to January 1, 1976. In other cases questions of priority shall be determined by this code as amended by the Legislature at the 1973–74 Regular Session. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14108. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
This section says certain 1973–74 amendments to the Commercial Code are to be treated as declaratory of the code’s meaning before January 1, 1976, unless a clear change in law was made.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14108. Unless a change in law has clearly been made, the provisions of this code as amended by the Legislature at the 1973–74 Regular Session shall be deemed declaratory of the meaning of this code as it existed prior to January 1, 1976. The amendments to subdivision (38) of Section 1201 and to subdivision (j) of Section 9104 of this code as amended by the Legislature at the 1973–74 Regular Session shall be deemed declaratory of the meaning of this code as it existed prior to January 1, 1976. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 14109. Verify source ↗
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. )
This section makes certain fixture-related amendments apply to specified security interests and deems some real-estate mortgage records effective as fixture filings as of January 1, 1981.
## Commercial Code - COM ## DIVISION 14. EFFECTIVE DATE AND TRANSITION PROVISIONS [14101 - 14109] ( Division 14 added by Stats. 1988, Ch. 1359, Sec. 9. ) ## 14109. (1) The amendments to this code relating to fixtures adopted by the Legislature at the 1979–1980 Regular Session shall apply to security interests which attach on or after January 1, 1981, in goods which become fixtures on or after January 1, 1981. (2) If the record of a mortgage of real estate would have been effective as a fixture filing of goods described therein if the amendments to this code relating to fixtures adopted by the Legislature at the 1979–1980 Regular Session had been in effect on the date of recording the mortgage, the mortgage shall be deemed effective as a fixture filing as to such goods under subdivision (6) of Section 9402 as of January 1, 1981. (Added by Stats. 1988, Ch. 1359, Sec. 9. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 15101. Verify source ↗
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. )
This section states when the referenced repeal and addition of Division 8 becomes effective: January 1, 1985.
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. ) ## 15101. The repeal and addition of Division 8 (commencing with Section 8101) made at the 1984 portion of the 1983–84 Regular Session shall become effective on January 1, 1985. (Added by Stats. 1988, Ch. 1359, Sec. 10. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 15102. Verify source ↗
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. )
Division 13 and Division 14 continue to apply to this code under the stated transition rule.
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. ) ## 15102. The provisions of Division 13 (commencing with Section 13101) and Division 14 (commencing with Section 14101) shall continue to apply to this code, as revised by the Legislature at the 1983–84 Regular Session, and for this purpose, this code as it existed prior to January 1, 1985, and this code, as revised by the Legislature at the 1984 portion of the 1983–84 Regular Session, shall be considered one continuous statute. (Added by Stats. 1988, Ch. 1359, Sec. 10. Operative January 1, 1990, by Sec. 11 of Ch. 1359.) - 15103. Verify source ↗
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. )
Some owners of uncertificated security interests do not have to take action to preserve or protect their ownership interest, and the interest remains effective and enforceable.
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. ) ## 15103. The owner of an interest (other than a security interest) in an uncertificated security (paragraph (b) of subdivision (1) of Section 8102) whose interest was acquired prior to January 1, 1985, or was acquired after January 1, 1985, in an uncertificated security issued in respect of a security in which the owner had such an interest, shall not be required to take any action under Section 8313 or otherwise to preserve or protect that ownership interest, which shall remain effective and enforceable to the same extent it was prior to January 1, 1985, in the absence of that action. However, if a security interest first attaches to the security or any other interest in the security first becomes effective after that date, the provisions of Division 8 (commencing with Section 8101) as revised shall govern the rights and obligations of all persons with respect to those interests. Except as otherwise provided in this division, the rights and obligations of all persons with respect to uncertificated securities issued prior to January 1, 1985, shall be governed by Division 8 (commencing with Section 8101) as revised by Chapter 927 of the Statutes of 1984. All references in this section to Division 8 (commencing with Section 8101) or a section thereof are references to Division 8 (commencing with Section 8101) as revised by Chapter 927 of the Statutes of 1984. (Amended by Stats. 1996, Ch. 497, Sec. 23. Effective January 1, 1997.) - 15104. Verify source ↗
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. )
This section gives transition rules for certain security interests in uncertificated securities, including when a secured party does not have to act under Division 8 and when it must furnish specified documents to keep perfection going.
## Commercial Code - COM ## DIVISION 15. EFFECTIVE DATE AND TRANSITION PROVISIONS [15101 - 15104] ( Division 15 added by Stats. 1988, Ch. 1359, Sec. 10. ) ## 15104. A secured party who has a security interest in an uncertificated security (paragraph (b) of subdivision (1) of Section 8102), which security interest attached to that uncertificated security (a) prior to January 1, 1985, or (b) after that date in an uncertificated security issued in respect of a security in which the secured party had the pre-January 1, 1985, security interest, shall not be required to take any action under Division 8 (commencing with Section 8101) to protect, preserve, or perfect that security interest, which shall remain attached and perfected to the same extent it was prior to that date in the absence of any such action. The priority and perfection of those security interests shall continue to be governed by Division 9 (commencing with Section 9101) as it existed prior to that date. However, on or before the last date on which any action is required under Division 9 (commencing with Section 9101) (as it existed prior to that date) to continue the perfection of the security interest, in order to continue the perfection of the security interest the secured party, rather than complying with Division 9 (commencing with Section 9101), shall furnish to a party described in subparagraph (i), (iii), or (iv) of paragraph (h) of subdivision (1) of Section 8313, or if none of those is applicable, then to the issuer of the uncertificated security, either (x) a copy of either the financing statement previously filed to perfect the security interest or the security agreement that created the security interest, in either case bearing a copy or an original of the debtor’s signature, or (y) a written notification from the registered owner under paragraph (b) of subdivision (7) of Section 8403. Any such notice to an issuer shall be deemed a written notification under paragraph (b) of subdivision (7) of Section 8403, subject to the limitation that there can be no more than one registered pledge of an uncertificated security at any time (Section 8108). Except as otherwise provided in this division, the provisions of Division 8 (commencing with Section 8101) as revised shall govern the rights and obligations of all persons with respect to a security interest in an uncertificated security that first attaches after January 1, 1985. All references in this section to Division 8 (commencing with Section 8101) or a section thereof are references to Division 8 (commencing with Section 8101) as revised by Chapter 927 of the Statutes of 1984. (Amended by Stats. 1996, Ch. 497, Sec. 24. Effective January 1, 1997.) - 16101. Verify source ↗
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. )
The cited amendments and related changes became effective on January 1, 1993, and the Legislature says they should be treated as amendments to Divisions 3 and 4.
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. ) ## 16101. The repeal and addition of Division 3 (commencing with Section 3101) and the repeal and addition, the amendment, and the addition of provisions of Division 4 (commencing with Section 4101), and the amendment of related sections, adopted by the Legislature in Chapter 914 of the Statutes of 1992, shall become effective on January 1, 1993. The Legislature intends that this action be construed as an amendment of Division 3 (commencing with Section 3101) and Division 4 (commencing with Section 4101), notwithstanding that the action took the form of a repeal and addition of Division 3 (commencing with Section 3101), and a repeal and addition to, and amendment of, or an addition to the provisions of Division 4 (commencing with Section 4101). (Amended by Stats. 2006, Ch. 538, Sec. 77. Effective January 1, 2007.) - 16102. Verify source ↗
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. )
Divisions 13, 14, and 15 continue to apply to the code as it existed on January 1, 1993, and the pre-1993 and January 1, 1993 versions are treated as one continuous statute.
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. ) ## 16102. The provisions of Division 13 (commencing with Section 13101), Division 14 (commencing with Section 14101), and Division 15 (commencing with Section 15101) shall continue to apply to this code, as this code existed on January 1, 1993, and for this purpose, this code, as it existed prior to January 1, 1993, and this code, as it existed on January 1, 1993, shall be considered one continuous statute. (Added by Stats. 1994, Ch. 668, Sec. 15. Effective January 1, 1995.) - 16103. Verify source ↗
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. )
This provision says the division does not revive claims already barred by limitation before January 1, 1993, and does not apply Sections 3118 or 4111 to actions started before that date.
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. ) ## 16103. Nothing in this division shall have the effect of (a) reviving a cause of action barred by limitation before January 1, 1993, or (b) applying Section 3118 or 4111 on limitation of actions to an action commenced before January 1, 1993. (Added by Stats. 1994, Ch. 668, Sec. 15. Effective January 1, 1995.) - 16104. Verify source ↗
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. )
If a change in law was not clearly made, this code is treated as stating the same meaning it had before January 1, 1993.
## Commercial Code - COM ## DIVISION 16. EFFECTIVE DATE AND TRANSITION PROVISIONS [16101 - 16104] ( Division 16 added by Stats. 1994, Ch. 668, Sec. 15. ) ## 16104. Unless a change in law, as contrasted with a clarification, has clearly been made, this code, as it existed on January 1, 1993, shall be deemed declaratory of the meaning of this code as it existed prior to January 1, 1993. (Added by Stats. 1994, Ch. 668, Sec. 15. Effective January 1, 1995.) - 17101. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 1. General Provisions and Definitions [17101 - 17102] ( Chapter 1 added by Stats. 2023, Ch. 210, Sec. 91. )
This section says Division 17 may be cited as “Transitional Provisions for Uniform Commercial Code Amendments (2022).”
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 1. General Provisions and Definitions [17101 - 17102] ( Chapter 1 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17101. This division may be cited as Transitional Provisions for Uniform Commercial Code Amendments (2022). (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17102. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 1. General Provisions and Definitions [17101 - 17102] ( Chapter 1 added by Stats. 2023, Ch. 210, Sec. 91. )
This section defines terms used in Division 17, including “adjustment date,” “Division 12,” and “Division 12 property.”
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 1. General Provisions and Definitions [17101 - 17102] ( Chapter 1 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17102. (a) In this division, the following definitions apply. (1) “Adjustment date” means July 1, 2025, or the date that is one year after the effective date of the act adding this division, whichever is later. (2) “Division 12” means Division 12 (commencing with Section 12101). (3) “Division 12 property” means a controllable account, controllable electronic record, or controllable payment intangible. (b) The following definitions in other divisions apply to this division: “Controllable account” Section 9102. “Controllable electronic record” Section 12102. “Controllable payment intangible” Section 9102. “Electronic money” Section 9102. “Financing statement” Section 9102. (c) Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division. (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17201. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 2. General Transition Provisions [17201- 17201.] ( Chapter 2 added by Stats. 2023, Ch. 210, Sec. 91. )
A transaction made before the division’s effective date stays valid, and the related rights, duties, and interests also remain valid, except as Chapter 3 provides.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 2. General Transition Provisions [17201- 17201.] ( Chapter 2 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17201. Except as provided in Chapter 3 (commencing with Section 17301), a transaction validly entered into before the effective date of the act adding this division and the rights, duties, and interests flowing from the transaction remain valid thereafter and may be terminated, completed, consummated, or enforced as required or permitted by law other than this code or, if applicable, this code, as though the act adding this division had not taken effect. (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17301. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. )
This section tells how amended Division 9 and Division 12 apply to certain property transactions, liens, and interests around the effective date, and preserves some pre-existing matters.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17301. (a) Except as provided in this chapter, Division 9 (commencing with Section 9101), as amended by the act adding this division, and Division 12 apply to a transaction, lien, or other interest in property, even if the transaction, lien, or interest was entered into, created, or acquired before the effective date of the act adding this division. (b) Except as provided in subdivision (c), Sections 17302 to 17306, inclusive, the following rules apply: (1) A transaction, lien, or interest in property that was validly entered into, created, or transferred before the effective date of the act adding this division and was not governed by this code, but would be subject to Division 9 (commencing with Section 9101), as amended by the act adding this division, or Division 12 if it had been entered into, created, or transferred on or after the effective date of the act adding this division, including the rights, duties, and interests flowing from the transaction, lien, or interest, remains valid on and after the effective date of the act adding this division. (2) The transaction, lien, or interest may be terminated, completed, consummated, and enforced as required or permitted by the act adding this division or by the law that would apply if the act adding this division had not taken effect. (c) The act adding this division does not affect an action, case, or proceeding commenced before the effective date of the act adding this division. (Amended by Stats. 2024, Ch. 80, Sec. 28. (SB 1525) Effective January 1, 2025.) - 17302. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. )
This section says when an existing security interest carries over as perfected under the new act, and when it stays enforceable or perfected during the transition.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17302. (a) A security interest that is enforceable and perfected immediately before the effective date of the act adding this division is a perfected security interest under the act adding this division if, on the effective date of the act adding this division, the requirements for enforceability and perfection under the act adding this division are satisfied without further action. (b) If a security interest is enforceable and perfected immediately before the effective date of the act adding this division, but the requirements for enforceability or perfection under the act adding this division are not satisfied on the effective date of the act adding this division, the following rules apply to the security interest: (1) The security interest is a perfected security interest until the earlier of the time perfection would have ceased under the law in effect immediately before the effective date of the act adding this division or the adjustment date. (2) The security interest remains enforceable thereafter only if the security interest satisfies the requirements for enforceability under Section 9203, as amended by the act adding this division, before the adjustment date. (3) The security interest remains perfected thereafter only if the requirements for perfection under the act adding this division are satisfied before the time specified in paragraph (1). (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17303. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. )
A previously enforceable but unperfected security interest stays enforceable until the adjustment date, and it becomes perfected either automatically on the effective date if perfection requirements were already met, or later when those requirements are met.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17303. A security interest that is enforceable immediately before the effective date of the act adding this division but is unperfected at that time: (a) remains an enforceable security interest until the adjustment date; (b) remains enforceable thereafter if the security interest becomes enforceable under Section 9203, as amended by the act adding this division, on the effective date of the act adding this division or before the adjustment date; and (c) becomes perfected: (1) without further action, on the effective date of the act adding this division if the requirements for perfection under the act adding this division are satisfied before or at that time; or (2) when the requirements for perfection are satisfied if the requirements are satisfied after that time. (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17304. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. )
This section gives transitional rules for when pre-effective-date actions or filings can perfect or make enforceable a security interest under the new division.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17304. (a) If action, other than the filing of a financing statement, is taken before the effective date of the act adding this division and the action would have resulted in perfection of the security interest had the security interest become enforceable before the effective date of the act adding this division, the action is effective to perfect a security interest that attaches under the act adding this division before the adjustment date. An attached security interest becomes unperfected on the adjustment date unless the security interest becomes a perfected security interest under the act adding this division before the adjustment date. (b) The filing of a financing statement before the effective date of the act adding this division is effective to perfect a security interest on the effective date of the act adding this division to the extent the filing would satisfy the requirements for perfection under the act adding this division. (c) The taking of an action before the effective date of the act adding this division is sufficient for the enforceability of a security interest on the effective date of the act adding this division if the action would satisfy the requirements for enforceability under the act adding this division. (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17305. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. )
This section says which law determines priority among conflicting claims to collateral, and when prior Division 9 priorities stop applying.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17305. (a) Subject to subdivisions (b) and (c), the act adding this division determines the priority of conflicting claims to collateral. (b) Subject to subdivision (c), if the priorities of claims to collateral were established before the effective date of the act adding this division, Division 9 (commencing with Section 9101) as in effect before the effective date of the act adding this division determines priority. (c) On the adjustment date, to the extent the priorities determined by Division 9 (commencing with Section 9101), as amended by the act adding this division, modify the priorities established before the effective date of the act adding this division, the priorities of claims to Division 12 property and electronic money established before the effective date of the act adding this division cease to apply. (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 17306. Verify source ↗
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. )
This section says which law controls priority disputes for Division 12 property in transitional situations.
## Commercial Code - COM ## DIVISION 17. EFFECTIVE DATE AND TRANSITION PROVISIONS [17101 - 17306] ( Division 17 added by Stats. 2023, Ch. 210, Sec. 91. ) ## CHAPTER 3. Transitional Provisions for Divisions 9 and 12 [17301 - 17306] ( Chapter 3 added by Stats. 2023, Ch. 210, Sec. 91. ) ## 17306. (a) Subject to subdivisions (b) and (c), Division 12 determines the priority of conflicting claims to Division 12 property when the priority rules of Division 9 (commencing with Section 9101) as amended by the act adding this division do not apply. (b) Subject to subdivision (c), when the priority rules of Division 9 (commencing with Section 9101) as amended by the act adding this division do not apply and the priorities of claims to Division 12 property were established before the effective date of the act adding this division, law other than Division 12 determines priority. (c) When the priority rules of Division 9 (commencing with Section 9101) as amended by the act adding this division do not apply, to the extent the priorities determined by the act adding this division modify the priorities established before the effective date of the act adding this division, the priorities of claims to Division 12 property established before the effective date of the act adding this division cease to apply on the adjustment date. (Added by Stats. 2023, Ch. 210, Sec. 91. (SB 95) Effective January 1, 2024.) - 2101. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This division is called Uniform Commercial Code—Sales and may be cited by that name.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2101. This division shall be known and may be cited as Uniform Commercial Code—Sales. (Enacted by Stats. 1963, Ch. 819.) - 2102. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section says the division applies to transactions in goods, and in hybrid transactions only as specified here. It does not apply to transactions that only create a security interest, and it does not impair or repeal certain consumer, farmer, or other buyer-protection sales laws.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2102. (a) Unless the context otherwise requires, and except as provided in subdivision (c), this division applies to transactions in goods and, in the case of a hybrid transaction, it applies to the extent provided in subdivision (b). (b) In a hybrid transaction: (1) If the sale-of-goods aspects do not predominate, only the provisions of this division which relate primarily to the sale-of-goods aspects of the transaction apply, and the provisions that relate primarily to the transaction as a whole do not apply. (2) If the sale-of-goods aspects predominate, this division applies to the transaction but does not preclude application in appropriate circumstances of other law to aspects of the transaction which do not relate to the sale of goods. (c) This division does not: (1) Apply to a transaction that, even though in the form of an unconditional contract to sell or present sale, operates only to create a security interest; or (2) Impair or repeal a statute regulating sales to consumers, farmers, or other specified classes of buyers. (Amended by Stats. 2023, Ch. 210, Sec. 5. (SB 95) Effective January 1, 2024.) - 2103. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section defines key terms used in Division 2 of the Commercial Code, including “buyer,” “seller,” and “receipt of goods.”
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2103. (1) In this division unless the context otherwise requires: (a) “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 division or to specified chapters thereof, and the sections in which they appear are: “Acceptance.” Section 2606. “Banker’s credit.” Section 2325. “Between merchants.” Section 2104. “Cancellation.” Section 2106(4). “Commercial unit.” Section 2105. “Confirmed credit.” Section 2325. “Conforming to contract.” Section 2106. “Contract for sale.” Section 2106. “Cover.” Section 2712. “Entrusting.” Section 2403. “Financing agency.” Section 2104. “Future goods.” Section 2105. “Goods.” Section 2105. “Identification.” Section 2501. “Installment contract.” Section 2612. “Letter of Credit.” Section 2325. “Lot.” Section 2105. “Merchant.” Section 2104. “Overseas.” Section 2323. “Person in position of seller.” Section 2707. “Present sale.” Section 2106. “Sale.” Section 2106. “Sale on approval.” Section 2326. “Sale or return.” Section 2326. “Termination.” Section 2106. (3) The following definitions in other divisions apply to this division: “Check.” Section 3104. “Consignee.” Section 7102. “Consignor.” Section 7102. “Consumer goods.” Section 9102. “Control.” Section 7106. “Dishonor.” Section 3502. “Draft.” Section 3104. (4) In addition, Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division. (Amended by Stats. 2006, Ch. 254, Sec. 31. Effective January 1, 2007.) - 2104. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section defines “merchant,” “financing agency,” and “between merchants.”
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2104. (1) “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself 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 his employment of an agent or broker or other intermediary who by his occupation holds himself 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 2707). (3) “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants. (Amended by Stats. 2006, Ch. 254, Sec. 32. Effective January 1, 2007.) - 2105. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section defines “goods,” “lot,” and “commercial unit,” and says goods must be existing and identified before any interest can pass.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2105. (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 (Division 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 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. (Enacted by Stats. 1963, Ch. 819.) - 2106. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section defines key sales-law terms like contract, sale, termination, cancellation, and hybrid transaction.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2106. (1) In this division 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 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 cancelling party also retains any remedy for breach of the whole contract or any unperformed balance. (5) “Hybrid transaction” means a single transaction involving a sale of goods and: (a) the provision of services; (b) a lease of other goods; or (c) a sale, lease, or license of property other than goods. (Amended by Stats. 2024, Ch. 80, Sec. 25. (SB 1525) Effective January 1, 2025.) - 2107. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. )
This section says some items attached to realty are treated as goods sales contracts, including minerals, structures to be removed, growing crops, and timber, depending on how they are severed.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 1. Short Title, General Construction and Subject Matter [2101 - 2107] ( Chapter 1 enacted by Stats. 1963, Ch. 819. ) ## 2107. (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 division 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 subdivision (1) or of timber to be cut is a contract for the sale of goods within this division 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 in the same manner 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. (Amended by Stats. 1974, Ch. 997.) - 2201. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A sale-of-goods contract for $500 or more is generally not enforceable unless there is a signed record, with several stated exceptions.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2201. (1) Except as otherwise provided in this section, a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there is a record 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 the party’s authorized agent or broker. A record is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subdivision beyond the quantity of goods shown in the record. (2) Between merchants if within a reasonable time a record 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 subdivision (1) against the party unless notice in a record of objection to its contents is given within 10 days after it is received. (3) A contract which does not satisfy the requirements of subdivision (1) but which is valid in other respects is enforceable: (a) 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; (b) If the party against whom enforcement is sought admits in its pleading, testimony, or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or (c) With respect to goods for which payment has been made and accepted or which have been received and accepted (Section 2606). (4) Subdivision (1) of this section does not apply to a qualified financial contract as that term is defined in paragraph (2) of subdivision (b) of Section 1624 of the Civil Code if either (a) there is, as provided in paragraph (3) of subdivision (b) of Section 1624 of the Civil Code, sufficient evidence to indicate that a contract has been made or (b) the parties thereto, by means of a prior or subsequent written contract, have agreed to be bound by the terms of the qualified financial contract from the time they reach agreement (by telephone, by exchange of electronic messages, or otherwise) on those terms. (Amended by Stats. 2024, Ch. 80, Sec. 26. (SB 1525) Effective January 1, 2025.) - 2202. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A final written record of agreed terms generally cannot be contradicted by earlier or simultaneous oral agreements, but it can be explained or supplemented in limited ways.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2202. Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: (a) By course of dealing, course of performance, or usage of trade (Section 1303); and (b) By evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement. (Amended by Stats. 2023, Ch. 210, Sec. 8. (SB 95) Effective January 1, 2024.) - 2204. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A contract for the sale of goods may be formed in any way that shows agreement, including conduct by both parties.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2204. (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. (Enacted by Stats. 1963, Ch. 819.) - 2205. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A merchant’s qualifying offer to buy or sell goods can be irrevocable for a limited time, and certain oral offers to supply goods to licensed contractors must be confirmed quickly.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2205. (a) An offer by a merchant to buy or sell goods in a signed record 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. (b) Notwithstanding subdivision (a), when a merchant renders an offer, oral or written, to supply goods to a contractor licensed pursuant to the provisions of Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code or a similar contractor’s licensing law of another state, and the merchant has actual or imputed knowledge that the contractor is so licensed, and that the offer will be relied upon by the contractor in the submission of its bid for a construction contract with a third party, the offer relied upon shall be irrevocable, notwithstanding lack of consideration, for 10 days after the awarding of the contract to the prime contractor, but in no event for more than 90 days after the date the bid or offer was rendered by the merchant; except that an oral bid or offer, when for a price of two thousand five hundred dollars ($2,500) or more, shall be confirmed in a record by the contractor or the contractor’s agent within 48 hours after it is rendered. Failure by the contractor to confirm the offer in a record shall release the merchant from the merchant’s offer. Nothing in this subdivision shall prevent a merchant from providing that the bid or offer will be held open for less than the time provided for herein. (Amended by Stats. 2023, Ch. 210, Sec. 9. (SB 95) Effective January 1, 2024.) - 2206. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
This section says how offers and acceptances are interpreted in contract formation, including shipment offers and delayed notice of acceptance.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2206. (1) Unless otherwise unambiguously indicated by the language or circumstances (a) 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. (Enacted by Stats. 1963, Ch. 819.) - 2207. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A timely acceptance or written confirmation can count as acceptance even if it adds or changes terms, unless acceptance is made conditional on agreeing to those terms.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2207. (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; or (c) 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 code. (Enacted by Stats. 1963, Ch. 819.) - 2209. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
Contracts modified under this division can be binding without new consideration, and certain signed anti-modification terms may require separate signing by the other party; a party who made a waiver may retract it with reasonable notice unless that would be unjust.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2209. (1) An agreement modifying a contract within this division needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing or other signed record 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 division (Section 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 subdivision (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. (Amended by Stats. 2023, Ch. 210, Sec. 10. (SB 95) Effective January 1, 2024.) - 2210. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. )
A party may use a delegate to perform duties, and sellers or buyers may assign rights, but several exceptions and limits apply.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 2. Form, Formation and Readjustment of Contract [2201 - 2210] ( Chapter 2 enacted by Stats. 1963, Ch. 819. ) ## 2210. (1) A party may perform his or her duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his or her original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach. (2) Except as otherwise provided in Section 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 or risk imposed on him or her by his or her contract, or impair materially his or her chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor’s due performance of his or her entire obligation can be assigned despite agreement otherwise. (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 subdivision (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 (A) 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 (B) 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 him or her 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 his or her rights against the assignor, demand assurances from the assignee (Section 2609). (Amended (as to be amended by Stats. 1999, Ch. 991) by Stats. 2000, Ch. 1003, Sec. 4. Effective January 1, 2001. Operative July 1, 2001, by Sec. 56 of Ch. 1003.) - 2301. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
The seller must transfer and deliver, and the buyer must accept and pay, according to the contract.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2301. 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. (Enacted by Stats. 1963, Ch. 819.) - 2303. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
If this division assigns a risk or burden between the parties, the agreement can change that allocation and can also split the risk or burden.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2303. Where this division 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. (Enacted by Stats. 1963, Ch. 819.) - 2304. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
A contract price may be payable in money or in something else, including goods or an interest in real property.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2304. (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 he 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 division, but not the transfer of the interest in realty or the transferor’s obligations in connection therewith. (Enacted by Stats. 1963, Ch. 819.) - 2305. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
Parties can make a sales contract even if the price is not yet settled, unless they meant to be bound only if the price was fixed or agreed.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2305. (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 if (a) Nothing is said as to price; or (b) The price is left to be agreed by the parties and they fail to agree; or (c) 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 him 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 his option treat the contract as canceled or himself 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. (Enacted by Stats. 1963, Ch. 819.) - 2306. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
A quantity term tied to output or requirements is read as actual good-faith output or requirements, but quantities cannot be unreasonably disproportionate to a stated estimate or, if none exists, to normal comparable prior output or requirements. Exclusive dealing agreements also require the seller and buyer to use best efforts unless they agree otherwise.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2306. (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. (Enacted by Stats. 1963, Ch. 819.) - 2307. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
Unless the parties agree otherwise, goods in a sale contract must be delivered in a single delivery, and payment is due only when that tender is made.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2307. 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. (Enacted by Stats. 1963, Ch. 819.) - 2308. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
This section sets default delivery locations for sold goods unless the parties agree otherwise.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2308. Unless otherwise agreed (a) The place for delivery of goods is the seller’s place of business or if he has none his residence; but (b) 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; and (c) Documents of title may be delivered through customary banking channels. (Enacted by Stats. 1963, Ch. 819.) - 2309. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
If no time is set for contract shipment, delivery, or another required action, it must be done within a reasonable time. Indefinite successive-performance contracts are valid for a reasonable time and may be ended by either party unless otherwise agreed, but termination by one party usually requires reasonable notice to the other party.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2309. (1) The time for shipment or delivery or any other action under a contract if not provided in this division 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. (Enacted by Stats. 1963, Ch. 819.) - 2310. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
This section sets when payment for goods is due, usually when and where the buyer receives the goods, and gives the buyer a limited right to inspect after arrival before payment unless the contract says otherwise.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2310. Unless otherwise agreed: (a) Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and (b) If the seller is authorized to send the goods he 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 2513); and (c) If delivery is authorized and made by way of documents of title otherwise than by subdivision (b) then payment is due regardless of where the goods are to be received (i) at the time and place at which the buyer is to receive delivery of the tangible documents or (ii) 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; and (d) Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but postdating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period. (Amended by Stats. 2006, Ch. 254, Sec. 35. Effective January 1, 2007.) - 2311. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
If a sales contract leaves performance details to be set later, those specifications must be made in good faith and within commercial reasonableness limits.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2311. (1) An agreement for sale which is otherwise sufficiently definite (subdivision (3) of Section 2204) 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 subdivisions (1)(c) and (3) of Section 2319 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 co-operation is necessary to the agreed performance of the other but is not seasonably forthcoming, the other party in addition to all other remedies (a) Is excused for any resulting delay in his own performance; and (b) May also either proceed to perform in any reasonable manner or after the time for a material part of his own performance treat the failure to specify or to co-operate as a breach by failure to deliver or accept the goods. (Enacted by Stats. 1963, Ch. 819.) - 2312. Verify source ↗
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. )
A seller in a contract for sale warrants good title and delivery free of unknown liens or security interests, unless the warranty is specifically limited. If the buyer supplies specifications, the buyer must hold the seller harmless for third-party claims caused by following those specifications.
## Commercial Code - COM ## DIVISION 2. SALES [2101 - 2801] ( Division 2 enacted by Stats. 1963, Ch. 819. ) ## CHAPTER 3. General Obligation and Construction of Contract [2301 - 2328] ( Chapter 3 enacted by Stats. 1963, Ch. 819. ) ## 2312. (1) Subject to subdivision (2) there is in a contract for sale a warranty by the seller that (a) The title conveyed shall be good, and its transfer rightful; and (b) The goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge. (2) A warranty under subdivision (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 in himself or that he is purporting to sell only such right or title as he 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. (Enacted by Stats. 1963, Ch. 819.)
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