Section 1--201. General Definitions

Subject to additional definitions contained in the subsequent Articles
  of  this Act which are applicable to specific Articles or Parts thereof,
  and unless the context otherwise requires, in this Act:
    (1)  "Action"  in  the  sense  of  a  judicial   proceeding   includes
  recoupment,   counterclaim,  set-off,  suit  in  equity  and  any  other
  proceedings in which rights are determined.
    (2) "Aggrieved party" means a party entitled to resort to a remedy.
    (3) "Agreement" means the bargain of the parties 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 Act (Sections 1--205 and 2--208). Whether an agreement has legal
  consequences is determined by the provisions of this Act, if applicable;
  otherwise  by  the  law  of  contracts  (Section  1--103).      (Compare
  "Contract".)
    (4) "Bank" means any person engaged in the business of banking.
    (5) "Bearer" means the person in possession of an instrument, document
  of  title,  or  certificated  security  payable to bearer or indorsed 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, and includes an airbill. "Airbill" means a document
  serving for air transportation as a bill of lading does  for  marine  or
  rail  transportation,  and  includes  an  air  consignment  note  or air
  waybill.
    (7) "Branch" includes a separately incorporated foreign  branch  of  a
  bank.
    (8) "Burden of establishing" a fact means the burden of persuading the
  triers  of fact that the existence of the fact is more probable than its
  non-existence.
    (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  pre-existing  contract
  for sale. Only a buyer that takes possession of the goods or has a right
  to  recover  the goods from the seller under article 2 may be a buyer in
  ordinary course of business. A person that acquires goods in a  transfer
  in  bulk  or  as  security  for or in total or partial satisfaction of a
  money debt is not a buyer in ordinary course of business.
    (10) "Conspicuous": A term or clause is  conspicuous  when  it  is  so
  written  that a reasonable person against whom it is to operate ought to
  have noticed it. A printed heading in capitals (as: NON-NEGOTIABLE  BILL
  OF   LADING)  is  conspicuous.  Language  in  the  body  of  a  form  is
  "conspicuous" if it is in larger or other  contrasting  type  or  color.
  But  in  a  telegram any stated term is "conspicuous". Whether a term or
  clause is "conspicuous" or not is for decision by the court.
    (11) "Contract" means the total legal obligation  which  results  from
  the  parties' agreement as affected by this Act and any other applicable
  rules of law. (Compare "Agreement".)

    (12) "Creditor" includes a general creditor,  a  secured  creditor,  a
  lien creditor and any representative of creditors, including an assignee
  for  the  benefit  of  creditors, a trustee in bankruptcy, a receiver in
  equity and an executor or administrator  of  an  insolvent  debtor's  or
  assignor's estate.
    (13)  "Defendant"  includes a person in the position of defendant in a
  cross-action or counterclaim.
    (14) "Delivery" with  respect  to  instruments,  documents  of  title,
  chattel  paper  or  certificated  securities means voluntary transfer of
  possession.
    (15) "Document of title" includes 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.
    (16) "Fault" means wrongful act, omission or breach.
    (17)  "Fungible"  with  respect  to goods or securities means goods or
  securities of which any unit is,  by  nature  or  usage  of  trade,  the
  equivalent of any other like unit. Goods which are not fungible shall be
  deemed  fungible for the purposes of this Act to the extent that under a
  particular  agreement  or  document  unlike   units   are   treated   as
  equivalents.
    (18) "Genuine" means free of forgery or counterfeiting.
    (19)  "Good faith" means honesty in fact in the conduct or transaction
  concerned.
    (20) "Holder" means a person who is in possession  of  a  document  of
  title  or  an  instrument  or an investment certificated security drawn,
  issued or indorsed to him or to his order or to bearer or in blank.
    (21) To "honor" is to pay or to accept and pay, or where a  credit  so
  engages  to purchase or discount a draft complying with the terms of the
  credit.
    (22) "Insolvency proceedings" includes any assignment for the  benefit
  of  creditors or other proceedings intended to liquidate or rehabilitate
  the estate of the person involved.
    (23) A person is "insolvent" who either has ceased to pay his debts in
  the ordinary course of business or cannot pay his debts as  they  become
  due or is insolvent within the meaning of the federal bankruptcy law.
    (24)  "Money"  means  a  medium of exchange authorized or adopted by a
  domestic or foreign government as a part of its currency except that  it
  does  not  include  rare  or unusual coins used for numismatic purposes.
  Such rare or unusual coins shall be considered goods; provided, however,
  that nothing in this subsection shall be deemend to impair or alter  the
  obligation  of  an  insurer  to an insured under a contract of insurance
  heretofore of hereafter issued or delivered in this state covering  loss
  of or damage to property.
    (25) A person has "notice" of a fact when
         (a) he has actual knowledge of it; or
         (b) he has received a notice or notification of it; or
         (c) from all the facts and circumstances known to him at the time
             in question he has reason to know that it exists.
  A  person  "knows"  or  has  "knowledge"  of  a  fact when he has actual
  knowledge of it. "Discover" or "learn" or a word or  phrase  of  similar
  import  refers  to knowledge rather than to reason to know. The time and

  circumstances under which a notice  or  notification  may  cease  to  be
  effective are not determined by this Act.
    (26)  A  person  "notifies"  or  "gives"  a  notice or notification to
  another by taking such steps as may be reasonably required to inform the
  other in ordinary course whether or not such  other  actually  comes  to
  know of it. A person "receives" a notice or notification when
         (a) it comes to his attention; or
         (b) it  is  duly delivered at the place of business through which
             the contract was made or at any other place held out  by  him
             as the place for receipt of such communications.
    (27)  Notice,  knowledge  or  a  notice or notification received by an
  organization is effective for a particular  transaction  from  the  time
  when  it  is  brought to the attention of the individual conducting that
  transaction, and in any event from the time  when  it  would  have  been
  brought   to  his  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   such
  communication  is  part of his regular duties or unless he has reason to
  know of the transaction and that the  transaction  would  be  materially
  affected by the information.
    (28) "Organization" includes a corporation, government or governmental
  subdivision  or  agency,  business  trust, estate, trust, partnership or
  association, two or more persons having a joint or common  interest,  or
  any other legal or commercial entity.
    (29)  "Party",  as distinct from "third party", means a person who has
  engaged in a transaction or made an agreement within this Act.
    (30) "Person" includes an individual or an organization  (See  Section   1--102).
    (31)  "Presumption"  or  "presumed"  means that the trier of fact must
  find the existence of the fact presumed unless  and  until  evidence  is
  introduced which would support a finding of its non-existence.
    (32)  "Purchase"  includes  taking  by  sale,  discount,  negotiation,
  mortgage, pledge, lien, security interest, issue or  re-issue,  gift  or
  any other voluntary transaction creating an interest in property.
    (33) "Purchaser" means a person who takes by purchase.
    (34)  "Remedy" means any remedial right to which an aggrieved party is
  entitled with or without resort to a tribunal.
    (35) "Representative" includes an agent, an officer of  a  corporation
  or  association,  and a trustee, executor or administrator of an estate,
  or any other person empowered to act for another.
    (36) "Rights" includes remedies.
    (37) "Security interest" means an interest  in  personal  property  or
  fixtures which secures payment or performance of an obligation. The term
  also  includes  any  interest  of  a  consignor and a buyer of accounts,
  chattel  paper,  a  payment  intangible,  or  a  promissory  note  in  a
  transaction  that is subject to Article 9. The special property interest
  of a buyer of goods on identification of those goods to a  contract  for
  sale  under Section 2--401 is not a "security interest", but a buyer may
  also acquire a "security interest" by complying with Article  9.  Except
  as otherwise provided in Section 2--505, the right of a seller or lessor
  of  goods  under Article 2 or 2-A to retain or acquire possession of the
  goods is not a "security interest", but a  seller  or  lessor  may  also
  acquire a "security interest" by complying with Article 9. The retention
  or reservation of title by a seller of goods notwithstanding shipment or

  delivery  to  the  buyer  (Section  2--401)  is  limited  in effect to a
  reservation of a "security interest".
         (a) Whether a transaction creates a lease or security interest is
             determined  by the facts of each case; however, a transaction
             creates a security interest if the consideration  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  not
             subject to termination by the lessee, and:
             (i) the  original  term  of  the lease is equal to or greater
                 than the remaining economic life of the goods,
            (ii) 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,
           (iii) the lessee has an option  to  renew  the  lease  for  the
                 remaining  economic  life  of the goods for no additional
                 consideration or nominal  additional  consideration  upon
                 compliance with the lease agreement, or
            (iv) the lessee has an option to become the owner of the goods
                 for  no  additional  consideration  or nominal additional
                 consideration upon compliance with the lease agreement.
         (b) A transaction does not  create  a  security  interest  merely
             because it provides that:
             (i) 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,
            (ii) the  lessee  assumes risk of loss of the goods, or agrees
                 to  pay   taxes,   insurance,   filing,   recording,   or
                 registration  fees,  or service or maintenance costs with
                 respect to the goods,
           (iii) the lessee has an option to renew the lease or to  become
                 the owner of the goods,
            (iv) 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
             (v) 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.
         (c) For purposes of this subsection (37):
             (i) Additional consideration is not nominal if  (A) when  the
                 option  to  renew  the lease is granted to the lessee the
                 rent is stated to be the fair market rent for the use  of
                 the  goods  for the term of the renewal determined at the
                 time the option is to  be  performed,  or  (B)  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. 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;
            (ii) "Reasonably predictable" and "remaining economic life  of
                 the  goods"  are  to  be determined with reference to the

                 facts and circumstances at the time  the  transaction  is
                 entered into; and
           (iii) "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  is  not
                 manifestly unreasonable at the time  the  transaction  is
                 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.
    (38) "Send" in connection with any writing or notice means to  deposit
  in  the  mail  or  deliver  for transmission by any other usual means of
  communication with postage or cost  of  transmission  provided  for  and
  properly  addressed  and  in  the  case  of  an instrument to an address
  specified thereon or otherwise agreed,  or  if  there  be  none  to  any
  address  reasonable  under the circumstances. The receipt of any writing
  or notice within the time at which it would  have  arrived  if  properly
  sent has the effect of a proper sending.
    (39)  "Signed" includes any symbol executed or adopted by a party with
  present intention  to  authenticate  a  writing.  Without  limiting  the
  generality  of  the preceding sentence, any financing or other statement
  or security agreement filed pursuant  to  Part  5  of  Article  9  which
  contains  a  copy,  however made, of the signature of a secured party or
  his representative, or of a debtor or his representative, is "signed" by
  the secured party or the debtor, as the case may be.
    (40) "Surety" includes guarantor.
    (41) "Telegram" includes a message  transmitted  by  radio,  teletype,
  cable, any mechanical method of transmission, or the like.
    (42)  "Term"  means  that  portion  of an agreement which relates to a
  particular matter.
    (43) "Unauthorized" signature or indorsement means  one  made  without
  actual, implied or apparent authority and includes a forgery.
    (44)  "Value". Except as otherwise provided with respect to negotiable
  instruments and bank collections (Sections 3--303, 4--208 and 4--209)  a
  person gives "value" for rights if he acquires them
         (a) in  return  for  a binding commitment to extend credit or for
             the extension of immediately available credit whether or  not
             drawn  upon  and whether or not a charge-back is provided for
             in the event of difficulties in collection; or
         (b) as security for or in total  or  partial  satisfaction  of  a
             pre-existing claim; or
         (c) by accepting delivery pursuant to a pre-existing contract for
             purchase; or
         (d) generally,  in  return  for  any  consideration sufficient to
             support a simple contract.
    (45) "Warehouse receipt" means a receipt issued by a person engaged in
  the business of storing goods for hire.
    (46) "Written" or "writing"  includes  printing,  typewriting  or  any
  other intentional reduction to tangible form.