An Act to enact the Uniform Commercial Code for the District of Columbia, and for other purposes
PL 88-243 (H.R.5338), enacted 12/30/1963

630 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
Public Law 88-243 
December 30, 1963 
A N 
A C T 
-
* 
To enact the Uniform Connnercial Code for the District of Colnnibia, and for 
other purposes. 
Be it enacted by the Senate and House of Representatives 
of the 
District of 
United States of America in Congress assemMed^ That the Uniform 
*
^ unifoim Com- 
Commercial Code is enacted as Subtitle I of Title 28 of the District 
merciai Code. 
of Columbia Codc, in which it shall be designated "Subtitle I—LTni-
form Commercial Code", and may be cited as "D.C. Code, § —", as 
follows: 
SUBTITLE I—UNIFORM COMMERCIAL 
CODE 
\ B T I C L E 
SECTIOX 
1. GENERAI, PROVISIONS 
28: 1—101 
2. SALES 
28: ^—101 
3. COMMEECIAL PAPER 
2 8 : 3—101 
4. BAXK DEPOSITS AND COLLECTIONS 
28: 4—101 
5. LETTERS OF CREDIT 
28: 5—101 
6. BULK 
TRANSFERS 
28: 
6—101 
7. WAREHOUSE RECEIPTS, BILLS OF LADING AND OTHER DOCUMENTS 
OP TITI>E 
28: 
7—101 
8. INVESTMENT SECURITIES 
28: 8—101 
9. SECURED TRANSACTIONS; SALES OF ACCOUNTS, CONTRACT BIGHTS 
AND CHATTEL PAPER 
28: 9—101 
10. CONSTRUCTION W I T H OTHER LAWS 
28:10—101 
ARTICLE I—GENERAL PROVISIONS 
PART 1—SHORT TITLE, CONSTRUCTION, APPLICATION AND SUBJECT MATTER 
Sec. 
28:1—101. Short title. 
28:1—102. Purposes ; rules of construction ; variation by agreement. 
28:1—103. Supplementary general principles of law applicable. 
28:1—104. Construction against implicit repeal. 
28:1—105. Territorial application of this subtitle; parties' power to choose 
applicable law. 
28:1—106. Remedies to be liberally administered. 
28:1—107. Waiver or renunciation of claim or right after breach. 
28:1—108. Severability. 
28:1—109. Section captions. 
PART 2—GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION 
28:1—201. General definitions. 
28:1—202. Prima facie evidence by third party documents. 
28:1—203. Obligation of good faith. 
28:1—204. Time; reasonable time; "seasonably". 
28:1—205. Course of dealing and usage of trade. 
28:1—206. Statute of frauds for kinds of personal property not otherwise 
covered. 
28:1—^207. Performance or acceptance under reservation of rights. 
28:1—r208. Option to accelerate at will. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1%3 
631 
PART 1—SHORT TITLE, CONSTRUCTION, APPLICATION 
AND SUBJECT MATTER 
§28:1—lOL Short title 
This subtitle shall be Imown and may be cited as Uniform Com- 
citation of title. 
mercial Code. 
§28:1—102. Purposes; rules of construction; variation by agree-
ment 
(1) This subtitle shall be liberally construed and applied to promote 
its underlying purposes and policies. 
(2) Underlying purposes and policies of this subtitle are 
(a) to simplify, clarify and modernize the law governing com-
mercial transactions; 
(b) to permit the continued expansion of commercial practices 
through custom, usage and agreement of the parties; 
(c) to make uniform the law among the various jurisdictions. 
(3) The effect of provisions of this subtitle may be varied by agree-
ment, except as otherwise provided in this subtitle and except that the 
obligations of good faith, diligence, reasonableness and care prescribed 
by this subtitle may not be disclaimed by agreement but the parties 
may by agreement determine the standards by which the performance 
of such obligations is to be measured if such standards are not mani-
festly unreasonable. 
(4) The presence in certain provisions of this subtitle of the words 
"unless otherwise agreed" or w^ords of similar import does not imply 
that the effect of other provisions may not be varied by agreement 
under subsection (3). 
(5) In this subtitle unless the context otherwise requires 
(a) words in the singular number include the plural, and in 
the plural include the singular; 
(b) words of the masculine gender include the feminine and the 
neuter, and when the sense so indicates words of the neuter gender 
may refer to any gender. 
§28:1—103. Supplementary general principles of law applicable 
Unless displaced by the particular provisions of this subtitle, 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, or other 
validating or invalidating cause shall supplement its provisions. 
§28:1—104. Construction against implicit repeal 
This subtitle being a general act intended as a unified coverage of its 
subj(Kit matter, no part of it shall be deemed to be impliedly repealed 
by subsequent legislation if such construction can reasonably be 
avoided. 
§ 28:1—105. Territorial application of this subtitle; parties' power 
to choose applicable law 
(1) Except as provided hereafter in this section, when a transaction 
bears a reasonable relation to the District and also to a state or nation 
the parties may agree that the law either of the District or of such 
state or nation shall govern their rights and duties. 
Failing such 
agreement this subtitle applies to transactions bearing an appropriate 
relation to the District. 
(2) Where one of the following provisions of this subtitle specifies 
the applicable law, that provision governs and a contrary agreement 
is effective only to the extent permitted by the law (including the con-
flict of laws rules) so specified: 
Rights of creditors against sold goods. 
Section 28:2—402. 
Applicability of the article on bank deposits and collections. 
Section 28:4—102. 
632 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
Bulk transfers subject to the article on bulk transfers. 
Section 
28:6—102. 
Applicability of the article on investment securities. 
Section 
28:8—106. 
Policy and scope of the article on secured transactions. 
Sec-
tions 28:9—102 and 28:9—103. 
§28:1—106. Remedies to be liberally administered 
(1) The remedies provided by this subtitle shall be liberally admin-
istered 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 conse-
quential or special nor penal damages may be had except as specifically 
provided in this subtitle or by other rule of law. 
(2) Any right or obligation declared by this subtitle is enforceable 
by action unless the provision declaring it specifies a different and 
limited effect. 
§ 28:1--107. Waiver or renunciation of claim or right after breach 
Any claim or right arising out of an alleged breach can be dis-
charged in whole or in part without consideration by a written waiver 
or renunciation signed and delivered by the aggrieved party. 
§28:1—108. Severability 
If any provision or clause of this subtitle or application thereof to 
any person or circumstances is held invalid, such invalidity shall not 
affect other provisions or applications of this subtitle which can be 
given effect without the invalid provision or application, and to this 
end the provisions of this subtitle are declared to be severable. 
§ 28:1—109. Section captions 
Section captions are parts of this subtitle. 
PART 2—GENERAL DEFINITIONS AND PRINCIPLES OF 
INTERPRETATION 
§28:1—201. General definitions 
Subject to additional definitions contained in the subsequent articles 
of this subtitle which are applicable to specific articles or parts thereof, 
and unless the context otherwise requires, in this subtitle: 
(1) "Action" in the sense of a judicial proceeding includes recoup-
ment, 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 j)arties 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 pro-
vided in this subtitle (sections 28:1—205 and 2—208). Whether an 
agreement has legal consequences is determined by the provisions of 
this subtitle, if applicable; otherwise by the law of contracts (section 
28:1—103). (Compare "Contract".) 
(4) "Bank" means any person engaged in the business of banking. 
(5) "Bearer" means the person in possession of an instrument, docu-
ment of title, or 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 trans 
porting 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. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
633 
(7) "Brancli"' 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 who in 
good faith and without knowledge that the sale to him is in violation 
of the ownership rights or security 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 receiving 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. 
(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 
fi-om the parties' agreement as affected by this subtitle 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, 
chatt-el paper or securities means voluntary transfer of possession. 
(14a) "District" means the District of Columbia; and "state" 
includes the District. 
(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 subtitle to the extent that 
mider 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 transac-
tion concerned. 
(20) "Holder" means a person who is in possession of a document 
of title or an instilment or an investment security drawn, issued or 
indorsed to him or to his order or to bearer or in blank. 
634 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(21) To "honor" is to pay or to accept and pay, or wliere 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 bank-
ruptcy law. 
(24) "Money" means a medium of exchange authorized or adopted 
by a domestic or foreign government as a part of its currency. 
(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 
knoAvledge 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 subtitle. 
(26) A i^erson "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 con-
ducting 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 information is 
part of his regular duties or unless he has reason to know of the trans-
action and that the transaction would be materially affected by the 
information. 
(28) "Organization" includes a corporation, government or govern-
mental 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 entit5^. 
(29) "Party", as distinct from "third party", means a person who 
has engaged in a transaction or made an agreement within this subtitle. 
(30) "Person" includes an individual or an organization (see sec-
tion 28:1—102). 
(31) "Presumption" or "presumed" means that the trier of fact 
nmst find the existence of the fact presumed unless and until evidence 
is introduced which would support a finding of its nonexistence. 
(32) "Purchase" includes taking by sale, discount, negotiation, 
mortgage, pledge, lien, 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 tribunal. 
77 STAT. ] 
PUBLIC LAW 88-243-D EC. 30, 1963 
635 
(35) ''Kepreseiitative'" 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 
retention or reservation of title by a seller of goods notwithstanding 
shipment or delivery to the buyer (section 28:2-401) is limited in ejffect 
to a reservation of a "security interest". 
The term also includes any 
interest of a buyer of accounts, chattel paper, or contract rights which 
is subject to article 9. The special property interest of a buyer of 
goods on identification of such goods to a contract for sale under 
section 28:2—401 is not a "security interest", but a buyer may also 
acquire a "security interest" by complying with article 9. Unless a 
lease or consignment is intended as security, reservation of title there-
under is not a "security interest" but a consignment is in any event 
subject to the provisions on consignment sales (section 28:2—326). 
Whether a lease is intended as security is to be determined by the facts 
of each case; however, (a) the inclusion of an option to purchase does 
r:ot of itself make the lease one intended for security, and (b) an agree-
ment that upon compliance with the terms of the lease the lessee shall 
l>ecome or has the option to become the owner of the property for no 
additional consideration or for a nominal consideration does make the 
lease one intended for security. 
(38) "Send" in connection with any writing or notice means to 
(lei30sit 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. 
(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) "Unauthorised" 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 nego-
tiable instruments and bank collections (sections 28:3—303, 28:4—208 
and 28:4—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 sup-
port a simple contract. 
(45) "Warehouse receipt" means a receipt issued by a person en-
gaged in the business of storing goods for hire. 
(46) "Written" or "writing" includes printing, typewriting or any 
other intentional reduction to tangible form. 
636 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:1—202. Prima facie evidence by third party documents 
A document in due form purporting- to be a bill of lading, policy 
or certificate of insurance, official weigher's or inspector's certificate, 
consular invoice, or any other document authorized or required by 
the contract to be issued by a third party shall be prima facie evidence 
of its own authenticity and genuineness and of the facts stated in the 
document by the third party. 
§28:1—203. Obligation of good faith 
Every contract or duty within this subtitle imposes an obligation of 
good faith in its performance or enforcement. 
§28:1—204. Time; reasonable time; "seasonably" 
(1) Whenever this subtitle requires any action to be taken within 
a reasonable time, any time which is not manifestly unreasonable may 
be fixed by agreement. 
(2) What is a reasonable time for taking any action depends on the 
nature, purpose and circumstances of such action. 
(3) An action is taken "seasonably" when it is taken at or within 
the time agreed or if no time is agreed at or within a reasonable time. 
§28:1—205. Course of dealing and usage of trade 
(1) A course of dealing is a sequence of previous conduct between 
the parties to a particular transaction which is fairly to be regarded 
as establishing a common basis of understanding for interpreting their 
expressions and other conduct. 
(2) A usage of trade is any practice or method of dealing having 
such regularity of observance m 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 are to be proved 
as facts. If it is established that such a usage is embodied in a written 
trade code or similar writing the interpretation of the writing is for 
the court. 
(3) A course of dealing between parties and any usage of trade in 
the vocation or trade in which they are engaged or of which they are 
or should be aware give particular meaning to and supplement or 
qualify terms of an agreement. 
(4) The express terms of an agreement and an applicable coui-se of 
dealing or usage of trade shall be construed wherever reasonable as 
consistent with each other; but when such construction is unreason-
able express terms control both course of dealing and usage of trade 
and couree of dealing controls usage of trade. 
(5) An applicable usage of trade in the place where any pait of 
{performance is to occur shall be used in interpreting the agreement 
as to that pait of the performance. 
(6) Evidence of a relevant usage of trade ofi'ered by one party is 
not admissible unless and until he has given the other party such notice 
as the court finds sufficient to ])revent unfair surprise to the latter. 
§28:1—^206. Statute of frauds for kinds of personal property not 
otherwise covered 
(1) Except in the cases described in subsection (2) of this section 
a contract for the sale of j^ersonal jjroperty is not enforceable by way 
of action or defense beyond five thousand dollars in amount or value 
of remedy unless tliere is some writing wliich indicates that a contract 
for sale lias been made between the })arties at a defined or stated price, 
reasonably identifies the subject matter, and is signed by the party 
against whom enforcement is sought or by his authorized agent. 
(2) Subsection (1) of this section does not apply to contracts for 
the sale of goods (section 28 :2—201) nor of securities (section 28:8— 
319) nor to security agreements (section 28:9—203). 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
637 
§28:1—207. Performance or acceptance under reservation of 
rights 
A party who with explicit reservation of rights performs or prom-
ises performance or assents to performance m a manner demanded 
or offered by the other party does not thereby prejudice the rights 
reserved. Such words as "without prejudice", "under protest" or tlie 
like are sufficient. 
§ 28:1—^208. Option to accelerate at will 
A term providing that one party or his successor in interest may 
accelerate payment or performance or require collateral or additional 
collateral 'at will" or ''when he deems himself insecure" or in words of 
similar import shall be construed to mean that he shall have power 
to do so only if he in good faith believes that the prospect of payment 
or performance is impaired. The burden of establishing lack of good 
faith is on the party against whom the power has been exercised. 
ARTICLE 2—SALES 
PART 1—SHORT TITLE, (GENERAL CONSTRUCTION AND SUBJECT MATTER 
Sec. 
28 :2—101. Short title. 
28 :2—102. Scope; certain security and other transactions excluded from this 
article. 
28 :2—103. Definitions and index of definitions. 
28:2—104. Definitions: "Merchant"; "between merchants"; "financing agency". 
28:2—105. Definitions: transferability ; "goods" ; "future" goods; "lot" ; "com-
mercial unit". 
28:2—106. Definitions: "contract" ; "agreement" ; "contract for sale" ; "sale"; 
"present sale"; "conforming" to contract; "termination"; "can-
cellation". 
28:2—107. Goods to be severed from realty: recording. 
PART 2—FORM, FORMATION AND READJUSTMENT OF CONTRACT 
28:2—201. Formal requirements; statute of frauds. 
28:2—^202. Final written expression; parol or extrinsic evidence. 
28:2—203. Seals inoperative. 
28:2—204. Formation in general. 
28:2—205. Firm offers. 
28:2—206. Offer and acceptance in formation of contract. 
28 :2—207. Additional terms in acceptance or confirmation. 
28:2—208. Course of performance or practical construction. 
28:2—209. Modification, rescission and waiver. 
28:2—210. Delegation of performance; assignment of rights. 
PART 3—GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT 
28:2—301. General obligations of parties. 
28:2—302. Unconscionable contract or clause. 
28:2—303. Allocation or division of risks. 
28:2—304. Price payable in money, goods, realty, or otherwise. 
28 :2—^05. Open price term, 
28:2—306. Output, requirements and exclusive dealings. 
28:2—307. Delivery in single lot or several lots. 
2&:2—308. Absence of specified place for delivery. 
28:2—309. Absence of specific time provisions; notice of termination. 
28:2—310. Open time for payment or running of credit; authority to ship under 
reservation. 
28:2—311. Options and cooperation respecting performance. 
28:2—312. Warranty of title and against infringement; buyer's 
obligation 
against infringement. 
28:2—313. Express warranties by afiirmation, promise, description, sample. 
28:2—314. Implied warranty: merchaBtability; usage of trade. 
28 :2—315. Implied warranty: fitness for particular purpose. 
28:2—316. Exclusion or modification of warranties. 
28:2—317. Cumulation and conflict of warranties express or implied. 
638 
PUBLIC L
A
W 88-243-DEC. 30, 1963 
[77STAT. 
ARTICLE 2—SALES—Continued 
PABT 3—GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT—Continued 
Sec. 
28:2—318. Third party beneficiaries of warranties express or implied. 
28:2—319. F.O.B. and F.A.S. terms. 
28:2—320. C.I.F. and C. & F. terms. 
28:2—321. C.I.F. or C. & F . : "net landed weights"; "payment on arrival"; war-
ranty of condition on arrival. 
28:2—322. Delivery "ex-ship". 
28:2—323. Form of bill of lading required in overseas shipment; "overseas". 
28:2—324. "No arrival, no sale" term. 
28:2—325. "Letter of credit" term; "confirmed credit". 
28:2—^326. Sale on approval and sale or return; consignment sales and rights 
of creditors. 
28:2—327. Special incidents of sale on approval and sale or return. 
28:2—328. Siale by auction. 
PART 4—^TITLE, CREDITORS AND GOOD F A I T H PURCHASERS 
28:2—401. Passing of title; reservation for security; limited application of this 
section. 
28:2—402. Rights of seller's creditors against sold goods. 
28:2—403. Power to transfer; good faith purchase of goods; "entrusting". 
PART 5—PERFORMANCE 
28:2—501. Insurable interest in goods; manner of identification of goods. 
28:2—502. Buyer's right to goods on seller's insolvency. 
28:2—503. Manner of seller's tender of delivery. 
28 :2—564. Shipment by seller. 
28:2—505. Seller's shipment under reservation. 
28:2—506. Rights of financing agency. 
28:2—507. Effect of seller's tender; delivery on condition. 
•28 :-2—508. Cure by seller of improper tender or delivery; replacement. 
28:2—509. Risk of loss in the absence of breach. 
28:2—510. Effect of breach on risk of loss. 
28:2—511. Tender of payment.by buyer; payment by check. 
28:2—512. Payment by buyer before inspection. 
28:2—513. Buyer's right to inspection of goods. 
28:2—514. When documents deliverable on acceptance; when on payment. 
28:2—515. Preserving evidence of goods in dispute. 
PART 6—BREACH, REPUDIATION AND EXCUSE 
28:2—601. Buyer's rights on improper delivery. 
2,8 ,;2—602. JVIanner,and effect of rightful rejection. 
^ 
28:2—603. Merchant buyer's duties as to rightfully rejected goods. 
28:2—604. Buyer's options as to salvage of rightfully rejected goods. 
28:2—605. Waiver of buyer's objections by failure to particularize. 
28:2—606. What constitutes acceptance of goods. 
28:2—607. Effect of acceptance; notice of breach; burden of establishing breach 
after acceptance; notice of claim or litigation to person answerable 
over. 
28:2—608. Revocation of acceptance in whole or in part. 
28:2—609. Right to adequate assurance of performance. 
28:2—610. Anticipatory repudiation. 
28:2—611. Retraction of anticipatory repudiation. 
28:2—612. "Installment contract" ; breach. 
28:2—613. Casualty to identified goods. 
28:2—614. Substituted performance, 
28:2—615. Excuse by failure of presupposed conditions. 
28:2—616. Procedure on notice claiming excuse. 
PART 7—REMEDIES 
28:2—701. Remedies for breach of collateral contracts not impaired. 
28:2—702. Seller's remedies on discovery of buyer's insolvency. 
28:2—703. Seller's remedies in general. 
28:2—704. Seller's right to identify goods to the contract notwithstanding breach 
or to salvage, unfinished goods. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
639 
ARTICLE 2—SALES—Continued 
PART 7—REMEDIES—Continued 
Sec. 
28:2—705. Seller's stoppage of delivery in transit or otherwise. 
28:2—706. Seller's resale including contract for resale. 
28:2—707. "Person in the position of a seller". 
28:2—708. Seller's damages for non-acceptance or repudiation. 
28:2—709. Action for the price. 
28:2—710. Seller's incidental damages. 
28:2—711. Buyer's remedies in general; b\iyer's security interest in rejected 
goods. 
28:2—712. "Cover" : buyer's procurement of substitute goods. 
28:2—713. Buyer's damages for non-delivery or repudiation. 
28:2—714. Buyer's damages for breach in regard to accepted goods. 
28:2—715. Buyer's incidental and consequential damages. 
28:2—716. Buyer's right to specific performance or replevin. 
28:2—717. Deduction of damages from the price. 
28:2—718. Liquidation or limitation of damages; deposits. 
28:2—719. Contracted modification or limitation of remedy. 
28:2—720. Effect of "cancellation" or "rescission" on claims fi»r 
antecedent 
breach. 
28:2—721. Remedies for fraud. 
28:2—722. Who can sue third parties for injury to goods. 
28:2—723. Proof of market price : time and place. 
28:2—724. Admissibility of market quotations. 
28:2—725. Statute of limitations in contracts for sale. 
PART 1—SHORT TITLE, GENERAL CONSTRUCTION AND 
SUBJECT MATTER 
§28:2—101. Short title 
This article shall be known and may be cited as Unifonii Comnier- 
citation of ar-
cial Code—Sales. 
"'=^^-
§28:2—102. Scope; 
certain 
security 
and other 
transactions 
excluded from this article 
Unless the context otherwise requires, this article applies to trans-
actions in goods; it does not apply to any transaction which although 
in the form of an imconditional contract to sell or present sale is 
intended to operate only as a security transaction nor does this article 
impair or repeal any statute regulating sales to consmners, farmers or 
other specified classes of buyers, 
§ 28:2—103. Definitions and index of definitions 
(1) In this article unless the context otherwise requires 
(a) "Buyer" means a person who buys or contracts to buy 
goods. 
(b) "Good faith" in the case of a merchant means honesty in 
fact and the observance of reasonable commercial standards of 
fair dealing in the trade. 
(c) "Receipt" of goods means taking physical pos^ssion of 
them. 
d) "Seller" means a person who sells or contracts to sell 
goods. 
(2) Other definitions applying to this article or to specified parts 
thereof, and the sections in which they appear are: 
"Acceptance". 
Section 28:2—606. 
"Banker's credit". Section 28:2—325. 
"Between merchants". 
Section 28:2—104. 
"Cancellation". 
Section 28:2—106(4). 
"Commercial unit". 
Section 28:2—105. 
"Confirmed credit". 
Section 28:2—325. 
"Conforming to contract". 
Section 28:2—106. 
640 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) Other definitions applying to this article, etc,—Continued 
"Contract for sale". 
Section 28:2—106. 
"Cover". 
Section 28:2—712. 
"Entrusting". 
Section 28:2—403. 
"Financing agency". 
Section 28:2—104. 
"Future goods". Section 28:2—105. 
"Goods". 
Section 28:2—105. 
"Identification". 
Section 28:2—501. 
"Installment contract". 
Section 28:2—612. 
"letter of Credit". Section 28: 2—325. 
"Lot". Section 28: 2—105. 
"Merchant". 
Section 28:2—104. 
"Overseas". Section 28: 2—328. 
"Person in position of seller". Section 28: 2—T07. 
"Present sale". Section 28: 2—106. 
"Sale". Section 28: 2—106. 
"Sale on approval". Section 28: 2—326. 
"Sale or return". Section 28: 2—326. 
"Termination". Section 28: 2—106. 
(3) The following definitions in other articles apply to this article: 
"Check". Section 28: 3—104. 
"Consignee". Section 28: 7—102. 
"Consignor". Section 28: 7—102. 
"Consumer goods". Section 28: 9—109. 
"Dishonor". Section 28: 3—507. 
"Draft". Section 28: 3—104. 
(4) In addition article 1 contains general definitions and principles 
of construction and interpretation applicable throughout this article. 
§28:2—104. Definitions: "merchant"; "between merchants"; "fi-
nancing agency" 
(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 
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 28:2—707). 
(3) "Between merchants" means in any transaction with respect 
to which both parties are chargeable w^ith the knowledge or skill of 
merchants. 
§ 28:2—105. Definitions: transferability; "goods"; "future" goods; 
"lot"; "commercial unit" 
(1) "Goods" means all things (including specially manufactured 
goods) which are movable at the time of identification to the contract 
for sale other than the money in which the price is to be paid, invest-
ment securities (article 8) and things in action. "Goods" also includes 
the unborn young of animals and growing crops and other identified 
things attached to realty as described in the section on goods to be 
severed from realty (section 28:2—107). 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
641 
(2) Goods must be both existing and identified before any interest 
in tlieni 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 quan-
tity thereof agreed upon by niunber, 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. 
§28:2—106. Definitions: "contract"; "agreement"; "contract for 
sale"; "sale"; "present sale"; "conforming" to con-
tract; "termination"; "cancellation" 
(1) In this article unless the context otherwise requires "contract" 
and "agreement" are limited to those relating to the present or future 
sale of goods. "Contract for sale" includes both a present sale of goods 
and a contract to sell goods at a future time. A "sale" consists in the 
passing of title from the seller to the buyer for a price (section 28: 
2—401). 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 "con-
forming" 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 
"tei-mination" except that the cancelling party also retains any remedy 
for breach of the whole contract or any unperformed balance. 
§ 28:2—107. Goods to be severed from realty: recording 
(1) A contract for the sale of timber, minerals or the like or a 
structure or its materials to be removed from realty is a contract for 
the sale of goods within this article if they are to be severed by the 
seller but until severance a purported present sale thereof which is 
not effective as a transfer of tin interest in land is effective only as a 
contract to sell. 
(2) A contract for the sale apart from the land of growing crops or 
other things attached to realty and capable of severance without 
material harm thereto but not described in subsection (1) is a contract 
for the sale of goods within this article whether the subject matter 
is to be severed by the buyer or by the seller even though it forms part 
of the realty at the time of contracting, and the parties can by identi-
fication effect a present sale before severance. 
93-025 0-64-43 
642 
PUBLIC LAW 88-243-DEC., 30, 1963 
[77 STAT. 
(3) The provisions of this section are subject to any third party 
rights provided by the law relating to realty records, and the contract 
for sale may be executed and recorded as a document transferring 
an interest in land and shall then constitute notice to third parties of 
the buyer's rights under the contract for sale. 
PART 
2—FORM, 
FORMATION AND 
READJUSTMENT 
OF 
CONTRACT 
§28:2—^201. Formal requirements; statute of frauds 
(1) Except as otherwise provided in this section a contract for the 
sale of goods for the price of $500 or more is not enforceable by way 
of action or defense imless there is some writing sufficient to indicate 
that a contract for sale has been made between the parties and signed 
by the party against whom enforcement is sought or by his authorized 
agent or broker. 
A writing is not insufficient because it omits or 
incorrectly states a term agreed upon but the contract is not enforce-
able under this paragraph beyond the quantity of goods shown in 
such writing. 
(2) Between merchants if within a reasonable time a writing in 
confirmation of the contract and sufficient against the sender is 
received and the party receiving it has reason to know its contents, 
it satisfies the requirements of subsection (1) against such party 
unless written notice of objection to its contents is given within 
ten days after it is received. 
(3) A contract which does not satisfy the requirements of subsection 
(1) but which is valid in other respects is 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 
i-eceived and under circumstances which reasonably indicfCte that 
the goods are for the buyer, has made either a substantial begin-
ning of their manufacture or commitments for their procurement; 
or 
(b) if the party against whom enforcement is sought admits in 
liis pleading, testimony or otherwise in court that a contract for 
sale was made, but the contract is not enforceable under this pro-
vision 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 
28:2—606). 
§28:2—^202. Final written expression: parol or extrinsic evidence 
Terms with respect to which the confirmatory memoranda of the 
parties agree or which are otherwise set forth in a writing intended 
by the parties as a final expression of their agreement with respect to 
such terms as are included therein may not be contradicted by evidence 
of any prior agreement or of a contemporaneous oral agreement but 
may be explained or supplemented 
(a) by course of dealing or usage of trade (section 28:1—205) 
or by course of performance (section 28 :2—208); and 
(D) by evidence of consistent additional terms unless the court 
finds the writing to have been intended also as a complete and 
exclusive statement of the terms of the agreement. 
§ 28:2—203. Seals inoperative 
The affixing of a seal to a writing evidencing a contract for sale or 
an offer to buy or sell goods does not constitute the writing a sealed 
instrument and the law with respect to sealed instruments does not 
apply to such a contract or offer. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
643 
§28:2—204. Formation in general 
(1) A contract for sale of goods may be made in any manner 
sufficient to show agreement, including conduct by both parties which 
recognizes the existence of such a contract. 
(2) An agreement sufficient to constitute a contract for sale may 
be found even though the moment of its making is undetermined. 
(3) Even though one or more terms are left open a contract for 
sale does not fail for indefiniteness if the parties have intended to 
make a contract and there is a reasonably certain basis for giving an 
appropriate remedy. 
§28:2—205. Firm offers 
An offer by a merchant to buy or sell goods in a signed writing which 
by its terms gives assurance that it will be held open is not revocable, 
for lack of consideration, during the time stated or if no time is stated 
for a reasonable time, but in no event may such period of irrevocability 
exceed three months; but any such term of assurance on a form 
supplied by the offeree must be separately signed by the offeror. 
§28:2—206. Offer and acceptance in formation of contract 
(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 
J 
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 
conformmg or non-conforming goods, but such a shipment of 
non-conforming 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 reason-
able mode of acceptance an offeror who is not notified of acceptance 
within a reasonable time may treat the offer as having lapsed before 
acceptance. 
§ 28:2—^207. Additional terms in acceptance or confirmation 
(1) A definite and seasonable expression of acceptance or a written 
confirmation which is sent within a reasonable time operates as an 
acceptance even though it states terms additional to or different from 
those offered or agreed upon, unless acceptance is expressly made 
conditional on assent to the additional or different terms. 
(2) The additional terms are to be construed as proposals for addi-
tion 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 writ-
ings 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 
tenns incorporated under any other provisions of this subtitle. 
644 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:2—^208. Course of performance or practical construction 
(1) Where the contract for sale involves repeated occasions for 
performance by eitlier party Avith knowledge of the nature of the 
performance and opportunity for objection to it by the other, any 
course of performance accepted or acquiesced in without objection 
shall be relevant to determine the nieaninjr of the agreement. 
(2) The express terms of the agreement and any such course of 
performance, as well as any course of dealing and usage of trade, 
shall be construed whenever reasonable as consistent Avith each other; 
but when such construction is unreasonable, express terms shall con-
trol course of performance and course of performance shall control 
both course of dealing and usage of trade (section 28 :1—205). 
(3) Subject to the pi^visions of the next section on modification 
and waiver, such course of ])erformance shall be relevant to show a 
waiver or modification of any term inconsistent with such course 
of performance. 
§28:2—^209. Modification, rescission and waiver 
(1) An agreement modifying a contract within this ai'ticle needs 
no consideration to be binding. 
(2) A signed agreement which excludes modification or rescission 
except by a signed writing cannot be otherwise modified or rescinded, 
but except as between merchants such a requirement on a form 
supplied by the merchant must be separately signed by the other 
party. 
(3) The requirements of the statute of frauds section of this article 
(section 28:2—201) must be satisfied if the contract as modified is 
within its provisions. 
(4) Although an attempt at modification or rescission does not 
satisfy the requirements of subsection (2) or (-5), it can operate as 
a waiver. 
(5) A party wlio 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 
by any term waived, unless the retraction would be unjust in view of 
a material change of position in reliance on the waiver. 
§ 28:2—^210. Delegation of performance; assignment of rights 
(1) A party may perfonn his duty through a delegate unless 
otherwise agreed or unless the other party has a substantial interest 
in having his original promisor perform or control the acts required 
by the contract. 
No delegation of performance relieves the party 
delegating of any duty to perfom or any liability for breach. 
(2) Unless otherwise agreed all rights of eitlier 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 by his contract, or impair materially his 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 per-
formance of his entire obligation can be assigned despite agreement 
otherwise. 
(3) 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. 
(4) An assignment of "the contract'' or of "all my rights under 
the contract'' or an jussignment in similar general teniis is an assign-
ment 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 to perform those duties. Tliis 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
645 
promise is enforceable by either tlie assignor or the other party to tlie 
original contraxit. 
(5) The other party may treat any assignment which delegates 
performance as creating reasonable grounds for insecurity and may 
without prejudice to his rights against the assignor demand assur-
ances from the assignee (section 28:2—609). 
PART 3—GENERAL OBLIGATION AND CONSTRUCTION OF 
CONTRACT 
§ 28:2—301. General obligations of parties 
The obligation of the seller is to transfer and deliver and that of 
the buyer is to accept and pay in accordance with the contract. 
§ 28:2—302. Unconscionable contract or clause 
(1) If the court as a matter of law finds the contract or any clause 
of the contract to have been unconscionable at the time it was made 
the court may refuse to enforce the contract, or it may enforce the 
remainder of the contrjict without the unconscionable clause, or it 
may so limit the application of any unconscionable clause as to avoid 
any unconscionable result. 
(2) When it is claimed or appears to the court that the contract 
or any clause thereof may be unconscionable the parties shall be 
afforded a reasonable opportunity to present evidence as to its com-
mercial setting, purpose and effect to aid the court in making the 
determination. 
§ 28:2—303. Allocation or division of risks 
Where this article allocates a risk or a burden as between the parties 
"unless otherwise agreed", the agreement may not only shift the alloca-
tion but may also divide the risk or burden. 
§ 28:2—304. Price payable in money, goods, realty, or otherwise 
(1) The price can be made payable in money or otherwise. If it is 
payable in whole or in part in goods each party is a seller of the goods 
which 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 refer-
ence to them are subject to this article, but not the transfer of the in-
terest in realty or the transferor's obligations in connection therewith. 
§28:2—305. Open price term 
(1) The parties if they so intend can conclude a contract for sale 
even though the price is not settled. In such a case the price is a rea-
sonable 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 l)e fixed through fault of one party the other may at 
his option treat the contract as cancelled 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 con-
tract. In such a case the buyer must return any goods already received 
or if miable so to do must pay their reasonable value at the time of 
646 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
delivery and the seller must return any portion of the price paid on 
account. 
§ 28:2—306. Output, requirements and exclusive dealings 
(1) A term which measures the quantity by the output of the seller 
or the re(}uirements of the buyer means such actual output or require-
ments as may occur in good faith, except that no quantity unreason-
ably dispro})ortionate 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 exclu-
sive 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. 
§ 28:2—307. Delivery in single lot or several lots 
Unless otherwise agreed all goods called for by a contract for sale 
must be tendered in a single delivery and payment is due only on 
such tender but where the circumstances give either party the right 
to make or demand delivery in lots the price if it can be apportioned 
may be demanded for each lot. 
§ 28:2—308. Absence of specified place for delivery 
L'nless otherwise agreed 
(a) the place tor delivery of goods is the seller's place of busi-
ness 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. 
§ 28:2—309. Absence of specific time provisions; notice of termi-
nation 
(1) The time for shipment or delivery or any other action under 
a contract if not provided in this article or agreed upon shall be a 
reasonable time. 
(2) Where the contract provides for successive performances but 
is indefinite in duration it is valid for a reasonable time but unless 
otherwise agreed may be terminated at any time by either party. 
(3) Termination of a contract by one party except on the happen-
ing 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. 
§ 28:2—310. Open time for payment or running of credit; author-
ity to ship under reservation 
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 doctmients 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 28:2—513) ; and 
(c) if delivery is authorized and made by way of documents 
of title otherwise than by subsection (b) then payment is due at 
the time and place at which the buyer is to receive the documents 
regardless of where the goods are t,o be received; and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
647 
(d) where the seller is required or authorized to ship the goods 
on credit the credit period runs from the time of shipment but 
post-dating the invoice or delaying its dispatch will correspond-
ingly delay the starting of the credit period. 
§ 28:2—311. Options and cooperation respecting performance 
(1) An agreement for sale which is otherwise sufficiently definite 
(subsection (3) of section 28:2—204) to be a contract is not made 
invalid by the fact that it leaves particulars of performance to be speci-
fied 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 
subsections (1) (c) and (3) of section 28:2—319 specifications or 
arrangements relating to shipment are at the seller's option. 
(3) "Where such specification would materially affect the other 
party's performance but is not seasonably made or where one party's 
cooperation is necessary to the agreed performance of the other but 
is not seasonably forthcoming, the other party in addition to all other 
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 perform-
ance treat the failure to specify or to cooperate as a breach by 
failure to deliver or accept the goods. 
§ 28:2—312. Warranty of title and against infringement; buyer's 
obligation against infringement 
(1) Subject to subsection (2) there is in a contract for sale a war-
ranty by the seller that 
(a) the title conveyed shall be good, and its transfer rightful; 
and 
(b) the goods shall be delivei-ed free from any security interest 
or other lien or encumbrance of which the buyer at the time of 
contracting has no knowledge. 
(2) A warranty under subsection (1) will be excluded or modified 
only by specific language or by circumstances which give the buyer 
reason to know that the person selling does not claim title 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. 
§ 28:2—313. Express warranties by affirmation, promise, descrip-
tion, sample 
(1) Express warranties by the seller are created as follows: 
(a) Any affirmation of fact or promise made by the seller to the 
buyer which relates to the goods and becomes part of the basis 
of the bargain creates an express warranty that the goods shall 
conform to the affirmation or promise. 
(b) Any description of the goods which is made part of the 
basis of the bargain creates an express warranty that the goods 
shall conform to the description. 
(c) Any sample or model which is made part of the basis of 
the bargain creates an express warranty that the whole of the 
goods shall conform to the sample or model. 
648 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) It is not necessary to the creation of an express warranty that 
the seller use formal words such as "warrant" or "guarantee" or that 
he have a specific intention to make a warranty, but an affinnation 
merely of the value of the goods or a statement purporting to be merely 
the seller's opinion or commendation of the goods does not create a 
warranty. 
§ 28:2—314. Implied warranty: merchantability; usage of trade 
(1) Unless excluded or modified (section 28:2—316), a warranty 
that the goods shall be mei-chantable is implied in a contract for tlieir 
sale if the seller is a merchant with respect to goods of that kind. 
Under this section the serving for value of food or drink to be con-
sumed either on the premises or elsewhere is a sale. 
(2) Goods to be merchantable must be at least such as 
(a) pass without objection in the trade under the contract 
description; and 
(b) in the case of fungible goods, are of fair average quality 
within the description; and 
(c) are fit for the ordinary purposes for which such goods are 
used; and 
(d) run, within the variations permitted by the agreement, of 
even kind, quality and quantity within each unit and among all 
units involved; ajid 
(e) are adequately contained, packaged, and labeled as the 
agreement may require; and 
(f) conform to the promises or affirmations of fact made on 
the container or label if any. 
(3) Unless excluded or modified (section 28:2—316), other implied 
warranties may arise from course of dealing or usage of trade. 
§ 28:2—315. Implied warranty: fitness for particular purpose 
Where the seller at the time of contracting lias reason to know any 
particular purpose for which the goods are required and that the 
buyer is relying on the seller's skill or judgment to select or furnish 
suitable goods, there is unless excluded or modified under the next 
section an implied warranty that the goods sliall be fit for such 
purpose. 
§ 28:2—316. Exclusion or modification of warranties 
(1) Words or conduct relevant to the creation of an express war-
ranty and words or conduct tending to negate or limit warranty 
shall be construed wherever reasonable as consistent with each other; 
but subject to the provisions of this article on parol or extrinsic 
evidence (section 28:2—202) negation or limitation is inoperative to 
the extent that such construction is unreasonable. 
(2) Subject to subsection (3), to exclude or modify the implied 
warranty of merchantability or any part of it the language must 
mention merchantability and in case of a writing must he conspicuous, 
and to exclude or modify any implied warranty of fitness the exclusion 
must be by a writing and conspicuous. 
Language to exclude all 
implied w^arranties of fitness is sufficient if it states, for example, that 
"There are no warranties which extend beyond the description on the 
face hereof." 
(3) Notwithstanding subsection (2) 
(a) imless the circumstances indicate otherwise, all implied 
warranties are excluded by expressions like "as is", "with all 
faults" or other language which in common understanding calls 
the buyer's attention to the exclusion of warranties and makes 
plain that there is no implied warranty; and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
649 
(b) when tlie buyer before entering into the contract has 
examined the goods or the sample or model as fully as he desired 
or has refused to examine the goods there is no implied warranty 
with regard to defects which an examination ought in the circum-
stances to have revealed to him; and 
(c) an implied warranty can also be excluded or modified by 
course of dealing or course of performance or usage of trade. 
(4) Remedies for breach of warranty can be limited in accordance 
with the provisions of this article on liquidation or limitation of dam-
ages and on contractual modification of remedy (sections 28:2— 
718 and 28:2—719). 
§ 28:2—317. Cumulation and conflict of warranties express or im-
plied 
Warranties whether express or implied shall be construed as con-
sistent with each other and as cumulative, but if such construction is 
unreasonable the intention of the parties shall determine which war-
ranty is dominant. 
In ascertaining that intention the following rules 
^vp^y- 
. 
., 
. 
. 
. 
. 
(a) Exact or technical specifications displace an niconsistent 
sample or model or general language of description. 
(b) A sample from an existing bulk displaces inconsistent 
general language of description. 
(c) Express warranties displace inconsistent implied warran-
ties other than an implied warranty of fitness for a particular 
purpose. 
§28:2—318. Third party beneficiaries of warranties express or 
implied 
A seller's warranty whether express or implied extends to any natu-
ral person who is in the family or household of his buyer or who is a 
guest in his home if it is reasonable to expect that such person may use, 
consume or be affected by the goods and who is injured in person by 
breach of the warranty. 
A seller may not exclude or limit the opera-
tion of this section. 
§ 28:2—519. F.O.B. and F.A.S. terms 
(1) Unless otherwise agreed the term F.O.B. (which means "free 
on board") at a named place, even though used only in connection 
with the stated price, is a delivery term under which 
(a) when the term is F.O.B. the place of shipment, the seller 
must at that place ship the goods in the manner provided in this 
article (section 28:2—504) and bear the expense and risk of put-
ting them into the possession of the carrier; or 
(b) when the term is F.O.B. the place of destination, the seller 
must at his own expense and risk transport the goods to that 
place and there tender delivery of them in the manner provided 
m this article (section 28:2—503); 
(c) when under either (a) or (b) the term is also F.O.B. ves-
sel, car or other vehicle, the seller must in addition at his own 
expense and risk load the goods on board. 
If the term is F.O.B. 
vessel the buyer must name the vessel and in an appropriate case 
the seller must comply with the provisions of this article on the 
form of bill of lading (section 28:8—323). 
(2) Unless otherwise agreed the term F.A.S. vessel (which means 
"free alongside") at a named port, even though used only in connection 
with the stated price, is a delivery term under which the seller must 
(a) at his own expense and risk deliver the goods alongside the 
vessel in the manner usual in that port or on a dock designated 
and provided by the buyer; and 
650 
PUBLIC LAW 88-243-DEC. 30, 1963 
C77 STAT. 
(b) obtain and tender a receipt for the goods in exchange for 
whicli tlie carrier is under a duty to issue a bill of hiding. 
(3) Unless otherwise agreed in any case falling within sul>section 
(1) (a) or (c) or subsection (2) the buyer must seasonably give any 
needed instructions for making delivery, including when the term is 
F.A.S. or F.O.B. the loading berth of tlie vessel and in an appropriate 
case its name and sailing (late. The seller may treat the failure of 
needed instructioiis as a failure of cooperation under this article (sec-
tion 28:2—811). He may also at his option move the goods in any 
reasonable manner preparatory to delivery or shi[)ment. 
(4) Under the term F.O.B. vessel or F.A.S. unless otherwise agreed 
the buyer must make payment against tender of the required docu-
ments and the seller may not tender nor the buyer demand deVuery of 
the goods in substitution for the documents. 
§28:2—320. C.I.F. and C. & F. terms 
(1) The term C.I.F. means that the price includes in a lump sum the 
cost of the goods and the insurance and freight to the named destina-
tion. The term (/. & F. or C.F. means that the price so includes cost 
and freight to the named destination. 
(2) Unless otherwise agreed and even though used only in con-
nection with the stated price and destination, the term C.I.F. destina-
tion or its equivalent requires the seller at his own expense and risk to 
(a) put the goods into the possession of a carrier at the port 
for shipment and obtain a negotiable bill or bills of lading cover-
ing the entire transportaiton to the named destination; and 
(b) load the goods and obtain a receipt from the carrier (which 
may be contained in the bill of lading) showing that the ireight 
lias been paid or provided for; and 
(c) obtain a policy or certificate of insurance, including any 
war risk insurance, of a kind and on terms then current at the 
port of shipment in the usual amount, in the currency of the con-
tract, shown to cover the same goods covered by the bill of lading 
and providing for payment of loss to the order of the buyer 
or for the account of whom it may concern; but the seller may 
add to the price the amount of the premium for any such war 
risk insurance; and 
(d) prepare an invoice of the goods and procnire any other 
documents required to effect shipment or to comply with the 
contract; and 
(e) forward and tender with commercial promptness all the 
documents in due foi-m and with any indorsement necessary to 
perfect the buyer's rights. 
(3) Unless otherwise agreed the term C & F. or its equivalent has 
the same effect and imposes upon the seller the same obligations and 
risks as a C.I.F. term except the obligation as to insurance. 
(4) Under the term C.I.F. or C. & F. unless otherwise agreed the 
buyer must make payment against tender of the required documents 
and the seller may not tender nor the buyer demand delivery of the 
goods in substitution for the documents. 
§28:2—321. C.I.F. or C. & F.: "net landed weights"; "payment on 
on arrival"; warranty of condition on arrival 
Under a contract containing a term C.I.F. or C. & F. 
(1) Where the price is based on or is to be adjusted according to 
"net landed weights", "delivered weights", "out turn" quantity or 
quality or the like, unless otherwise agreed the seller must reasonably 
estimate the price. The payment due on tender of the documents 
called for by the contract is the amount so estimated, but after final 
adjustment of the price a settlement must be made with commercial 
promptness. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
651 
(2) An agreement described in subsection (1) or any warranty of 
(luality or condition of the goods on arrival places upon the seller the 
risk of ordinary deterioration, shrinkage and the like in transporta-
tion but has no effect on the place or time of identification to the 
contract for sale or delivery or on the passing of the risk of loss. 
(3) Unless otherwise agreed wliere the contract provides for pay-
ment on or after arrival of the goods the seller must before payment 
allow such preliminary inspection as is feasible; but if the goods are 
lost delivery of the documents and payment are due when the goods 
should have arrived. 
§28:2—322. Delivery "ex-ship" 
(1) Unless otherwise agreed a term for delivery of goods "ex-ship" 
(which means from the carrying vessel) or in equivalent language is 
not restricted to a particular ship and requires delivery from a ship 
which has reached a place at the named port of destination where 
goods of the kind are usually discharged. 
(2) Under such a term unless otherwise agreed 
(a) the seller must discharge all liens arising out of the car-
riage and furnish the buyer with a direction which puts the 
carrier under a duty to deliver the goods; and 
(b) the risk of loss does not pass to the buyer until the goods 
leave the ship's tackle or are otherwise properly unloaded. 
§ 28:2—323. Form of bill of lading required in overseas shipment; 
"overseas'* 
(1) Wliere the contract contemplates overseas shipment and con-
tains a term C.I.F. or C. & F. or F.O.B. vessel, the seller unless other-
wise agreed must obtain a negotiable bill of lading stating that the 
goods have been loaded on board or, in the case of a terrfi C.I.F. or 
C. & F., received for shipment. 
(2) Where in a case within subsection (1) a bill of lading has been 
issued in a set of parts, unless otherwise agreed if the documents are 
not to be sent from abroad the buyer may demand tender of the full 
set; otherwise only one part of the bill of lading need be tendered. 
Even if the agreement expressly requires a full set 
(a) due tender of a single part is acceptable within the pro-
visions of this article on cure of improper delivery (subsection (1) 
of section 28:2—508); and 
(b) even though the full set is demanded, if the documents are 
sent from abroad the person tendering an incomplete set may 
nevertheless require payment upon furnishing an indemnity which 
the buyer in good faith deems adequate. 
(3) A shipment by water or by air or a contract contemplating such 
shipment is "overseas" insofar as by usage of trade or agreement it is 
subject to the commercial, financing or shipping practices character-
istic of international deep water commerce. 
§ 28:2—324. "No arrival, no sale" term 
Under a term "no arrival, no sale" or terms of like meaning, unless 
otherwise agreed, 
(a) the seller must properly ship conforming goods and if they 
arrive by any means he must tender them on arrival but he 
assumes no obligation that the goods will arrive unless he has 
caused the non-arrival; and 
(b) where without fault of the seller the goods are in part lost 
or have so deteriorated as no longer to conform to the contract or 
arrive after the contract time, the buyer may proceed as if there 
had been casualty to identified goods (section 28:2—613). 
652 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:2—325. "Letter of credit" term; "confirmed credit" 
(1) Failure of the buyer seasonably to furnish an agreed letter of 
credit is a breacli of the contract for sale. 
(2) The delivery to seller of a j)roper letter of credit suspends the 
buyer's obligation to pay. 
If the letter of credit is dishonored, the 
seller mav on seasonable notification to the buyer require payment 
directly irom him. 
(3) Unless otherwise agreed the term "letter of credit" or "banker's 
credit"' in a contract for sale means an irrevocable credit issued by a 
financing agency of good repute and, where the shipment is overseas, 
of good international repute. The term "confirmed credit" means that 
the credit must also carry the direct obligation of such an agency which 
does business in the seller's financial market. 
§28:2—326. Sale on approval and sale or return; consignment 
sales and rights of creditors 
(1) Unless otherwise agreed, if delivered goods may be returned by 
the buyer even though they confoim to the contract, the transaction is 
(a) a "sale on approval" if the goods are delivered primarily 
for use, and 
(b) a "sale or return" if the goods are delivered primarily 
for resale. 
(2) Except as provided in subsection (3), goods held on approval 
are not subject to the claims of the buyer's creditors until acceptance; 
' 
goods held on sale or return are subject to such claims while in the 
buyer's possession. 
(3) Where goods are delivered to a person for sale and such person 
maintains a place of business at which he deals in goods of the kind 
involved, under a name other than the name of the person making 
delivery, then with respect to claims of creditors of the person conduct-
ing the business the goods are deemed to be on sale or return. 
The 
provisions of this subsection are applicable even though an agreement 
purports to reserve title to the person making delivery until payment 
or resale or uses such words as "on consignment" or "on memorandum". 
However, this subsection is not applicable if the person making 
delivery 
(a) complies wdth an applicable law providing for a consignor's 
interest or the like to be evidenced by a sign, or 
(b) establishes that the person conductmg the business is gen-
erally known by his creditors to be substantially engaged in sell-
ing the goods of others, or 
(c) complies with the filing provisions of the article on secured 
transactions (article 9). 
(4) Any "or return" term of a contract for sale is to be treated as a 
separate contract for sale within the statute of frauds section of this 
article (section 28:2—201) and as contradicting the sale aspect of 
the contract within the provisions of this article on parol or extrinsic 
evidence (section 28:2—202). 
§28:2—327. Special incidents of sale on approval and sale or 
return 
(1) Under a sale on approval imless otherwise agreed 
(a) although the goods are identified to the contract the risk 
of loss and the title do not pass to the buyer until acceptance; 
and 
(b) use of the goods consistent wdth the purpose of trial is not 
acceptance but failure seasonably to notify the seller of election 
to return the goods is acceptance, and if the goods conform to 
the contract acceptance of any part is acceptance of the whole; 
and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
653 
(c) after due notification of election to return, the return is at 
.the seller's risk and expense but a merchant buyer must follow 
any reasonable instructions. 
(2) Under a sale or return unless otherwise agreed 
(a) the option to return extends to the whole or any commercial 
imit of the goods while in substantially their original condition, 
but must be exercised seasonably; and 
(b) the return is at the buyer's risk and expense. 
§28:2—328. Sale by auction 
(1) In a sale by auction if goods are put up in lots each lot is the 
subject of a separate sale. 
(2) A sale by auction is complete when the auctioneer so announces 
by the fall of the hammer or in other customary manner. 
Where 
a bid is made while the hammer is falling in accej)tance of a prior 
bid the auctioneer may in his discretion reopen the bidding or declare 
the goods sold under the bid on which the hammer was falling. 
(3) Such a sale is with reserve unless the goods are in explicit terms 
put up without reserve. In an auction with reserve the auctioneer 
may withdraw the goods at any time until he announces completion 
of the sale. In an auction without reserve, after the auctioneer calls 
for bids on an article or lot, that article or lot cannot be withdrawn 
unless no bid is made within a reasonable time. In either case a 
bidder may retract his bid until the auctioneer's announcement of com-
pletion of the sale, but a bidder's retraction does not revive any 
previous bid. 
(4) If the auctioneer knowingly receives a bid on the seller's behalf 
or the seller makes or procures such a bid, and notice has not been 
given that liberty for such bidding is reserved, the buyer may at his 
option avoid the sale or take the goods at the price of the last good 
faith bid prior to the completion of the sale. This subsection shall 
not apply to any bid at a forced sale. 
PART 4—TITLE, CREDITORS AND GOOD FAITH 
PURCHASERS 
§ 28:2—401. Passing of title; reservation for security; limited ap-
plication of this section 
Each provision of this article with regard to the rights, obligations 
and remedies of the seller, the buyer, purchasers or other third parties 
applies irrespective of title to the goods except where the provision 
refers to such title. Insofar as situations are not covered by the other 
provisions of this article and matters concerning title become material 
the following rules apply: 
(1) Title to ^oods cannot pass under a contract for sale prior to 
their identification to the contract (section 28:2—501), and unless 
otherwise explicitly agreed the buyer acquires by their identification 
a special property as limited by this subtitle. Any retention or reser-
vation by the seller of the title (property) in goods shipped or 
delivered to the buyer is limited in effect to a reservation of a security 
interest. 
Subject to these provisions and to the provisions of the 
article on secured transactions (article 9), title to goods passes from 
the seller to the buyer in any manner and on any conditions explicitly 
agreed on by the parties. 
(2) Unless otherwise explicitly agreed title passes to the buyer at 
the time and place at which the seller completes his performance with 
reference to the j)hysical delivery of the goods, despite any reserva-
tion of a security interest and even though a document of title is to be 
654 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
delivered at a dirt'erent time or place; and in pai'ticular and despite 
any reservation of a security interest by the bill of lading 
(a) if the contract requires or authorizes the seller to send the 
goods to the buyer but does not require him to deliver them at 
estination, title passes to the buyer at the time and place of 
shipment; but 
(b) if the contract requires deliver}- at destination, title passes 
on tender there. 
(3) Unless otherwise explicitly agreed where delivery is to l3e made 
without moving the goods, 
(a) if the seller is to deliver a document of title, title passes at 
the time when and the place where he delivers such documents;* 
or 
(b) if the goods are at the time of contracting already identi-
fied and no documents are to he delivered, title passes at the time 
and place of contracting. 
(4) A rejection or other refusal by the buyer to receive or retain the 
goods, whether or not justified, or a justified revocation of acceptance 
revests title to the goods in the seller. 
Such revesting occurs by 
operation of law and is not a "sale". 
§ 28:2—402. Rights of seller's creditors against sold goods 
(1) Except as provided in subsections (2) and (3), rights of 
unsecured creditors of the seller with respect to goods which have 
been identified to a contract for sale are subject to the buyer's rights 
to recover the goods under this article (sections 28:2—502 and 28:2— 
716). 
(2) A creditor of the seller nuiy treat a sale or an identification of 
goods to a contract for sale as void if as against him a retention of 
possession by the seller is fraudulent under any rule of law of the 
state where the goods are situated, except that retention of possession 
in good faith and current coui'se of trade by a merchant-seller for a 
commercially reasonable time after a sale or identification is not 
fraudulent. 
(3) Nothing in this article shall be deemed to impair the rights 
of creditors of the seller 
(a) under the provisions of the article on secured transactions 
(article 9); or 
(b) where identification to the contract or delivery is made 
not in current course of trade but in satisfaction of or as security 
for a pre-existing claim for money, security or the like and is made 
under circumstances which under any rule of law of the state 
where the goods are situated would apart from this article con-
stitute the transaction 
a fraudulent 
transfer 
or 
voidable 
preference. 
§28:2—403. Power to transfer; good faith purchase of goods; 
"entrusting" 
(1) A purchaser of goods acquires all title which his transferor had 
or had power to transfer except that a purchaser of a limited interest 
acquires rights only to the extent of the interest purchased. A person 
with voidable title has power to transfer a good title to a good faith 
purchaser for value. 
When goods have been delivered under a, 
transaction of purchase the purchaser has such power even though 
(a) the transferor was deceived as to the identity of the 
purchaser, or 
(b) the delivery was in exchange for a check which is later 
dishonored, or 
(c) it was agreed that the transaction Avas to be a "cash sale", or 
(d) the delivery was procured through fraud punishable as 
larcenous under the criminal law. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
6551 
(2) Any entrustiiig of possession of goods to a niercliant who deals 
in goods of that kind gives him power to transfer all rights of the 
entruster to a buyer in ordinary course of business. 
(3) "Entrusting" includes any delivery and any acquiescence in 
retention of possession regardless of any condition expressed between 
the parties to the delivery or acquiescence and regardless of whether 
the procurement of the entrusting or the possessor's disposition of the 
goods have been such as to be larcenous under the criminal law. 
(4) The rights of other purchasers of goods and of lien creditors are 
governed by the articles on secured transactions (article 9), bulk trans-
fers (article 6) and documents of title (article 7). 
PART 5—PERFORMANCE 
§ 28:2—501. Insurable interest in goods; manner of identification 
of goods 
(1) The buyer obtains a special property and an insurable interest 
in goods by identification of existing goods as goods to which the con-
tract refers even though the goods so identified are non-conforming 
and he has an option to return or reject them. 
Such identification 
can be made at any time and in any manner explicitly agreed to by 
the parties. 
In the absence of explicit agreement identification occurs 
(a) when the contract is made if it is for the sale of goods 
already existing and identified; 
(b) if the contract is for the sale of future goods other than 
those described in paragraph (c), when goods are shipped, marked 
or otherwise designated by the seller as goods to which the con-
tract refers; 
(c) when the crops are planted or otherwise become growing 
crops or the young are conceived if the contract is for the sale of 
unborn young to be born within twelve months after contracting 
or for the sale of crops to be harvested within twelve months or 
the next normal har\est season after contracting whichevei' is 
longer. 
(2) The seller retains an insurable interest in goods so long as title to 
or any security interest in the goods remains in him and where the 
identification is by the seller alone he may until default or insolvency 
or notification to the buyer that the identification is final substitute 
other goods for those identified. 
(3) Nothing in this section impairs any insurable interest recog-
nized under any other statute or rule of law. 
§ 28:2—502. Buyer's right to goods on seller's insolvency 
(1) Subject to subsection (2) and even though the goods have not 
been shipped a buyer who has paid a part or all of the price of goods 
in which he has a special property under the provisions of the im-
mediately preceding section may on making and keeping good a tender 
of any unpaid portion of their price recover them from the seller if 
the seller becomes insolvent within ten days after receipt of the first 
installment on their price. 
(2) If the identification crejiting his special property has been 
made by the buyer he acquires the right to recover the goods only if 
they conform to the contract for sale. 
§ 28:2—503. Manner of seller's tender of delivery 
(1) Tender of delivery requires that the seller put and hold con-
forming goods at the buyer s disposition and give the buyer any 
notification reasonably necessary to enable him to take delivery. The 
manner, time and place for tender are determined by th^ agreement 
and this article, and in particular 
656 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(a) tender nuist be at a reasonable hour, and if it is of jroods 
they must be kept available for the period reasonably necesstiry 
to enable the buyer to take possession; but 
(b) unless otherwise agreed the buyer nnist furnish facilities 
reasonably suited to the receipt of the goods. 
(2) Where the case is within the next section respecting shipment 
tender requires that the seller comply with its provisions. 
(3) Where the seller is required to deliver at a particular destina-
tion tender requires that he comply with subsection (1) and also in 
any appropriate case tender dcx'uments as described in subsections 
(4) and (5) of this section. 
(4) Where goods are in the possession of a bailee and are to be 
delivered without being moved 
(a) tender requires that the seller either tender a negotiable 
document of title covering such goods or procure acknowledge-
ment by the bailee of the buyer's right to possession of the goods; 
but 
(b) tender to the buyer of a non-negotiable document of title 
or of a written direction to the bailee to deliver is sufficient tender 
unless the buyer seasonably objects, and receipt by the bailee of 
notification of the buyers rights fixes those rights as against the 
bailee and all third persons; but risk of loss of the goods and 
of any failure by the bailee to honor the non-negotiable document 
of title or to obey the direction remains on the seller until the 
buyer has had a reasonable time to present the document or 
direction, and a refusal by the bailee to honor the document or 
to obey the direction defeats the tender. 
(5) Where the contract requires the seller to deliver documents 
(a) he must tender all such documents in coiTect form except 
as provided in this article with respect to bills of lading in a set 
(subsection (2) of section 28: 2—323); and 
(b) tender through customary banking channels is sufficient 
and dishonor of a draft accompanying the documents constitutes 
non-acceptance or rejection. 
§28:2—504. Shipment by seller 
Where the seller is required or authorized to send the goods to the 
buyer and the contract does not require him to deliver them at a par-
ticular destination, then unless otherwise agreed he must 
(a) put the goods in the possession of such a carrier and 
make such a contract for their transportation as may be reason-
able having regard to the nature of the goods and other cir-
cumstances of the case; and 
(b) obtain and promptly deliver or tender in due form any 
document necessary to enable the buyer to obtain possession of 
the goods or otherwise required by the agreement or by usage 
of trade; and 
(c) promptly notify the buyer of the shipment. 
Failure to notify the buyer under paragraph (c) or to make a proper 
contract under paragraph (a) is a ground for rejection only if ma-
terial delay or loss ensues. 
§ 28:2—505. Seller's shipment under reservation 
(1) Where the seller has identified goods to the contract by or before 
shipment: 
(a) his procurement of a negotiable bill of lading to his own 
order or otherwise reserves in him a security interest m the goods. 
His procurement of the bill to the order of a financing agency or 
of the buyer indicates in addition only the seller's expectation of 
transferring that interest to the person named. 
77 STAT. ] 
PUBLIC LAW 88-243~DEC. 30, 1963 
657 
(b) a non-negotiable bill of lading to himself or his nominee 
reserves possession of the goods as security but except in a case of 
conditional delivery (subsection (2) of section 28:2—507) a non-
negotiable bill of ladmg naming the buyer as consignee reserves 
no security interest even though the seller retains possession of 
the bill of lading. 
(2) When shipment bv the seller with reservation of a security 
interest is in violation of the contract for sale it constitutes an im-
proper contract for transportation within the preceding section but 
impairs neither the rights given to the buyer by shipment and iden-
tification of the goods to the contract nor the seller's powers as a 
liolder of a negotiable document. 
§ 28:2—506. Rights of financing agency 
(1) A financing agency by paying or purchasing for value a draft 
which relates to a shipment of ^oods acquires to the extent of the 
payment or purchase and in addition to its own rights under the draft 
and any document of title securing it any rights of tlie shipper in the 
goods including the right to stop delivery and the shipper's right to 
have the draft honored by the buyer. 
(2) The right to reimbursement of a financing agency which has 
in good faith honored or purchased the draft under commitment to 
or authority from the Iniyer is not impaired by subsequent discovery 
of defects with reference to any relevant document which was appar-
ently regular on its face. 
§ 28:2—507. Effect of seller's tender; delivery on condition 
(1) Tender of delivery is a condition to the buyer's duty to accept 
the goods and, unless otherwise agreed, to his duty to pay for them. 
Tender entitles the seller to acceptance of the goods and to payment 
according to the contract. 
(2) Where payment is due and demanded on the delivery to the 
buyer of goods or documents of title, his right as against the seller 
to retain or dispose of tliem is conditional upon his making the pay-
ment due. 
§28:2—508. Cure by seller of improper tender or delivery; re-
placement 
(1) Where any tender or delivery by tlie seller is rejected because 
non-conforming and the time for i)erformance has not yet expired, the 
seller may seasonably notify the buyer of his intention to cure and 
may then within the contract time make a conforming delivery. 
(2) Where the buyer rejects a non-conforming tender which the 
seller had reasonable grounds to l)elieve would be acceptable with or 
without money allowance the seller may if he seasonably notifies the 
buyer have a further reasonable time to substitute a conforming tender. 
§ 28:2—509« Risk of loss in the absence of breach 
• (1) Where the contract recpiires or authorizes the seller to ship 
the goods by carrier 
(a) if it does not require him to deliver them at a particular 
destination, the risk of loss passes to the buyer when the goods 
are duly delivered to the carrier even though the shipment is 
under reservation (section 28:2—505); but 
(b) if it does require him to deliver them at a i)articular des-
tination and the goods are there duly tendered while in the 
possession of ih^. carrier, the risk of loss passes to the buyer 
when the goods are there duly so tendered as to enable the buyer 
to take delivery. 
93-025 0-64-44 
658 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) Where the goods are held by a bailee to l)e delivered without 
being moA'ed, the risk of loss passes to the buyer 
(a) on his receipt of a negotiable document of title coA'ering 
the goods; or 
(b) on acknowledgment by the bailee of the buyer's right to 
possession of the goods; or 
(c) after his receipt of a non-negotiable document of title or 
other written direction to deliver, as provided in subsection 
(4) (b) of section 28:2—503. 
(3) In any case not within subsection (1) or (2), the risk of loss 
passes to the buyer on his receipt of the goods if the seller is a mer-
chant; otherwise the risk passes to the buyer on tender of delivery. 
(4) The provisions of this section are subject to contrary agreement 
of the parties and to the provisions of this article on sale on approval 
(section 28:2—327) and on effect of breach on risk of loss (section 
28:2—510). 
§28:2—510. Effect of breach on risk of loss 
(1) Where a tender or deliverjof goods so fails to conform to the 
contract as to give a right of rejection tlie risk of their loss remains 
on the seller until cure or acceptance. 
(2) Where the buyer riglitfidly i-evokes acceptance he may to the 
extent of any deficiency in his effective insurance coverage treat the 
risk of loss as having rested on the seller from the l)eginning. 
(3) Where the buyer as to conforming goods already identified to 
the contract for sale repudiates or is otherwise in breach l)efore risk 
of their loss has passed to him, the seller may to the extent of any 
deficiency in his effective insurance coverage treat the risk of loss as 
resting on the buyer for a commercially reasonable time. 
§ 28:2—511. Tender of payment by buyer; payment by check 
(1) Unless otherwise agreed tender of payment is a condition to 
the seller's duty to tender and complete any delivery. 
(2) Tender of payment is sufficient Avhen made by any means or 
in any manner current in the ordinary course of business unless the 
seller demands payment in legal tender and gives any extension of 
time reasonably necessary to procure it. 
(3) Subject to the provisions of this subtitle on the effect of an 
instrument on an obligation (section 28:3—802), ])ayment by check 
is conditional and is defeated as l)etween the parties by dishonor of tlie 
check on due ]>resentment. 
§ 28:2—512. Payment by buyer before inspection 
(1) Where the contract requires payment before inspection non-
conformity of the goods does not excuse tlie buyer from so making 
payment unless 
(a) the non-conformity appears without inspection; or 
(b) despite tender or the required doctiunents the circum-
stances would justify injunction against honor under the provi-
sions of this subtitle (section 28:5—114). 
(2) Payment pursuant to subsection (1) does not constitute an ac-
ceptance of goods or impair the buyer's right to inspect or any of his 
remedies. 
§ 28:2—513. Buyer's right to inspection of goods 
(1) Unless otherwise agreed and subject to subsection (3), where 
goods are tendered or delivered or identified to the contract for sale, 
the buyer has a right before payment or acceptance to inspect them 
at any reasonable place and time and in any reasonable manner. When 
the seller is required or authorized to send the goods to the buyer, the 
inspection may be after their arrival. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
659 
(2) Expenses of inspection must be borne by tlie buyer but may be 
recovered from tlie seller if the goods do not conform and are rejected. 
(3) Unless otherwise agreed and subject to the provisions of this 
article on C.I.F. contracts (subsection (3) of section 28:2—321), the 
buyer is not entitled to inspect the goods before payment of the price 
when the contract provides 
(a) for delivery ''C.O.D." or on other like terms; or 
(b) for payment against documents of title, except where such 
payment is due only after the goods are to become available for 
inspection. 
(-1) A place or method of inspection fixed by the parties is pre-
sumed to be exclusive but unless otherwiseexpressl}- agreed it does not 
postpone identification or shift the place for delivery or for passing 
the risk of loss. If compliance becomes impossible, inspection shall be 
as provided in this section unless the place or method fixed was clearly 
intended as an indispensable condition failure of which avoids the 
contract. 
§28:2—514. When documents deliverable on acceptance; when on 
payment 
Unless otherwise agreed documents against which a draft is drawn 
are to be delivered to the drawee on acceptance of the draft if it is 
payable more than three days after presentment; otherwise, only on 
payment. 
§28:2—515. Preserving evidence of goods in dispute 
In furtherance of the adjustment of any claim or dispute 
(a) either party on reasonable notification to the other and for 
the purpose of ascertaining the facts and preserving evidence has 
the right to inspect, test and sample the goods including such of 
them as may be in the possession or control of the other; and 
(b) the parties may agree to a third pai-ty inspection or sur-
vey to determine the conformity or condition of the goods and may 
agree that the findings shall be binding upon them in any sub-
sequent litigation or adjustment. 
PART 
6—BREACH, 
REPUDIATION 
AND EXCUSE 
§ 28: 2—601. Buyer's rights on improper delivery 
Subject to the provisions of this article on breach in installment con-
tracts (section 28:2—(>12) and unless otherwise agreed under the 
sex^tions on contractual limitations of remedy (sections 28:2—718 and 
28:2—719), if the goods or the tender of delivery fail in any respect 
to confonn to the contract, the buyer may 
(a) reject the whole; or 
(b) accept the whole; or 
(c) accept any conunercial unit or units and reject the rest. 
§ 28: 2—602. Manner and effect of rightful rejection 
(1) Rejection of goods nuist be within a reasonable time after their 
delivery or tender. 
It is ineffective unless the buyer seasonably noti-
fies the seller. 
(2) Subject to the provisions of the two following sections on 
rejected goods (sections 28 :2—603 and 28:2—604), 
(a) after rejection any exercise of ownership by the buyer with 
respect to any commercial unit is wrongful as against the seller; 
and 
(b) if the buyer has before rejection taken physical possession 
of goods in which he does not have a security interest under the 
provisions of this article (subsection (3) of section 28:2—711), he 
660 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
is under a duty after rejection to hold them with reasonable care 
at the seller's disposition for a time sufficient to permit the seller 
to remove them; but 
(c) the buyer has no further obligations with repn-d to goods 
rightfully rejected. 
(3) The seller's rights with respect to goods wrongfully rejected are 
governed by the provisions of this article on Seller's remedies in 
general (section 28:2—703). 
§ 28: 2—603. Merchant buyer's duties as to rightfully rejected 
goods 
(1) Subject to any security interest in the buyer (sul>secti()n (3) 
of section 28:2—711), when the seller has no agent or ])]ace of business 
at the market of rejection a merchant buyer is under a duty after 
rejection of goods in his possession or control to follow any reasonable 
instructions received from the seller with respect to the gcwxls and in 
the absence of such instructions to make reasonable efforts to sell them 
for the seller's account if they are perishable or threaten to decline in 
value speedily. 
Instructions are not reasonable if on demand 
indemnity for expenses is not forthcoming. 
(2) When the buyer sells goods under subsection (1), he is entitled 
to reimbursement from the seller or out of the proceeds for reasonable 
expenses of caring for and selling them, and if the expenses include 
no selling connnission then to such commission as is usual in the trade 
or if there is none to a reasonable sum not exceeding ten per cent on 
the gross proceeds. 
(3) In complying with this section the buyer is held only to good 
faith and good faith conduct hereunder is neither acceptance nor 
conversion nor the basis of an action for damages. 
§28:2—604. Buyer's options as to salvage of rightfully rejected 
goods 
Subject to the provisions of the immediately preceding section on 
perishables if the seller gives no instructions within a reasonable time 
after notification of rejection the buyer may store the rejected goods 
for the seller's account or reship them to him or resell them for the 
seller's account with reimbursement as provided in the preceding 
section. Such action is not acceptance or conversion. 
§ 28:2—605. Waiver of buyer's objections by failure to particu-
larize 
(1) The buyer's failure to state in connection with rejection a par-
ticular defect which is ascertainable by reasonable inspection pre-
cludes him from relying on the unstated defect to justify rejection or 
to establish breach 
(a) where the seller could have cured it if stated seasonably; 
or 
(b) between merchants when the seller has after rejection made 
a request in writing for a full and final written statement of all 
defects on which the buyer proposes to rely. 
(2) Payment against documents made without reservation of rights 
j>recludes recovery of the payment for defects apparent on the face 
of the documents. 
§ 28:2—606. What constitutes acceptance of goods 
(1) Acceptance of goods occurs when the buyer 
(a) after a reasonable opportunity to inspect the goods signifies 
to the seller that the goods are conforming or that he will take or 
retain them in spite of their nonconformity; or 
(b) fails to make an effective rejection (subsection (1) of sec-
tion 28:2—602), but such acceptance does not occur until the 
buyer has had a reasonable opportunity to inspect them; or 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
661 
(c) does any act inconsistent with the seller's ownership; but 
if such act is wrongful as against the seller it is an acceptance only 
if ratified by him. 
(2) Acceptance of a part of any commercial unit is acceptance of 
that entire unit. 
§28:2—607. Effect of acceptance; notice of breach; burden of es-
tablishing breach after acceptance; notice of claim 
or litigation to person answerable over 
(1) The buyer must pay at the contract rate for any goods accepted. 
(2) Acceptance of goods by the buyer precludes rejection of the 
jioods accepted and if made with knowledge of a non-conformity can-
not be revoked because of it unless the acceptance was on the reason-
able assumption that the non-conformity would be seasonably cured 
but acceptance does not of itself impair any other remedy provided by 
this article for non-conformity. 
(3) Where a tender has been accepted 
(a) the buyer must within a reasonable time after he discovers 
or should have discovered any breach notify the seller of breach or 
be barred from any remedy; and 
(b) if the claim is one for infringement or the like (subsection 
(3) of section 28:2—312) and the buyer is sued as a result of such 
a breach he must so notify the seller within a reasonable time after 
he receives notice of the litigation or be barred from any remedy 
over for liability established by the litigation. 
(4) The burden is on the buyer to establish any breach with respect 
i o the goods accepted. 
* (5) Where the buyer is sued for breach of a warranty or other obli-
gation for which his seller is answerable over 
(a) he may give his seller written notice of the litigation. 
If 
the notice states that the seller may come in and defend and that if 
the seller does not do so he will be bound in any action against him 
by his buyer by any determination of fact common to the two 
litigations, then unless the seller after seasonable receipt of the 
notice does come in and defend he is so bound. 
(b) if the claim is one for infringement or the like (subsection 
(3) of section 28:2—312) the original seller may demand in writ-
ing that his buyer turn over to him control of the litigation includ-
ing settlement or else be barred from any remedy over and if he 
also agrees to bear all expense and to satisfy any adverse judg-
ment, then unless the buyer after seasonable receipt of the demand 
does turn over control the buyer is so barred. 
(6) The provisions of subsections (3), (4) and (5) apply to any 
obligation of a buyer to hold the seller harmless against infringement 
or the like (subsection (3) of section 28:2—312). 
§ 28:2—608. Revocation of acceptance in whole or in part 
(1) The buyer may revoke his acceptance of a lot or commercial 
unit whose non-conformity substantially impairs its value to him if 
he has accepted it 
(a) on the reasonable assumption that its non-conformity would 
be cured and it has not been seasonably cured; or 
(b) without discovery of such non-conformity if his acceptance 
was reasonably induced either by the difficulty of discovery before 
acceptance or by the seller's assurances. 
(2) Revocation of acceptance must occur within a reasonable time 
after the buyer discovers or should have discovered the ground for it 
and before any substantial change in condition of the goods Avhich is 
not caused by their own defects. It is not effective until the buyer 
notifies the seller of it. 
(3) A buyer who so revokes has the same rights and duties with 
regard to the goods involved as if he had rejectea them. 
662 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:2—609. Right to adequate assurance of performance 
(1) A contract for sale imposes an obligation on each party that 
the other's expectation of receiving due performance will not be 
impaired. When reasonable grounds for insecurity arise with respect 
to the performance of either party the other may in writing demand 
adequate assurance of due performance and imtil he receives such 
assurance may if commercially reasonable suspend any performance 
for which he has not already received the agreed return. 
(2) Between merchants the reasonableness of grounds for insecu-
rity and the adequacy of any assurance offered shall be determined 
according to commercial standards. 
(3) Acceptance of any improper delivery or payment does not 
prejudice the aggrieved party's right to demand adequate assurance 
of future performance. 
(4) After receipt of a justified demand failure to provide within 
a reasonable time not exceeding thirty days such assurance of due 
performance as is adequate under the circumstances of the particular 
case is a repudiation of the contract. 
§ 28:2—610. Anticipatory repudiation 
When either party repudiates the contract with respect to a per-
formance not yet due the loss of which will substantially impair 
the value of the contract to the other, the aggrieved party may 
(a) for a commercially reasonable time await performance by 
the repudiating party; or 
(b) resort to any remedy for breach (section 28:2—703 or sec-
tion 28:2—711), even though he has notified the repudiating party 
that he would await the latter's performance and has urged 
retraction; and 
(c) in either case suspend his own performance or proceed in 
accordance with the provisions of this article on the seller's right 
to identify goods to the contract notwithstanding breach or to 
salvage unfinished goods (section 28:2—704). 
§ 28:2—611. Retraction of anticipatory repudiation 
(1) Until the repudiating party's next performance is due he can 
retract his repudiation unless the aggrieved party has since the 
repudiation cancelled or materially changed his position or otherwise 
indicated that he considers the repudiation final. 
(2) Retraction may be by any method which clearly indicates to the 
aggrieved party that the repudiating party intends to perform, but 
must include any assurance justifiably demanded under the provisions 
of this article (section 28:2—609). 
(3) Retraction reinstates the repudiating party's rights under the 
contract with due excuse and allowance to the aggrieved party for 
any delay occasioned by the repudiation. 
§28:2—612. ''Installment contract"; breach 
(1) An "installment contract" is one which requires or authorizes 
the delivery of goods in separate lots to be separately accepted, even 
though the contract contains a clause "each delivery is a separate con-
tract" or its equivalent. 
(2) The buyer may reject any installment which is non-conforming 
if the non-conformity substantially impairs the value of that install-
ment and cannot be cured or if the non-conformity is a defect in the 
required documents; but if the non-conformity does not fall within 
subsection (3) and the seller gives adequate assurance of its cure the 
buyer must accept that installment. 
(3) AVhenever non-conformity or default with respect to one or 
more installments substantially impairs the value of the whole con-
11 STAT. J 
PUBLIC LAW 88-243-DEC. 30, 1963 
663 
tract there is a breach of the, whole. But the aggrieved partjr rein-
states the contract if he accepts a non-con:tonning installment without 
seasonably notifying of cancellation or if he bring an action with 
respect only to past mstallments or demands performance as to future 
installments. 
§28:2—613. Casualty to identified goods 
Where the contract requires for its performance goods identified 
when the contract is made, and the goods suffer casualty without fault 
of either party before the risk of loss passes to the buyer, or in a 
proper case under a "no arrival, no sale" term (section 28:2—324) then 
(a) if the loss is total the contract is avoided; and 
(b) if the loss is partial or the goods have so deteriorated as 
no longer to conform to the contract the buyer may nevertheless 
demand inspection and at his option either treat the contract as 
avoided or accept the goods with due allowance from the contract 
price for the deterioration or the deficiency in quantity but with-
out further right against the seller. 
§ 28:2—614. Substituted performance 
(1) Where without fault of either party the agreed berthing, load-
ing, or unloading facilities fail or an agreed type of carrier becomes 
unavailable or the agreed manner of delivery otherwise becomes com-
mercially impracticable but a commercially reasonable substitute is 
available, such substitute performance must be tendered and accepted. 
(2) If the agreed means or manner of payment fails because of 
domestic or foreign governmental regulation, the seller may withhold 
or stop delivery unless the buyer provides a means or manner of pay-
ment which is commercially a substantial equivalent. If delivery has 
already been taken, payment by the means or in the manner provided 
by the regulation discharges the buyer's obligation unless the regu-
lation is discriminatory, oppressive or predatory. 
§ 28:2—615. Excuse by failure of presupposed conditions 
Except so far as a seller may have assumed a greater obligation and 
subject to the preceding section on substituted performance: 
(a) Delay in delivery or non-delivery in whole or in part by a 
seller who complies with paragraphs (b) and (c) is not a breach 
of his duty under a contract for sale if performance as agreed has 
been made impracticable by the occurrence of a contingency the 
non-occurrence of which was a basic assumption on which the 
contract was made or by compliance in good faith with any 
applicable foreign or domestic governmental regulation or order 
whether or not it later proves to be invalid. 
(b) Where the causes mentioned in paragraph (a) affect only 
a part of the seller's capacity to perform, he must allocate produc-
tion and deliveries among his customers but may at his option 
include regular customers not then under contract as well as his 
own requirements for further manufacture. He may so allocate 
in any manner which is fair and reasonable. 
(c) The seller must notify the buyer seasonably that there 
will be delay or non-delivery and, when allocation is required 
under paragraph (b), of the estimated quota thus made available 
for the buyer. 
§ 28:2—616. Procedure on notice claiming excuse 
(1) Wliere the buyer receives notification of a material or indefinite 
delay or an allocation justified under the preceding section he may 
by written notification to the seller as to any delivery concerned, an^ 
where the prospective deficiency substantially impairs the value of 
the whole contract under the provisions of this article relating to 
664 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
breacli of installment contracts (section 28:2—012), then also as to 
the whole, 
(a) terminate and thereby discharge any unexecuted portion 
of the contract; or 
(b) modify the contract by agreeing to take his available quota 
in substitution. 
(2) If after receipt of such notification from the seller the buyer 
fails so to modify the contract within a reasonable time not exceeding 
thirty days the contract lapses with respect to any deliveries affectet^L 
(3) The provisions of this section may not be negated by agreement 
except in so far as the seller has assumed a greater obligation under 
the preceding section. 
PART 7—REMEDIES 
§28:2—701. Remedies for breach of collateral contracts not 
impaired 
Remedies for breach of any obligation or promise collateral or 
ancillary to a contract for sale are not impaired by the provisions of 
this article. 
§ 28:2—702. Seller's remedies on discovery of buyer's insolvency 
(1) Where the seller discovers the buyer to be insolvent he may 
refuse delivery except for cash including payment for all goods 
theretofore delivered under the contract, and stop delivery under this 
article (section 28:2—705). 
(2) Where the seller discovers that the buyer has received goods 
on credit while insolvent he may reclaim the goods upon demand 
made within ten days after the receipt, but if misrepresentation of 
solvency has been made to the particular seller in writing within three 
months before delivery the ten day limitation does not apply. 
Except 
as provided in this subsection the seller may not base a right to 
reclaim goods on the buyer's fraudulent or innocent misrepresenta-
tion of solvency or of intent to pay. 
(3) The seller's right to reclaim under subsection (2) is subject 
to the rights of a buyer in ordinary coui'se or other good faith pur-
chaser or lien creditor under this article (section 28:2—403). Suc-
cessful reclamation of goods excludes all other remedies with respect 
to them. 
§ 28:2—703. Seller's remedies in general 
Where the buyer wrongfully rejects or revokes acceptance of goods 
or fails to make a payment due on or before delivery or repudiates 
with respect to a part or the whole, then with respect to any goods 
directly affected and, if the breach is of tlie whole contract (section 
28:2—612), then also with respect to the whole undelivered balance, 
the aggrieved seller may 
(a) withhold delivery of such goods; 
(b) stop delivery by any bailee as hereafter provided (section 
28:2—705); 
(c) proceed under the next section respecting goods still 
unidentified to the contract; 
(d) resell and recover danuiges as hereafter provided (section 
28:2—706); 
(e) recover damages for non-acceptance (section 28:2—708) 
or in a proper case the price (section 28:2—709) ; 
(f) cancel. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
665 
§28:2—704. Seller's right to identify goods to the contract not-
withstanding breach or to salvage unfinished goods 
(1) An aggrieved seller under the preceding sectioii inay 
(a) identify to the contract conforming gcKxds not already 
identified if at the time he learned of the breach they are in his 
possession or control; 
(b) treat as the subject of resale goods "which have demon-
strably been intended for the particular contract even though 
those goods are unfinished. 
(2) "Where the goods are unfinished an aggrieve<l seller may in the 
exercise of reasonjible commercial judgment for the pur])oses of avoid-
ing loss and of effective realization either complete the manufacture 
and wholly identify tlie goods to the contract or cease manufacture 
and resell for scrap or salvage value or proceed in any other reason-
able manner. 
§28:2—705. Seller's stoppage of delivery in transit or otherwise 
(1) The seller may stop delivery of goods in the possession of a 
carrier or other bailee when he discovers the buyer to be insolvent 
(section 28:2—702) and may stop delivery of carload, truckload, 
planeload or larger shipments of express or freight when tlie buyer 
lepudiates or fails to make a ])ayment due before delivery or if for any 
other reason the seller has a right to withhold or reclaim the goods. 
(2) As against such buyer the seller may stop delivery until 
(a) receipt of the goods by the buyer; or 
(b) acknowledgment to the buyer by any bailee of the goods 
except a carrier that the bailee holds the goods for the buyer; or 
(c) such acknowledgment to the buyer by a carrier by reship-
ment or as warehouseman; or 
(d) negotiation to the buyer of any negotiable doc-ument of 
title covering the goods. 
(H)(a) To stop delivery the seller must so notify as to enable 
I lie badee by reasonable diligence to prevent delivery of the ^oods. 
(b) After such notification the bailee must hold and deliver the 
goods according to the directions of the seller but the seller is liable 
to the bailee for any ensuing charges or damages. 
(c) If a negotial)le document of title has been issued for goods the 
bailee is not obliged to obej* a notification to stop until surrender of 
the document. 
(d) A carrier who has issued a non-negotiable bill of lading is not 
obliged to obey a notification to stop received from a person other than 
the consignor. 
§28:2—706. Seller's resale including contract for resale 
(1) Under the conditions stated in section 28:2—703 on seller's 
remedies, the seller may resell the goods concerned or the undelivered 
balance thereof. Where the resale is made in good faith and hi a com-
mercially reasonable manner the seller may recover the difference 
between the resale price and the contract price together with any 
incidental damages allowed under the provisions of this article (sec-
tion 28:2—710), but less expenses saved in consequence of the buyer's 
breach. 
(2) Except as otherwise provided in subsection (3) or unless 
otherwise agreed resale may be at public or private sale including 
sale by way of one or more contracts to sell or of identification to an 
existing contract of the seller. 
Sale may be as a unit or in parcels 
and at any time and place and on any terms but every aspect of the 
sale including the method, manner, time, place and terms must be 
commercially reasonable. 
The resale must be reasonably identified 
as referring to the broken contract, but it is not necessaiy that the 
666 
PUBLIC LAW 88-243-DEC. 30, 1%3 
[77 STAT. 
goods be in existence or that any or all of them have been identified 
to the contract before the breach. 
(3) Where the resale is at private sale the seller must give the buyer 
reasonable notification of his intention to resell. 
(4) Where the resale is at public sale 
(a) only identified goods can be sold except where there is a 
recognized market for a public sale of futures in goods of the 
kind; and 
(b) it must be made at a usual place or market for public sale 
if one is reasonably available and except in the case of goods 
which are perishable or threaten to decline in value speedily the 
seller must give the buyer reasonable notice of the time and place 
of the resale; and 
(c) if the goods are not to be within the view of those attending 
the sale the notification of sale must state the place where the 
goods are located and provide for their reasonable inspection by 
prospective bidders; and 
(d) the seller may buy. 
(5) A purchaser who buys in good faith at a resale takes the goods 
free of any rights of the original buyer even though the seller fails to 
comply with one or more of the requirements of this section. 
(6) The seller is not accountable to the buyer for any profit made 
on any resale. A person in the position of a seller (section 28:2—707) 
or a buyer who has rightfully rejected or justifiably revoked accept-
ance must account for any excess over the amount of his security inter-
est, as hereinafter defined (subsection (3) of section 28:2—711). 
§ 28:2—707. "Person in the position of a seller" 
(1) A "person in the position of a seller" includes as against a prin-
cipal an agent who has paid or become responsible for the price of 
goods on behalf of his principal or anyone who otherwise holds a 
security interest or other right in goods similar to that of a seller. 
(2) A person in the position of a seller may as provided in this 
iirticle withhold or stop deliverer (section 28:2—705) and resell (sec-
tion 28:2—706) and recover incidental damages (section 28:2—710). 
§ 28:2—708. Seller's damages for non-acceptance or repudiation 
(1) Subject to subsection (2) and to the provisions of this article 
with respect to proof of market price (section 28:2—723), the measure 
of damages for non-acceptance or repudiation by the buyer is the dif-
ference between the market price at the time and place for tender and 
the unpaid contract price together with any incidental damages pro-
vided m this article (section 28:2—710), but less expenses saved in 
consequence of the buyer's breach. 
(2) If the measure of damages provided in subsection (1) is inade-
quate to put the seller in as good a position as performance would 
have done then the measure of damages is the profit (including 
reasonable overhead) which the seller would have made from full per-
formance by the buyer, together with any incidental damages provided 
in this article (section 28:2—710), due allowance for costs reasonably 
incurred and due credit for payments or proceeds of resale. 
§ 28:2—709. Action for the price 
(1) When the buyer fails to pay the price as it becomes due the 
seller may recover, together with any incidental damages imder the 
next section, the price 
(a) of goods accepted or of conforming goods lost or damaged 
within a commercially reasonable time after risk of their loss has 
passed to the buyer; and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
667 
(b) of goods identified to the contract if the seller is unable 
after reasonable effort to resell them at a reasonable price or the 
circumstances reasonably indicate that such effort will be 
unavailing. 
(2) Where the seller sues for the price he must hold for the buyer 
any goods which have been identified to the contract and are still in 
his control except that if resale becomes possible he may resell them at 
any time prior to the collection of the judgment. The net proceeds of 
any such resale must be credited to the buyer and payment of the 
judgment entitles him to any goods not resold. 
(3) After the buyer has wrongfully rejected or revoked acceptance 
of the goods or has failed to make a payment due or has repudiated 
(section 28:2—610), a seller who is held not entitled to the price under 
this section shall nevertheless be awarded damages for non-acceptance 
under the preceding section. 
§28:2—710. Seller's incidental damages 
Incidental damages to an aggrieved seller include any commercially 
reasonable charges, expenses or conmiissions incurred in stopping 
delivery, in the transportation, care and custody of goods after the 
buyer's breach, in connection with return, or I'esale of the goods or 
otherwise resulting from the breach. 
§ 28:2—711. Buyer's remedies in general; buyer's security interest 
in rejected goods 
(1) Where the seller fails to make delivery or repudiates or the 
buyer rightfully rejects or justifiably revokes acceptance then with 
respect to any goods involved, and with respect to the whole of the 
breach goes tx) the whole contract (section 28:2—612), the buyer may 
cancel and whether or not he has done so may in addition to recovering 
so much of the price as has been paid 
(a) "cover" and have damages under the next section as to all 
the goods affected whether or not they have been identified to the 
contract; or 
(b) recover damages for non-deli 
very as provided in this arti-
cle (section 28:2—713). 
(2) Where the seller fails to deliver or repudiates the buyer may 
also 
(a) if the goods have been identified recover them as provided 
in this article (section 28:2—502); or 
(b) in a proper case obtain specific performance or replevy 
the goods as provided in this article (section 28:2—716). 
(3) On rightful rejection or justifiable revocation of acceptance a 
buyer has a security interest in goods in his possession or control for 
any payments made on their price and any expenses reasonably 
incurred in their inspection, receipt, transportation, care and custody 
and may hold such goods and resell them in like manner as an 
aggrieved seller (section 28:2—706). 
§28:2—712. "Cover"; buyer's procurement of substitute goods 
(1) After a breach within the preceding section the buyer may 
"cover" by making in good faith and without unreasonable delay any 
reasonable purchase of or contract to purchase goods in substitution 
for those due from the seller. 
(2) The buyer may recover from the seller as damages the differ-
ence between the cost of cover and the contract price together with 
any incidental or consequential damages as hereinafter defined (sec-
tion 28:2—715), but less expenses savSi in consequence of the seller's 
breach. 
(3) Failure of the buyer to effect cover within this section does not 
bar him from any other remedy. 
668 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:2—713. Buyer's damages for non-delivery or repudiation 
(1) Subject to the provisions of this article with respect to proof 
of market price (section 28:2—723), the measure of damages for 
non-delivery or repudiation by the seller is the difference between the 
market price at the time when the buyer learned of the breach and 
the contract price together with any incidental and consequential dam-
ages provided in this article (section 28:2—715), but less expenses 
saved in consequence of the seller's breach. 
(2) Market price is to be determined as of the place for tender 
or, in cases of rejection after arrival or revocation of acceptance, as of 
the place of arrival. 
§28:2—714. Buyer's damages for breach in regard to accepted 
goods 
(1) Where the buyer has accepted goods and given notification 
(subsection (3) of section 28:2—607) he may recover as damages for 
any non-conformity of tender the lo'ss resulting in the ordinary coui"se 
of events from the seller's breach as determined in any manner which 
is reasonable. 
(2) The measure of damages for breach of warranty is the differ-
ence at the time and place of acceptance between the value of the goods 
accepted and the value they would have had if they had been as war-
ranted, unless special circumstances show proximate damages of a 
different amount. 
(3) In a proper case any incidental and consequential damages 
under the next section may also be recovered. 
§ 28:2—715. Buyer's incidental and consequential damages 
(1) Incidental damages resulting from the seller's breach include 
expenses reasonably incurred in inspection, receipt, transportation 
and care and custody of goods rightfully rejected, any commerciallj' 
i-easonable charges, expenses or commissions m connection with effect-
ing cover and any other reasonable expense incident to the delay or 
other breach. 
(2) Consequential damages resulting from the seller's breach 
include 
(a) any loss resulting from general or particular requirements 
and needs of which the seller at the time of contracting had reason 
to know and which could not reasonably be prevented by cover 
or otherwise; and 
(b) injury to person or property proximately resulting from 
any breach of warranty. 
§ 28:2—716. Buyer's right to specific performance or replevin 
(1) Specific performance may be decreed where the goods are 
unique or in other proper circumstances. 
(2) The decree for specific performance may include such terms 
and conditions as to payment of the price, damages, or other relief as 
the court may deem just. 
(3) The buyer has a right of replevin for goods identified to the 
contract if after reasonable effort he is unable to effect cover for such 
goods or the circmnstances reasonably indicate that such effort will 
be unavailing or if the goods have been shipped under reservation and 
satisfaction of the security interest in them has been made or tendered. 
§ 28:2—717. Deduction of damages from the price 
The buyer on notifying the seller of his intention to do so may 
deduct all or any part of the damages resulting from any breach of 
the contract from any part of the price still due under the same 
contract. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
669 
§28:2—718. Liquidation or limitation of damages; deposits 
(1) Damages for breach by either party may be liquidated in the 
agreement but only at an amount which is reasonable in the light of 
the anticipated or actual harm caused by the breach, the difficulties 
of proof of loss, and the inconvenience or non-feasibility of otherwise 
obtaining an adequate remedy. 
A term fixing unreasonably large 
liquidated damages is void as a penalty. 
(2) Where the seller justifiably withholds delivery of goods because 
of the buyer's breach, the buyer is entitled to restitution of any amount 
by which the sum of his payments exceeds 
(a) the amount to which the seller is entitled by virtue of 
terms liquidating the seller's damages in accordance with sub-
section (1), or 
(b) in the absence of such terms, twenty per cent of the value 
of the total performance for which the buyer is obligated under 
the contract or $500, whichever is smaller. 
(3) The buyer's right to restitution under subsection (2) is subject 
to offset to the extent that the seller establishes 
(a) a right to recover damages under the provisions of this 
article other than subsection (1), and 
(b) the amount or value of any benefits received by the buyer 
directly or indirectly by reason of the contract. 
(4) Where a seller has received payment in goods their reasonable 
, value or the proceeds of their resale shall be treated as payments for 
the purposes of subsection (2) ; but if the seller has notice of the 
buyer's oreach before reselling goods received in part performance, 
his resale is subject to the conditions laid down in this article on 
resale by an aggrieved seller (section 28:2—706). 
§ 28:2—719. Contractual modification or limitation of remedy 
(1) Subject to the provisions of subsections (2) and (3) of this 
section and of the preceding section on liquidation and limitation of 
damages, 
(a) the agreement may provide for remedies in addition to 
or in substitution for those provided in this article and may 
limit or alter the measure of damages recoverable under this 
article, as by limiting the buyer's remedies to return of the goods 
and repayment of the price or to repair and replacement ot non-
conforming goods or parts; and 
(b) resort to a remedy as provided is optional unless the 
remedy is expressly agreed to be exclusive, in which case it is the 
sole remedy. 
(2) Where circumstances cause an exclusive or limited remedy to 
fail of its essential purpose, remedy may be had as provided in this 
subtitle. 
(3) Consequential damages may be limited or excluded unless the 
limitation or exclusion is unconscionable. Limitation of consequential 
damages for injury to the person in the case of consumer goods is 
prima facie unconscionable but limitation of damages where the loss 
is commercial is not. 
§ 28:2—720. Effect of "cancellation" or "rescission" on claims for 
antecedent breach 
Unless the contrary intention clearly appears, expressions of "can-
cellation" or "rescission" of the contract or the like shall not be con-
strued as a renunciation or discharge of any claim in damages for 
an antecedent breach. 
670 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:2—721. Remedies for fraud 
Remedies for material misrepresentation or fraud inchide all 
remedies available under this article for nonfraudulent 
breach. 
Neither rescission or a claim for rescission of the contract for sale nor 
reiection or return of the goods shall bar or be deemed inconsistent 
with a claim for damages or other remedy. 
§ 28:2—722. Who can sue third parties for injury to goods 
Where a third party so deals with goods which have been identified 
to a contract for sale as to cause actionable injury to a party to that 
contract 
(a) a right of action against the third pjirty is in either party 
to the contract for sale who has title to or a security interest or a 
special property or an insurable interest in the goods; and if the 
goods have been destroyed or converted a right of action is also 
in the party who either bore the risk of loss under the contract 
for sale or has since the injury assumed that risk as against the 
other; 
(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 contract for sale 
and there is no arrangement between them for disposition of the 
recovery, his suit or settlement is, subject to his own interest, as 
a fiduciary for the other party to the contract; 
(c) either party may with the consent of the other sue for the 
benefit of whom it may concern. 
§ 28:2—723. Proof of market price: time and place 
(1) If an action based on anticipatory repudiation comes to trial 
before the time for performance with respect to some or all of the 
goods, any damages based on market price (section 28:2—708 or 
section 28:2—713) shall be determined according to the price of such 
goods prevailing at the time when the aggrieved party learned of the 
repudiation. 
(2) If evidence of a price prevailing at the times or places described 
in this article is not readily available the price prevailing within any 
reasonable time before or after the time described or at any other place 
which in commercial judgment or under usage of trade would serve 
as a resonable substitute for the one described may be used, making 
any proper allowance for the cost of transporting the goods to or from 
such other place. 
(3) Evidence of a relevant price prevailing at a time or place other 
than the one described in this article offered by one party is not 
admissible unless and until he has given the other party such notice 
as the court finds sufficient to prevent unfair surprise. 
§28:2—(724. Admissibility of market quotations 
WTienever the prevailing price or value of any goods regularly 
bought and sold in any established commodity market is in issue, 
reports in official publications or trade journals or in newspapers 
or periodicals of general circulation published as the reports of such 
market shall be admissible in evidence. The circumstances of the 
preparation of such a report may be shown to affect its weight but 
not its admissibility. 
§ 28:2—725. Statute of limitations in contracts for sale 
(1) An action for breach of any contract for sale must be com-
menced within four years after the cause of action has accrued. 
By 
the original agi-eement the parties may reduce the period of limitation 
to not less than one year but may not extend it. 
(2) A cause of action accrues when the breach occurs, regardless 
of the aggrieved party's lack of knowledge of the breach. A breach 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
671 
of warranty occurs when tender of delivery is made, except that 
where a warranty explicitly extends to future perfomiance of the 
j^oods and discovery of the breach must await the time of such per-
formance the cause of action accrues when the breach is or should 
have been discovered. 
(3) Where an action commenced within the time limited by sub-
section (1) is so terminated as to leave available a remedy by another 
action for the same breach such other action may be commenced after 
the expiration of the time limited and within six months after the 
termination of the first action imless the termination resulted from 
voluntary discontinuance or from dismissal for failure or neglect to 
prosecute. 
(4) This section does not alter the law on tolling of the statute 
of limitations nor does it apply to causes of action which have accrued 
before this subtitle becomes effective. 
ARTICLE 3—COMMERCIAL PAPER 
PAKT 1—^SHORT TITLE, FORM AM) IXTERPRETATIOX 
Sec. 
28:3—101. Short title. 
28:3—102. Definitions and index of definitions. 
28:3—103. Limitations on scope of article. 
28 :3—104. Form of negotiable instruments: "draft"; "check" ; "certificate of 
deposit"; "note". 
28:3—105. When promise or order unconditional. 
28:3—106. Sum certain. 
28:3—107. Money. 
28:3—108. I'ayable on demand. 
28:3—109. Definite time. 
28:3—110. Payable to order. 
28:3—111. Payable to bearer. 
28:3—112. Terms and omissions not affecting negotiability. 
28:3—113. Seal. 
28:3—114. Date, antedating, postdating. 
28:3—115. Incomplete instruments. 
28:3—116. Instruments payable to two or more persons. 
28:3—117. Instruments payable with words of description. 
28:3—118. Ambiguous terms and rules of construction. 
28:3—119. Other writings affecting instrument. 
28:3—120. Instruments "payable through" bank. 
28:3—121. Instruments payable at bank. 
28:3—122. Accrual of cause of action. 
PART 2—TRANSFER AND NEGOTIATION 
28:3—201. Transfer: right to indorsement. 
28 :3—202. Negotiation. 
28:3—203. Wrong or misspelled name. 
28:3—204. Special indorsement; blank indorsement. 
28:3—205. Restrictive indorsements. 
28:3—206. Effect of restrictive indorsement. 
28:3—^207. Negotiation effective although it may be rescinded. 
28:3—208. Reacquisition. 
PART 3—RIGHTS OF A HOIJ>EB 
28:3—301. Rights of a holder. 
28:3—302. Holder in due course. 
28:3—303. Taking for value. 
28:3—304. Notice to purchaser. 
28:3—305. Rights of a holder in due course. 
28:3—306. Rights of one not holder in due course. 
28:3—307. Burden of establishing signatures, defenses and due course. 
672 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
ARTICLE 3—COMMERCIAL PAPER—Continued 
PAKT 4—LIABILITY OF PARTIES 
Sec. 
28:3—401. Signature. 
28:3—402. Signature in ambiguous capacity. 
28 :3—403. Signature by authorized representative. 
28 :3—404. Unauthorized signatures. 
28:3—405. Imposters; signature in name of payee. 
28:3—406. Negligence contributing to alteration or unauthorized signature. 
28:3—407. Alteration. 
28:3—408. Consideration. 
28:3—409. Draft not an assignment. 
28:3—410. Definition and operation of acceptance. 
28:3—411. Certification of a check. 
28 :.3—412. Acceptance varying draft. 
28:3—413. Contract of maker, drawer and acceptor. 
28:3—414. Contract of indorser; order of liability. 
28 :3—41."». Contract of accommodation party. 
28:3—416. Contract of guarantor. 
28 :.3—417. Warranties on presentment and transfer. 
28 :3—118. Finality of payment or acceptance. 
28:3—41!). Conversi(m of instrument; innocent representative. 
PART ~t—PRESENTMENT, 
NOTICE OF DISHONOR AND PROTEST 
28:3—501. When presentment, notice of dishonor, and protest necessary or 
pennissible. 
28:3—502. Unexcused delay; discharge. 
28:3—503. Time of presentment. 
28:3—504. How presentment made. 
28:3—505. Rights of party to whom presentment is made. 
28 :3—506. Time allowed for acceptance or payment. 
28:3—507. Dishonor; holder's right of recourse; term allowing re-presentment. 
28 :3—508. Notice of dishonor. 
28 :3—50J). Protest; noting for protest. 
28:3—510. Evidence of dishonor and notice of dishonor. 
28:3—511. Waived or excused presentment, protest or notice of dishonor or 
delay therein. 
PART 6—DISCHARGE 
28:3—601. Discharge of parties. 
28:3—602. Effect of discharge against holder in due course. 
28 :3—603. Payment or satisfaction. 
28:3—604. Tender of payment. 
28:3—605. Cancellation and renunciation. 
28:3—606. Impairment of recourse or of collateral. 
PART 7—ADVICE OF INTERNATIONAL SIGHT DRAFT 
28:3—701. Letter of advice of international sight draft. 
PART 8—MISCELLANEOUS 
28:3—801. Drafts in a s^t. 
28 :3—802. Effect of instrument on obligation for which it is given. 
28 :3—803. Notice to third party. 
28:3—804. Lost, destroyed or stolen instruments. 
28:3—805. Instruments not payable to order or to bearer. 
PART 1—SHORT TITLE, FORM AND INTERPRETATION 
§28:3—101. Short title 
Citation of ar- 
This ai'ticle shall be known and may be cited as Uniform Commer-
cial Code—Commercial Paper. 
§ 28:3—102. Definitions and index of definitions 
(1) In this article unless the context otherwise requires 
(a) "Issue" means the first delivery of an instrument to a 
holder or a remitter. 
(b) An "order" is a direction to pay and must be more than 
an authorization or request. It must identify the person to pay 
tide 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
673 
with reasonable certainty. It may be addressed to one or more 
snch persons jointly or in the alternative but not in succession.' 
(c) A "promise" is an undertaking to pay and must be more 
than an acknowledgment of an obligation. 
(d) "Secondary party" means a drawer or endorser. 
(e) "Instrument" means a negotiable instrument. 
(2) Other definitions applying to this article and the sections in 
which they appear are: 
"Acceptance". 
Section 28:3—110. 
"Accommodation party-'. 
Section 28:3—115. 
"Alteration". 
Section 28:3-^07. 
"Certificate of deposit". 
Section 28:3—104. 
"Certification". 
Section 28:3—411. 
"Check". 
Section 28:3—104. 
"Definite time". Section 28:3—109. 
"Dishonor". Section 28:3—507. 
"Draft". 
Section 28:3—104. 
"Holder in due course". 
Section 28:3—302. 
"Negotiation". 
Section 28:3—202. 
"Note". 
Section 28:3—104. 
"Notice of dishonor". 
Section 28:3—508. 
"On demand". 
Section 28:3—108. 
"Presentment". 
Section 28:3—504. 
"Protest". 
Section 28:3—509. 
"Restrictive Indorsement". 
Section 28:3—205. 
"Signature". 
Section 28:3—401. 
(3) The following definitions in other articles apply to this article. 
"Account". Section 28:4—104. 
"Banking day". 
Section 28:4^104. 
"Clearing house". Section 28:4—104. 
"Collecting bank". 
Section 28:4—105. 
"Customer". 
Section 28:4—104. 
"Depositary bank". 
Section 28:4—105. 
"Documentary draft". 
Section 28:4—104. 
"Intermediary bank". 
Section 28:4—105. 
"Item". 
Section 28:4^104. 
"Midnight deadline". 
Section 28:4—104. 
"Payor bank". 
Section 28:4—105. 
(4) In addition article 1 contains general definitions and principles 
of construction and interpretation applicable throughout this article. 
§ 28:3—103. Limitations on scope of article 
(1) This article does not apply to money, documents of title or 
j uvestment securities. 
(2) The provisions of this article are subject to the provisions oi 
the article on bank deposits and collections (article 4) and secured 
transactions (article 9). 
§28:3—104. Form of negotiable instruments; "draft"; "check"; 
"certificate of deposit"; "note" 
(1) Any writing to be a negotiable instrument within this article 
must 
(a) be signed by the maker or drawer; and 
(b^ contain an unconditional promise or order to pay a sum 
certain in money and no other promise, order, obligation or power 
given by the maker or drawer except as authorized by this article; 
and 
(c) be payable on demand or at a definite time; and 
(d) be payable to order or to bearer. 
93-025 0-64-45 
674 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) A writing whioli complies with tlie requirements of this 
section is 
(a) a "draft" ("bill of exchange") if it is an order; 
(b) a "check" if it is a draft drawn on a bank and payable 
on demand; 
(c) a "certificate of deposit" if it is an acknowledgment by a 
bank of receipt of money with an engagement to repay it; 
(d) a "note" if it is a promise other than a certificate of deposit. 
(3) As used in other articles of this subtitle, and as the context 
may require, the terms "draft", "check", "certificate of deposit" and 
"note" may refer to instruments which are not negotiable within this 
article as well as to instruments which are so negotiable. 
§28:3—105. When promise or order unconditional 
(1) A promise or order otherwise unconditional is not made con-
ditional by the fact that the instrument 
(a^ is subject to implied or constructive conditions; or 
(b) states its consideration, whether performed or promised, 
or the transaction which gave rise to the instrument, or that the 
promise or order is made or the instrmnent matures in accordance 
with or "as per" such transaction; or 
(c) refers to or states that it arises out of a separate agreement 
or refers to a separate agreement for rights as to prepayment 
or acceleration; or 
(d) states that it is drawn under a letter of credit; or 
(e) states that it is secured, whether by mortgage, reservation 
of title or otherwise; or 
(f) indicates a particular account to be debited or any other 
fund or source from which reimbursement is expected; or 
(g) is limited to payment out of a particular fund or the 
proceeds of a particular source, if the instrument is issued by a 
government or governmental agency or unit; or , 
(h) is limited to payment out of the entire assets of a partner-
ship, unincorporated association, trust or estate by or on behalf of 
which the instrument is issued. 
(2) A promise or order is not unconditional if the instrument 
(a) states that it is subject to or governed by any other agree-
ment; or 
(b) states that it is to he paid only out of a particular fund 
or source except as provided in this section. 
§28:3—106. Sum certain 
(1) The sum payable is a sum certain even though it is to be paid 
(a) with stated interest or by stated installments; or 
(b) with stated different rates of interest before and after 
default or a specified date; or 
(c) with a stated discount or addition if paid before or after 
the date fixed for payment; or 
(d) with exchange or less exchange, whether at a fixed rate or 
at the current rate; or 
(e) with costs of collection or an attorney's fee or both upon 
default. 
(2) Nothing in this section shall validate any term which is other-
wise illegal. 
§28:3—107. Money 
(1) An instrument is payable in money if the medium of exchange 
in w^hich it is payable is money at the time the instrument is made. 
An instrument payable in "currency" or "current funds" is payable 
in money. 
77 STAT.,] 
PUBLIC L
A
W 88-243-DEC. 30, 1963 
675 
(2) A promise or order to pay a sum stated in a foreign currency 
is for a sum certain in money and, unless a different medium of pay-
ment is specified in the instrument, may be satisfied by payment of 
that number of dollars which the stated foreign currency will purchase 
at the buying sight rate for that currency on the day on which the 
instrument is payable or, if payable on demand, on the day of demand. 
If such an instrument specifies a foreign currency as the medium of 
payment the instrument is payable in that currency. 
§28:3—108. Payable on demand 
Instruments payable on demand include those payable at sight or 
on presentation and those in which no time for payment is stated. 
§28:3—109. Definite time 
(1) An instrument is payable at a definite time if by its terms it 
is payable— 
(a) on or before a stated date or at a fixed period after a stated 
date; or 
(b) at a fixed period after sight; or 
(c) at a definite time subject to any acceleration; or 
(d) at a definite time subject to extension at the option of the 
holder, or to extension to a further definite time at the option of 
the maker or acceptor or automatically upon or after a specified 
act or event. 
(2) An instrument which by its terms is otherwise payable only 
upon an act or event uncertain as to time of occurrence is not payable 
at a definite time even though the act or event has occurred. 
§ 28:3—110. Payable to order 
(1) An instrument is payable to order when by its terms it is 
payable to the order or assies of any person therein specified with 
reasonable certainty, or to him or his order, or when it is conspicu-
ously designated on its face as "exchange'' or the like and names a 
payee. It may be payable to the order of 
(a) the maker or drawer; or 
(b) the drawee; or 
(c) a payee who is not maker, drawer or drawee; or 
(d^ two or more payees together or in the alternative; or 
(e) an estate, trust or fund, in which case it is payable to the 
order of the representative of such estate, trust or fund or his 
successors; or 
(f) an office, or an officer by his title as such in which case it 
is payable to the principal but the incumbent of the office or his 
successors may act as if he or they were the holder; or 
(g) a partnership or unincorporated association, in which case 
it is payable to the partnership or association and may be 
indorsed or transferred by any person thereto authorized. 
(2) An instrument not payaole to order is not made so payable by 
such words as "payable upon return of this instrument properly 
indorsed". 
(3) An instrument made payable both to order and to bearer is 
payable to order unless the bearer words are handwritten or type-
written. 
§28:3—111. Payable to bearer 
An instrument is payable to bearer when by its terms it is payable 
to— 
(a^ bearer or the order of bearer; or 
(h) a specified person or bearer; or 
(c) "cash" or the order of "cash", or any other indication which 
[h) a specified person or bearer; or 
(c) "cash" or the order of "cash", or 
does not purport to designate a specific payee. 
676 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:3—112. Terms and omissions not affecting negotiability 
(1) The negotiability of an instrument is not affected b}^— 
(a) the omission of a statement of any consideration or of the 
place where the instniment is drawn or payable; or 
(b) a statement that collateral has been given to secure obli-
gations either on the instrument or otherwise of an obligor on 
the instrument or that in the case of default on those obligations 
the holder may realize on or dispose of the collateral; or 
(c) a promise or power to maintain or protect collateral or to 
give additional collateral; or 
(d) a term authorizing a confession of judgment on the instru-
ment if it is not paid when due; or 
(e) a term purporting to waive the benefit of any law intended 
for the advantage or protection of any obligor; or 
(f) a term in a draft providing that the payee by indorsing 
or cashing it acknowledges full satisfaction of an obligation of 
the drawer; or 
(g) a statement in a draft draAvn in a set of parts (section. 
28:3—801) to the effect that the order is effective only if no other 
part has been honored. 
(2) Nothing in this section shall validate any term M'hich is other-
wise illegal. 
§28:3—113. Seal 
An instrument otherwise negotiable is within this article even 
though it is under a seal. 
§28:3—114. Date, antedating, postdating 
(1) The negotiability of an instrument is not affected by the fact 
that it is undated, antedated, or postdated. 
(2) Where an instrument is antedated or postdated the time when it 
is payable is determined by" the stated date if the instrument is payable 
on demand or at a fixed period after date. 
(3) Where the instrument or any signature thereon is dated, the 
date is presumed to be correct. 
§ 28:3—115. Incomplete instruments 
(1) When a paper whose contents at the time of signing show that 
it is intended to become an instrument is signed while still incomplete 
in any necessary respect it cannot be enforced until completed, but 
when it is completed in accordance with authority given it is effective 
as completed. 
(2) If the completion is unauthorized the rules as to material alter-
ation apply (section 28:3—407), even though the paper was not 
delivered by the maker or drawer; but the burden of establishing that 
any completion is unauthorized is on the party so asserting. 
§ 28:3—116. Instruments payable to two or more persons 
An instrument payable to the order of two or more persons 
(a) if in the alternative is payable to any one of them and may 
be negotiated, discharged or enforced by any of them who has 
possession of it; 
(b) if not in the alternative is payable to all of them and may 
be negotiated, discharged or enforced only by all of them. 
§ 28:3—117. Instruments payable with words of description 
An instrument made payable to a named person with the addition 
of words describing him 
(a) as agent or of&cer of a specified person is payable to his 
principal but the agent or officer may act as if he were the holder; 
(b) as any other fiduciary for a specified person or purpose is 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
677 
payable to the payee and may be negotiated, discharged or 
enforced by him; 
(c) in any other manner is payable to the payee micondition-
ally and the additional words are without effect on subsequent 
parties. 
§ 28:3—118. Ambiguous terms and rules of construction 
The following rules apply to every instrument: 
(a) Where there is doubt whether the instrument is a draft 
or a note the holder may treat it as either. 
A draft drawn on 
the drawer is effective as a note. 
(b) Handwritten terms control typewritten and printed terms, 
and typewritten control printed. 
(c) Words control figures except that if the words are ambigu-
ous figures control. 
(d) Unless otherwise specified a provision for interest means 
interest at the judgment rate at the place of payment from the 
date of the instrument, or if it is undated from the date of issue. 
(e) Unless the instrument otherwise specifies two or more 
persons who sign as maker, acceptor or drawer or indorser and 
as a part of the same transaction are jointly and severally liable 
even though the instrument contains such words as "I promise 
to pay". 
(f) Unless otherwise specified consent to extension authorizes 
a single extension for not longer than the original period. 
A 
consent to extension, expressed in the instrument, is binding on sec-
ondary parties and accommodation makers. A holder may not 
exercise his option to extend an instrument over the objection 
of a maker or acceptor or other party who in accordance with 
section 28:3—604 tenders full payment when the instrument 
is due. 
§ 28:3—119. Other writings affecting instrument 
(1) As between the obligor and his immediate obligee or any trans-
feree the terms of an instrument may be modified or affected by any 
other written agreement executed as a part of the same transaction, 
except that a holder in due course is not affected by any limitation of 
his rights arising out of the separate written agreement if he had no 
notice of the limitation when he took the instrument. 
(2) A separate agreement does not affect the negotiability of an 
instrument. 
§ 28:3—120. Instruments "payable through" bank 
An instrument which states that it is "payable through" a bank or 
the like designates that bank as a collecting bank to make presentment 
but does not of itself authorize the bank to pay the instrument. 
§28:3—121. Instruments payable at bank 
A note or acceptance which states that it is payable at a bank is the 
equivalent of a draft drawn on the bank payable when it falls due 
out of any funds of the maker or acceptor in current account or other-
wise available for such payment. 
§ 28:3—122. Accrual of cause of action 
(1) A cause of action against a maker or an a,cceptor accrues 
(a) in the case of a time instrument on the day after maturity; 
(b) in the case of a demand instrument upon its date or, if no 
date is stated, on the date of issue. 
(2) A cause of action against the obligor of a demand or time 
certificate of deposit accrues upon demand, but demand on a tim^ 
certificate may not be made until on or after the date of maturity. 
678 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(3) A cause of action against a drawer of a draft or an indorser 
of any instrument accrues upon demand following dishonor of the 
instrument. 
Notice of dishonor is a demand. 
(4) Unless an instrument provides otherwise, interest runs at the 
rate provided by law for a judgment 
(a) in the case of a maker, acceptor or other primary obligor 
of a demand instrument, from the date of demand; 
(b) in all other cases from the date of accrual of the cause of 
action. 
PART 2—TRANSFER AND NEGOTIATION 
§ 28:3—^201. Transfer: right to indorsement 
(1) Transfer of an instrument vests in the transferee such rights 
as the transferor has therein, except that a transferee who has him-
self been a party to any fraud or illegality affecting the instrument 
or who as a prior holder had notice of a defense or claim against it 
cannot improve his position by taking from a later holder in due 
course. 
(2) A transfer of a security interest in an instrument vests the fore-
going rights in the transferee to the extent of the interest transferred. 
(3) Unless otherwise agreed any transfer for value of an instrument 
not then payable to bearer gives the transferee the specifically enforce-
able right to have the unqualified indorsement of the transferor. 
Negotiation takes effect only when the indorsement is made and until 
that time there is no presumption that the transferee is the owner. 
§28:3—202. Negotiation 
(1) Negotiation is the transfer of an instrument in such form that 
the transferee becomes a holder. If the instrument is payable to order 
it is negotiated by delivery with any necessary indorsement; if payable 
to bearer it is negotiated by delivery. 
(2) An indorsement must be written by or on behalf of the holder 
and on the instrument or on a paper so firmly affixed thereto as to 
become a part thereof. 
(3) An indorsement is effective for negotiation only when it con-
veys the entire instrument or any unpaid residue. If it purports to be 
of less it operates only as a partial assignment. 
(4) Words of assignment, condition, waiver, guaranty, limitation 
or disclaimer of liability and the like accompanying an indorsement 
do not affect its character as an indorsement. 
§ 28:3—203. Wrong or misspelled name 
Where an instrument is made payable to a person under a mis-
spelled name or one other than his own he may indorse in that name 
or his own or both; but signature in both names may be required by a 
person paying or giving value for the instrument. 
§ 28:3—^204. Special indorsement; blank indorsement 
(1) A special indorsement specifies the person to whom or to whose 
order it makes the instrument payable. 
Any instrument specially 
indorsed becomes payable to the order of the special indorsee and 
may be further negotiated only by his indorsement. 
(2) An indorsement in blank specifies no particular indorsee and 
may consist of a mere signature. 
An instrument payable to order 
and indorsed in blank becomes payable to bearer and may be negoti-
ated by delivery alone until specially indorsed. 
(3) The holder may convert a blank indorsement into a special 
indorsement by writing over the signature of the indorser in blank 
any contract consistent with the character of the indorsement. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
679 
§ 28:3—^205. Restrictive indorsements 
An indorsement is restrictive which either 
(a) is conditional; or 
(b) purports to prohibit further transfer of the instrument; or 
(c) includes the words "for collection", "for deposit", "pay 
any bank", or like terms signifying a purpose of deposit or collec-
tion; or 
(d) otherwise states that it is for the benefit or use of the 
indorser or of another person. 
§28:3—206. Effect of restrictive indorsement 
(1) No restrictive indorsement prevents further transfer or negoti-
ation of the instrument. 
(2) An intermediary bank, or a payor bank which is not the deposi-
tary bank, is neither given notice nor otherwise affected by a restric-
tive indorsement of any person except the bank's immediate transferor 
or the person presenting for payment. 
(3) Except for an intermediary bank, any transferee under an 
indorsement which is conditional or includes the words "for collec-
tion", "for deposit", "pay any bank", or like terms (subparagraphs 
(a) and (c) of section 28:3—205) must pay or apply any value given 
by him for or on the security of the instrument consistently witn the 
indorsement and to the extent that he does so he becomes a holder for 
value. In addition such transferee is a holder in due course if he 
otherwise complies with the requirements of section 28:3—302 on what 
constitutes a holder in due course. 
(4) The first taker under an indorsement for the benefit of the 
indorser or another person (subparagraph (d) of section 28:3—205) 
must pay or apply any value ^iven by him for or on the security 
of the instrument consistently with the indorsement and to the extent 
that he does so he becomes a holder for value. In addition such taker 
is a holder in due course if he otherwise complies with the require-
ments of section 28:3—302 on what constitutes a holder in due course. 
A later holder for value is neither given notice nor otherwise affected 
by such restrictive indorsement unless he has knowledge that a 
fiduciary or other person has negotiated the instrument in any trans-
action for his own benefit or otherwise in breach of duty (subsection 
(2) of section 28:3—304). 
§ 28:3—^207. Negotiation effective although it may be rescinded 
(1) Negotiation is effective to transfer the instrument although 
the negotiation is 
(a) made by an infant, a corporation exceeding its powers, 
or any other person without capacity; or 
(b) obtained by fraud, duress or mistake of any kind; or 
(c) part of an illegal transaction; or 
(d) made in breach of duty. 
(2) Except as against a subsequent holder in due course such 
negotiation is in an appropriate case subject to rescission^ the declara-
tion of a constructive trust or any other remedy permitted by law. 
§ 28:3—208. Reacquisition 
Where an instrument is returned to or reacquired by a prior party 
he may cancel any indorsement which is not necessary to his title and 
reissue or further negotiate the instrument, but any intervening party 
is discharged as against the reacquiring party and subsequent holders 
not in due course and if his indorsement has been cancelled is dis-
charged as against subsequent holders in due course as well. 
680 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
PART 3—RIGHTS OF A HOLDER 
§ 28:3—301. Rights of a holder 
The holder of an instrument whether or not he is the owner may 
transfer or negotiate it and, except as otherwise provided in section 
28:3—603 on payment or satisfaction, discharge it or enforce payment 
in his own name. 
§ 28:3—502. Holder in due course 
(1) A holder in due course is a holder who takes the instrument 
(a) for value; and 
(b) in good faith; aaid 
(c) without notice that it is overdue or has been dishonored 
or of any defense against or claim to it on the part of any person. 
(2) A payee may be a holder in due course. 
(3) A holder does not become a holder in due course of an 
instrument: 
(a) by purchase of it at judicial sale or by taking it under 
legal process; or 
(b) by acquiring it in taking over an estate; or 
(c) by purchasmg it as part of a bulk transaction not in 
regular course of business of the transferor. 
(4) A purchaser of a limited interest can be a holder in due course 
only to the extent of the interest purchased. 
§ 28:3—303. Taking for value 
A holder takes the instrument for value 
(a) to the extent that the agreed consideration has been per-
formed or that he acquires a security interest in or a lien on the 
instrument otherwise than by legal process; or 
(b) when he takes the instrument in payment of or as security 
for an antecedent claim against any person whether or not the 
claim is due; or 
(c) when he gives a negotiable instrument for it or makes an 
irrevocable commitment to a third person. 
§ 28:3—304. Notice to purchaser 
(1) The purchaser has notice of a claim or defense if 
(a) the instrument is so incomplete, bears such visible evidence 
of forgery or alteration, or is otherwise so irregular as to call into 
question its validity, terms or ownership or to create an ambiguity 
as to the party to pay; or 
(b) the purchaser has notice that the obligation of any party 
is voidable in whole or in part, or that all parties have been 
discharged. 
(2) The purchaser has notice of a claim against the instrument 
when he has knowledge that a fiduciary has negotiated the instrument 
in payment of or as security for his own debt or in any transaction for 
his own benefit or otherwise in breach of duty. 
(3) The purchaser has notice that an instrument is overdue if he 
has reason to know 
(a) that any part of the principal amount is overdue or that 
there is an uncured default in payment of another instrument of 
the same series; or 
(b) that acceleration of the instrument has been made; or 
(c) that he is taking a demand instrmnent after demand has 
been made or moi-e than a reasonable length of time after its issue. 
A reasonable time for a check drawn and payable within the 
states and territories of the LTnited States and the District is 
presumed to be thirty days. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
681 
(4) Knowledge of the following facts does not of itself give the 
purchaser notice of a defense or claim 
(a) that the instrument is antedated or postdated; 
(b) that it was issued or negotiated in return for an executory 
promise or accompanied by a separate agreement, unless the pur-
chaser has notice that a defense or claim has arisen from the terms 
thereof; 
(c) that any party has signed for accommodation; 
(d) that an incomplete instrument has been completed, unless 
the purchaser has notice of any improper completion; 
(e) that any person negotiating the instrument is or was a 
fiduciary; 
(f) that there has been default in payment of interest on the 
instrument or in payment of any other instrument, except one of 
the same series. 
(5) The filing or recording of a document does not of itself con-
stitute notice within the provisions of this article to a person who 
would otherwise be a holder in due course. 
(6) To be effective notice must be received at such time and in such 
manner as to give a reasonable opportunity to act on it. 
§ 28:3—305. Rights of a holder in due course 
To the extent that a holder is a holder in due course he takes the 
instrument free from 
(1) all claims to it on the part of any person; and 
(2) all defenses of any party to the instrument with whom the 
liolder has not dealt except 
(a) infancy, to the extent that it is a defense to a simple con-
tract; and 
(b) such other incapacity, or duress, or illegality of the trans-
action, as renders the obligation of the party a nullity; and 
(c) such misrepresentation as has induced the party to sign 
the instrument with neither knowledge nor reasonable opportunity 
to obtain knowledge of its character or its essential terms; and 
(d) discharge in insolvency proceedings; and 
(e) any other discharge of which the holder has notice when 
he takes the instrument. 
§ 28:3—306. Rights of one not holder in due course 
Unless he has the rights of a holder in due coui'se any pei*son takes 
the instrument subject to 
(a) all valid claims to it on the part of any person; and 
(b) all defenses of any party which would be available in an 
action on a simple contract; and 
(c) the defenses of want or failure of consideration, nonper-
formance of any condition precedent, nondelivery, or delivery 
for a special purpose (section 28:3—408) ; and 
(d) the defense that he or a person through whom he holds 
the instrument acquired it by theft, or that payment or satisfac-
tion to such holder would be inconsistent with the terms of a 
restrictive indorsement. 
The claim of any third person to the 
instrument is not otherwise available as a defense to any party 
liable thereon unless the third person himself defends the action 
for such party. 
§ 28:3—307. Burden of establishing signatures, defenses and due 
course 
(1) L^nlass specifically denied in tlie pleadings each signature on an 
instiiiment is admitted. 
When the effectiveness of a signature is put 
in issue 
682 
PUBLIC L
A
W 88-243-DEC. 30, 1963 
[77 STAT. 
(a) tlie burden of establishing it is on the party claiming under 
the signature; but 
(b) the signature is presumed to be genuine or authorized ex-
cept where the action is to enforce the obligation of a purported 
signer who has died or become incompetent before proof is 
required. 
(2) t\rhen signatures are admitted or established, production of the 
instrument entitles a holder to recover on it unless the defendant estab-
lishes a defense. 
(3) After it is shown that a defense exists a person claiming the 
rights of a holder in due coui-se has the burden of establishing that 
he or some person under whom he claims is in all respects a holder 
in due course. 
PART 4—LIABILITY OF PARTIES 
§28:3—401. Signature 
(1) No person is liable on an instrument unless his signature 
appears thereon. 
(2) A signature is made by use of any name, including any trade 
or assumed name, upon an instrument, or by any word or mark used 
in lieu of a written signature. 
§ 28:3—402. Signature in ambiguous capacity 
Unless the instrument clearly indicates that a signature is made 
in some other capacity it is an indorsement. 
§ 28:3—403. Signature by authorized representative 
(1) A signature may be made by an agent or other representative, 
and his authority to make it may be established as in other cases of 
representation. "No particular form of appointment is necessaiy to 
establish such authority. 
(2) An authorized representative who sigiis his own name to an 
instrument 
(a) is personally obligated if the instmment neither names 
the person represented nor shows that the representative signed 
in a representative capacity; 
(b) except as otherwise established between the immediate 
parties, is personally obligated if the instrument names the person 
represented but does not show that the representative signed in a 
representative capacity, or if the instrument does not name the 
person represented but does show that the representative signed 
in a representative capacity. 
(8) Except as otherwise established the name of an organization 
preceded or followed by the name and office of an authorized individ-
ual is a signature made in a representative capacity. 
§28:3—404. Unauthorized signatures 
(1) Any unauthorized si^ature is wholly inoperative as that 
of the person whose name is signed unless he ratifies it or is precluded 
from denying it; but it operates as the signature of the unauthorized 
signer in favor of any pei-son who in good faith pays the instrument or 
takes it for value. 
(2) Any unauthorized signature may be ratified for all purposes of 
(his article. Such ratification does not of itself affect any rights of 
the person ratifying against the actual signer. 
77 STAT. ] 
PUBLIC LAW 88'243-DEC. 30, 1963 
683 
§28:3—405. Impostors; signature in name of payee 
(1) An indorsement by any person in tlie name of a named payee 
is effective if 
(a) an imposter by use of the mails or otherwise has induced 
the maker or drawer to issue the instrument to him or his con-
federate in the name of the payee; or 
(b) a person signing as or on behalf of a maker or drawer 
intends the payee to have no interest in the instrument; or 
(c) an agent or employee of the maker or drawer has supplied 
him with the name of the payee intending the latter to have nb 
such interest. 
(2) Nothing in this section shall affect the criminal or civil liability 
of the person so indorsing. 
§ 28:3—406. Negligence contributing to alteration or unauthorized 
signature 
Any person who by his negligence substantially contributes to a 
material alteration of the instrument or to the making of an 
unauthorized signature is precluded from asserting the alteration or 
lack of authority against a holder in due course or against a drawee 
or other payor who pays the instrument in good faith and in 
accordance with the reasonable commercial standards of the drawee's 
or payor's business. 
§28:3—407. Alteration 
(1) Any alteration of an instrument is material which changes the 
contract of any pai-ty thereto in any respect, including any such 
change in 
(a) the number or relations of the parties; or 
(b) an incomplete instrument, by completing it otherwise than 
as authorized; or 
(c) the writing as signed, by adding to it or by removing any 
)art of it. 
(•' 
course 
(a) alteration by the holder which is both fraudulent and mate-
rial discharges any party whose contract is thereby changed unless 
that party assents or is precluded from asserting the defence; 
(b) no other alteration discharges any party and the instru-
ment may be enforced according to its original tenor, or as to 
incomplete instruments according to the authority given. 
(3) A subsequent holder in due course may in all cases enforce the 
instrument according to its original tenor, and when an incomplete 
instrument has been completed, he may enforce it as completed. 
§28:3—408. Consideration 
Want or failure of consideration is a defense as against any person 
not having the rights of a holder in due course (section 28:3—305), 
except that no consideration is necessaiy for an instrument or obliga-
tion thereon given in payment of or as security for an antecedent obli-
gation of any kind. 
Nothing in this section shall be taken to displace 
any statute outside this subtitle under which a promise is enforceable 
notwithstanding lack or failure of consideration. 
Partial failure of 
consideration is a defense pro tanto whether or not the failure is in an 
ascertained or liquidated amount. 
§28:3—409. Draft not an assignment 
(1) A check or other draft does not of itself operate as an assign-
ment of any funds in the hands of the drawee available for its pay-
ment, and the drawee is not liable on the instrument until he accepts it. 
(2) Nothing in this section shall affect any liability in contract, tort 
or otherwise arising from any letter of credit or other obligation or 
representation whicm is not an acceptance. 
part of it. 
['2) As against any person other than a subsequent holder in due 
684 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:3—410. Definition and operation of acceptance 
(1) Acceptance is the drawee's signed engagement to honor the 
draft as presented. 
It must be written on the draft, and may consist 
of his signature alone. It becomes operative when completed by deliv-
ery or notification. 
(2) A draft may be accepted although it has not been signed by 
the drawer or is otherwise incomplete or is overdue or has been 
dishonored. 
(3) Where the draft is payable at a fixed period after sight and 
the acceptor fails to date his acceptance the holder may complete it by 
supplying a date in good faith. 
§ 28:3—411. Certification of a check 
(1) Certification of a check is acceptance. Where a holder pro-
cures certification the drawer and all prior indorsers are discharged. 
(2) Unless otherwise agreed a bank has no obligation to certify a 
check. 
(3) A bank may certify a check before returning it for lack of 
proper indorsement. If it does so the drawer is discharged. 
§ 28:3—412. Acceptance varying draft 
(1) Where the drawee's proffered acceptance in any manner varies 
the draft as presented the holder may refuse the acceptance and treat 
the draft as dishonored in which case the drawee is entitled to have 
his acceptance cancelled. 
(2) The terms of the draft are not varied by an acceptance to pay 
at any particular bank or place in the United States, unless the 
acceptance states that the draft is to be paid only at such bank or 
place. 
(3) Where the holder assents to an acceptance varying the terms 
of the draft each drawer and indorser who does not affirmatively 
assent is discharged. 
§ 28:3—413. Contract of maker, drawer and acceptor 
(1) The maker or acceptor engages that he will pay the instrument 
according to its tenor at the time of his engagement or as completed 
pursuant to section 28:3—115 on incomplete instruments. 
(2) The drawer engages that upon dishonor of the draft and any 
necessary notice of dishonor or protest he will pay the amount of the 
draft to the holder or to any indorser who takes it up. The drawer 
may disclaim this liability by drawing without recourse. 
(3) By making, drawing or accepting the party admits as against 
all subsequent parties including the drawee the existence of the 
payee and his then capacity to indorse. 
§28:3—414. Contract of indorser; order of liability 
(1) Unless the indorsement otherwise specifies (as by such words 
as "without recourse") every indorser engages that upon dishonor and 
any necessary notice of dishonor and protest he will pay the instru-
ment according to its tenor at the time of his indorsement to the 
holder or to any subsequent indorser who takes it up, even though the 
indorser who takes it up was not obligated to do so. 
(2) Unless they otherwise agree indorsers are liable to one another 
in the order in which they indorse, which is presumed to be the order 
in which their signatures appear on the instrument. 
§ 28:3—415. Contract of accommodation party 
(1) An accommodation party is one who signs the instrument in 
any capacity for the purpose of lending his name to another party 
to it. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
685 
(2) Wlien the instrument lias been taken for value before it is due 
tlie acconnnodation party is liable in the capacity in which he has 
signed even thoug-h the taker knows of the accommodation. 
(3) As against a holder in due course and without notice of the 
accommodation oral proof of the accommodation is not admissible to 
gh-e the accommodation party the benefit of discharges dependent on 
his character as such. 
In other cases the accommodation character 
may be shown by oral proof. 
(4) An indorsement which shows that it is not in the chain of title 
is notice of its accommodation character. 
(5) An accommodation party is not liable to the party accommo-
dated, and if he pays the instrument has a right of recourse on the 
instrument against such party. 
§ 28:3—416. Contract of guarantor 
(1) "Payment guaranteed" or equivalent words added to a signa-
ture mean that the signer engages that if the instrument is not paid 
M-lien due he will pay it according to its tenor without resort by the 
holder to any other party. 
(2) "Collection guaranteed" or equivalent words added to a signa-
ture mean that the signer engages that if the instrument is not paid 
when due he will pay it according to its tenor, but only after the 
liolder has reduced his claim against the maker or acceptor to judgment 
and execution has been returned unsatisfied, or after the maker or 
acceptor has become insolvent or it is otherwise apparent that it is 
useless to proceed against him. 
(3) Words of guaranty which do not otherwise specify guarantee 
payment. 
(4) No words of guaranty added to the signature of a sole maker 
or acceptor affect his liability on the instrument. 
Such words added 
to the signature of one of two or more makers or acceptors create 
a presumption that the signature is for the accommodation of the 
others. 
(5) When words of guaranty are used presentment, notice of 
dishonor and protest are not necessary to charge the user. 
(6) Any guaranty written on the instrument is enforcible notwith-
standing any statute of frauds. 
§ 28:3—417. Warranties on presentment and transfer 
(1) Any person who obtains payment or acceptance and any prior 
t ransferor warrants to a person who in good faith pays or accepts that 
(a) he has a good title to the instrument or is authorized to 
obtain payment or acceptance on behalf of one who has a good 
title; and 
(b) he has no knowledge that the signature of the maker or 
drawer is unauthorized, except that this warranty is not given 
by a holder in due course acting in good faith 
(i) to a maker with respect to the maker's own signature; 
or 
(ii) to a drawer with respect to the drawer's own signature, 
whether or not the drawer is also the drawee; or 
(iii) to an acceptor of a draft if the holder in due course 
took the draft after the acceptance or dbtained the accept-
ance without knowledge that the drawer's signature was 
unauthorized; and 
(c) the instrument has not been materially altered, except that 
this warranty is not given by a holder in due course acting in 
good faith 
686 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
^i) to the maker of a note; or 
(ii) to the drawer of a draft whether or not the drawer is 
also the drawee; or 
(iii) to the acceptor of a draft with respect to an altera-
tion made prior to the acceptance if the holder in due 
course took the draft after the acceptance, even though the 
acceptance provided "payable as originally drawn" or equiv-
alent terms; or 
(iv) to the acceptor of a draft with respect to an altera-
tion made after the acceptance. 
(2) Any person who transfei-s an instrument and receives con-
sideration warrants to his ti'ansferee and if the transfer is by indorse-
ment to any subsequent holder who takes the instrument in good faith 
that 
(a) he has a good title to the instrument or is authorized to 
obtain payment or acceptance on behalf of one who has a good 
title and the transfer is otherwise rightful; and 
^b) all signatures are genuine or authorized; and 
(c) the instrument has not been materially altered; and 
(d) no defense of any party is good against him; and 
(e) he has no knowledge of any insoh'^ency proceeding insti-
tuted with respect to the maker or acceptor or the drawer of an 
unaccepted instrument. 
(3) By transferring "without recouree" the transferor limits the 
obligation stated in subsection (2)(d) to a warranty that he has no 
knowledge of such a defense. 
(4) A selling agent or broker who does not disclose the fact that he 
is acting only as such gives the warranties provided in this section, 
but if he makes such disclosure warrants only his good faith and 
authority. 
§28:3—418. Finality of payment or acceptance 
Except for recovery of bank payments as provided in the article on 
bank deposits and collections (article 4) and except for liability for 
breach of warranty on presentment under the preceding section, pay-
ment or acceptance of any instrument is final in favor of a holder m 
due course, or a person who has in good faith changed his position in 
reliance on the payment. 
§ 28:3—119. Conversion of instrument; innocent representative 
(1) An instrument is converted when 
(a) a drawee to whom it is delivered for acceptance refuses to 
return it on demand; or 
(b) any person to whom it is delivered for payment refuses on 
demand either to pay or to return it; or 
(c) it is paid on a forged indorsement. 
(2) In an action against a drawee under subsection (1) the measure 
of the drawee's liability is the face amount of the instrument. In any 
other action under subsection (1) the measure of liability is presumed 
to be the face amount of the instrument. 
(3) Subject to the provisions of this subtitle concerning restrictive 
indorsements a representative, including a depositary or collecting 
bank, who has a good faith and in accordance with the reasonable 
commercial standards applicable to the business of such representa-
tive dealt with an instrument or its proceeds on behalf of one who was 
not the true owner is not liable in conversion or otherwise to the true 
owner beyond the amount of any proceeds remaining in his hands. 
(4) An intermediary bank or payor bank which is not a depositary 
bank is not liable in conversion solely by reason of the fact that 
proceeds of an item indorsed restrictively (sections 28:3—205 and 
28:3—206) are not paid or applied consistently with the restrictive 
indorsement of an indorser other than its immediate transferor. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
687 
PART 5—PRESENTMENT, NOTICE OF DISHONOR AND 
PROTEST 
§28:3—501. When presentment, notice of dishonor, and protest 
necessary or permissible 
(1) Unless excused (section 28:8—511) presentment is necessary 
to charge secondaiy parties as follows: 
(a) presentment for acceptance is necessary to charge the 
drawer and indorsers of a draft where the draft so provides, or is 
payable elsewhere that at the residence or place of business of 
the drawee, or its date of payment depends upon such present-
ment. The holder may at his option present for acceptance any 
other draft payable at a stated date; 
(b) presentment for payment is necessary to charge any 
indorser; 
(c) in the case of any drawer, the acceptor of a draft payable 
at a bank or the maker of a note payable at a bank, presentment 
for payment is necessary, but failure to make presentment dis-
charges such drawer, acceptor or maker only as stated in section 
28:3—502(1) (b). 
(2) Unless excused (section 28:3—511) 
(a) notice of any dishonor is necessary to charge any indorser; 
(b) in the case of any drawer, the acceptor of a draft payable 
at a bank or the maker of a note payable at a bank, notice of any 
dishonor is necessary, but failure to give such notice discharges 
such drawer, acceptor or maker only as stated in section 28:3—502 
(l)"(b). 
(3) Unless excused (section 28:3—511) protest of any dishonor is 
necessary to charge the drawer and indorsers of any draft which on 
its face appears to be drawn or payable outside of the states and ter-
ritories of the United States and the District. 
The holder may at 
his option make protest of any dishonor of any other instrument 
and in the case of a foreign draft may on insolvency of the acceptor 
before maturity make protest for better security. 
(4) Notwitfistanding any provision of this section, neither pre-
sentment nor notice of dishonor nor protest is necessary to charge an 
indorser who has indorsed an instrument after maturity. 
§ 28:3—502. Unexcused delay; discharge 
(1) Where without excuse any necessary presentment or notice of 
dishonor is delated beyond the time when it is due 
(a) any indorser is discharged; and 
(b) any draw^er or the acceptor of a draft payable at a bank 
or the maker of a note j)ayable at a bank who because the drawee 
or payor bank becomes insolvent during the delay is deprived of 
funds maintained with the drawee or payor bank to cover the 
instrument may discharge his liability by written assignment to 
the holder of his rights against the drawee or payor bank in 
respect of such funds, but such drawer, acceptor or maker is not 
otherwise discharged. 
(2) Where without excuse a necessary protest is delayed beyond 
the time when it is due any drawer or indorser is discharged. 
§28:3—503. Time of presentment 
(1) Unless a different time is expressed in the instrument the time 
for any presentment is determined as follows: 
(a) where an instrument is payable at or a fixed period after 
a stated date sm^ presentment for acceptance must be made on or 
before the date it is payable; 
688 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(b) where an instrument is payable after sight it must either 
be presented for acceptance or negotiated within a reasonable 
time after date or issue whichever is later; 
(c) where an instrument shows the date on which it is payable 
presentment for payment is due on that date; 
(d) where an instrument is accelerated presentment for pay-
ment is due within a reasonable time after the acceleration; 
(e) with respect to the liability of any secondary party pre-
sentment for acceptance or payment of any other instrument is 
due within a reasonable time after such party becomes liable 
thereon. 
(2) A reasonable time for presentment is determined by the nature 
of the instrument, any usage of banking or trade and the facts of 
the particular case. In the case of an uncertified check which is drawn 
and payable within the United States and which is not a draft drawn 
by a bank the following are presumed to be reasonable periods within 
which to present for payment or to initiate bank collection: 
(a) with respect to the liability of the drawer, thirty days after 
date or issue whichever is later; and 
• 
(b) with respect to the liability of an indorser, seven days after 
his indorsement. 
(3) Where any presentment is due on a day which is not a full 
business day for either the person making presentment or the party 
to pay or accept, presentment is due on the next following day which 
is a full business day for both parties. 
(4) Presentment to be sufficient must be made at a reasonable hour, 
and if at a bank during its banking day. 
§ 28:3—504. How presentment made 
(1) Presentment is a demand for acceptance or payment made upon 
the maker, acceptor, drawee or other payor by or on behalf of the 
holder. 
(2) Presentment may be made 
(a) by mail, in which event the time of presentment is deter-
mined by the time of receipt of the mail; or 
(b) through a clearing house; or 
(c) at the place of acceptance or payment specified in the 
instrument or if there be none at the place of business or residence 
of the party to accept or pay. 
If neither the party to accept or 
pay nor anyone authorized to act for him is present or accessible 
at such place presentment is excused. 
(3) It may be made 
(a) to any one of two or more makers, acceptors, drawees or 
other payors; or 
(b) to any person who has authority to make or refuse the 
acceptance or payment. 
(4) A draft accepted or a note made payable at a ]y'Ank in the 
United States must be presented at such bank. 
(5) In the cases described in section 28:4—210 Presentment may 
be made in the manner and with the result stated in that section. 
§ 28:3—505. Rights of party to whom presentment is made 
(1) The party to whom presentment is made may without dis-
honor require 
(a) exhibition of the instrument; and 
(b) reasonable identification of the person making present-
ment and evidence of his authority to make it if made for 
another; and 
(c) that the instrument be produced for acceptance or pay-
ment at a place specified in it, or if there be none at any place 
reasonable in the circumstances; and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
689 
(d) a signed receipt on the instrument for any partial or 
full payment and its surrender upon full payment. 
(2) Failure to comply with any such requirement invalidates 
the presentment but the person presenting has a reasonable time 
in which to comply and the time for acceptance or payment nuis 
from the time of compliance. 
§ 28:3—506. Time allowed for acceptance or payment 
(1) Acceptance may be deferred without dishonor until the close 
of the next business day following presentment. 
The holder may 
also in a good faith effort to obtam acceptance and without either 
dishonor of the instrument or discharge of secondary parties allow 
postponement of acceptance for an additional business day. 
(2) Except as a longer time is allowed in the case of documentary 
drafts drawn under a letter of credit, and unless an earlier time is 
agreed to by the party to pay, payment of an instrument may be 
deferred without dishonor pending reasonable examination to deter-
mine whether it is properly payable, but payment must be made 
in any event before the close of business on the day of presentment. 
§28:3—507. Dishonor; holder's right of recourse; term allowing 
re-presentment 
(1) An instrument is dishonored when 
(a) a necessary or optional presentment is duly made and 
due acceptance or payment is refused or cannot be obtained 
within the prescribed time or in case of bank collections the 
instrument is seasonably I'eturned by the midnight deadline 
(section 28:4—301); or 
(b) presentment is excused and the instrument is not duly 
accepted or paid. 
(2) Subject to any necessary notice of dishonor and protest, the 
holder has upon dishonor an immediate right of recourse against the 
drawere and indorsers. 
(3) Return of an instrument for lack of proper indorsement is not 
dishonor. 
(4) A term in a draft or an indorsement thereof allowing a stated 
time for i-e-presentment in the event of any dishonor of the draft by 
iionacce]3tance if a time draft or by nonpayment if a sight draft gives 
the holder as against any secondary party bound by the terai an 
option to waive the dishonor without affecting the liability of the 
secondary pai"ty and he may present again up to the end of the stated 
time. 
§28:3—508. Notice of dishonor 
(1) Notice of dishonor may be given to any person who may be 
liable on the instrument by or on behalf of the holder or any party 
who has himself received notice, or any other party who can be com-
pelled to pay the instrument. 
In addition an agent or bank in whose 
liands the instrument is dishonored may give notice to his principal or 
customer or to another agent or bank from which the instrument was 
received. 
(2) Any necessary notice nmst be given by a bank before its mid-
night deadline and by any other person before midnight of the third 
business day after dislionor or receipt of notice of dishonor. 
(3) Notice may be given in any reasonable manner. 
It may be 
oral or written and in any terms which identify the instrument and 
state that it has been dishonored. 
A misdescription which does not 
mislead the party notified does not vitiate the notice. Sending the 
instrument bearing a stamp, ticket or writing stating that acceptance 
or payment has been refused or sending a notice of debit with respect 
to the instrument is sufficient. 
93-025 0-64-46 
690 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(4) "Written notice is jjiven when sent althougli it is not received. 
(5) Xotice to one piii-tner is notice to each although the firm has 
been dissolved. 
(fi) Whenanypai-ty is in insolvency proceedings instituted after the 
issue of the instrument notice may be given either to the party or to the 
I'epresentative of his estate. 
(7) When any paity is dead or incompetent notice may be sent to 
his last known address or given to his personal repi'eseiitative. 
(8) Xotice operates for the benefit of all parties who have rights on 
the instrument against the party notified. 
§ 28:3—509. Protest; noting for protest 
(1) A protest is a certificate of dishonor made under the hand and 
seal of a United ^tates consul or vice consul or a notaiy public or 
other pei*son authorized to cei-tify dishonor by the law of the place 
vyhere dishonor occurs. It may be made upon information satis-
factory to such pei*son. 
(2) The protest must identify the instrument and certify either 
that due presentment has been made or the i*eason why it is excuse<l 
and that the instrument has been dishonored by nonacceptance or 
nonpayment. 
(3) The protest may also certify that notice of dishonor has been 
given to all parties or to specified parties. 
(•4) Subject to subsection (5) any necessary protest is due by the 
time that notice of dishonor is due. 
(5) If, before protest is due, an instrument has been noted for 
protest by the officer to make protest, the protest may be made at any 
time thereafter as of the date of the noting. 
§ 28:3—510. Evidence of dishonor and notice of dishonor 
The following are admissible as evidence and create a presumption 
of dishonor and of any notice of dishonor therein shown: 
(a) a document regular in form as provided in the preceding 
section which purports to be a pi*otest; 
(b) the purported stamp or writing of the drawee, payor bank 
or presenting bank on the instrument or accompanying it stating 
that acceptance or payment has been refused for reasons consistent 
with dishonor; 
(c) any book or record of the drawee, payor bank, or any 
collecting bank kept in the usual course of business which shows 
dishonor, even though there is no evidence of who made the entry. 
§28:3—511. Waived or excused presentment, protest or notice of 
dishonor or delay therein 
(1) Delay in presentment, protest or notice of dishonor is excused 
when the party is without notice that it is due or when the delay is 
caused by circumstances beyond his control and he exercises reason-
able diligence after the cause of the delay ceases to operate. 
(2) Presentment or notice or protest as the case may be is entirely 
excused when 
(a) the party to be charged has waived it expressly or by" 
implication either before or after it is due; or 
(b) such party has himself dishonored the instrument or has 
countermanded payment or otherwise has no reason to expect or 
right to require that the instrument be accepted or paid; or 
(c) by reasonable diligence the presentment or protest cannot 
be made or the notice given. 
(3) Presentment is also entirely excused when 
(a) the maker, acceptor or drawee of any instrument excej)t 
a documentary draft is dead or in insolvency proceedings insti-
tuted after the issue of the instrument; or 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
691 
(b) Rcceptance or payment is refused but not for want of 
proper presentment. 
(4) Where a draft has been dishonored by nonacceptance a later 
presentment for payment and an^ notice of dishonor and jjrotest for 
nonpayment are excused unless m the meantime the instrument has 
been accepted. 
(5) A waiver of protest is also a waiver of presentment and of 
notice of dishonor even though protest is not required. 
(6) Where a waiver of presentment or notice or protest is embodied 
in the instrument itself it is binding upon all parties; but where it is 
written above the signature of an indorser it binds him only. 
PART 6—DISCHARGE 
§28:3—601. Discharge of parties 
(1) The extent of the discharge of any party from liability on an 
instrument is governed by the sections on 
(a) payment or satisfaction (section 28:3—603); or 
(b) tender of payment (section 28:3—604); or 
(c) cancellation or renunciation (section 28:3—605); or 
(d) impairment of right of recourse or of collateral (section 
28:3—606); or 
(e) reacquisition of the instrument by a prior party (section 
28:3—208); or 
(f) fraudulent and material alteration (section 28:3—407); or 
(g) certification of a check (section 28:3-—411); or 
(h) acceptance varying a draft (section 28:3—412); or 
(i) unexcused delay in presentment or notice of dishonor or 
protest (section 28:3—502). 
(2) Any party is also discharged from his liability on an instrument 
to another party by any other act or agreement with such party which 
would discharge his simple contract for the payment of money. 
(3) The liability of all parties is discharged when any party who 
has himself no right of action or recourse on the instrument 
(a) reaccfuires the instrument in his own right; or 
(b) is discharged under any provision of this article except 
as otherwise provided with respect to discharge for impairment 
of recourse or of collateral (section 28:3—606). 
§ 28:3—602. Effect of discharge against holder in due course 
Xo discharge of any party provided by this article is effective 
against a subsequent holder in due course unless he has notice thereof 
Avhen he takes the instrument. 
§ 28:3—603. Payment or satisfaction 
(1) The liability of any party is discharged to the extent of his 
payment or satisfaction to the holder even though it is made with 
knowledge of a claim of another person to the instniment unless prior 
to such payment or satisfaction the person making the claim either 
supplies indemnity deemed adequate by the party seeking the 
discharge or enjoins payment or satisfaction by order of a court of 
competent jurisdiction in an action in w^hich the adverse claimant 
and the holder are parties. This subsection does not, however, result 
in the discharge of the liability 
(a) of a party who in bad faith pays or satisfies a holder 
who acquirea the instrument by theft or who (unless having the 
rights.of a holder in due course) holds through one who so 
acquired it; or 
(b) of a party (other than an intermediary bank or a payor 
bank which is not a depositary bank) who pays or satisfies xhe 
692 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
liolder of nn instnimeiit wliicli has been restrictively indorsed in 
a manner not consistent Avitli the terms of sucli restrictiv^e indorse-
ment, 
(2) Payment or satisfaction may be made witli tlie consent of the 
liolder by any person including a stranger to the instrument. 
Sur-
render of the instrument to such a person gives him the rights of a 
transferee (section 28:8—201). 
§28:3—604. Tender of payment 
(1) An}^ party making tender of full payment to a holder when 
or after it is due is discharged to the extent of all subsequent liability 
for interest, costs, and attorney's fees. 
(2) The holder's refusal of such tender wholly discharges any party 
who has a right of recourse against the party making the tender. 
(3) Where the maker or acceptor of an instrument payable other-
wise than on demand is able and ready to pay at every place of 
payment specified in the instrument when it is due, it is equivalent 
to tender. 
§ 28:3—605. Cancellation and renunciation 
(1) The holder of an instrument may even without consideration 
discharge any party 
(a) in any manner apparent on the face of the instrument or 
the indorsement, as by intentionally cancelling the instrument or 
the party's signature by destruction or mutilation, or by striking 
out the party's signature; or 
(b) by renouncing his rights by a writing signed and delivered 
or by surrender of the instrument to the party to be discharged. 
(2) Neither cancellation nor renunciation without surrender of 
the instrument affects the title thereto. 
§ 28:3—606. Impairment of recourse or of collateral 
(1) The holder discharges any party to the instrument to the extent 
that without such party's consent the holder 
(a) without express reservation of rights releases or agrees not 
to sue any person against whom the party has to the knowledge 
of the holder a right of recourse or agrees to suspend the right 
to enforce against such person the instrument or collateral or 
otherwise discharges such person, except that failure or delay in 
effecting any required presentment, protest or notice of dishonor 
with respect to any such person does not discharge any party as 
to whom presentment, protest or notice of dishonor is effective 
or unnecessary; or 
(b) unjustifiably impairs any collateral for the instrument 
given by or on behalf of the party or any person against w^hom 
he has a right of recourse. 
(2) By express reservation of rights against a party with a right of 
recourse the holder preserves 
(a) all his rights against such party as of the time when the 
instrument was originally due; and 
(b) the right of the party to pay the instrument as of that 
time; and 
(c) all rights of such party to recourse against others. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
693 
PART 7—ADVICE OF INTERNATIONAL SIGHT DRAFT 
§ 28:3—701. Letter of advice of international sight draft 
(1) A '"letter of advice" is a drawer's coniniiinifatioii to tlie drawee 
that a described draft has been drawn. 
(2) Unless otherwise agreed when a bank recei\es from another 
bank a letter of advice of an international sight draft the drawee 
bank may immediately debit the drawer's account and stop the rmi-
ning of interest pro tanto. 
Such a debit and any resulting credit to 
any account covering outstanding drafts leaves in the drawer full 
power to stop payment or otherwise dispose of the amount and creates 
no trust or interest in favor of the holder. 
(3) Unless otherwise agreed and except where a draft is drawn 
under a credit issued by the drawee, the drawee of an international 
s'ght draft owes the drawer no duty to pay an unadvised draft but if 
it does so and the draft is genuine, may appropriately debit the draw-
er's account. 
PART 8—MISCELLANEOUS 
§ 28:3—801. Drafts in a set 
(1) Where a draft is drawn in a set of parts, each of which is num-
bered and expressed to be an order only if no other part has been 
honored, the whole of the parts constitutes one draft but a taker of 
any part may become a holder in due course of the draft. 
(2) Any person who negotiates, indorses or accepts a single part 
of a draft drawn in a set thereby becomes liable to any holder in due 
course of that part as if it were the whole set, but as between different 
holders in due course to whom different parts have been negotiated 
the holder whose title first accrues has all rights to the draft and its 
proceeds. 
(3) As against the drawee the first presented part of a draft drawn 
in a set is the part entitled to payment, or if a time draft to acceptance 
and payment. Acceptance of any subsequently presented part rendei*s 
the drawee liable thereon under subsection (2). With respect both to 
a holder and to the drawer payment of a subsequently presented part 
of a draft payable at sight has the same effect as payment of a check 
notwithstandmg an effective stop order (section 28:4—407). 
(4) Except as otherwise provided in this section, where any part 
of a draft in a set is discharged by payment or otherwise the w^hole 
draft is discharged. 
§28:3—802. Effect of instrument on obligation for which it is 
given 
(1) Unless otherwise agreed where an instrument is taken for an 
underlying obligation 
(a) the ooligation is pro tanto discharged if a bank is drawer, 
maker or acceptor of the instrument and there is no recourse on 
the instrument against the underlying obligor; and 
(b) in any other case the obligation is suspended pro tanto 
until the instrument is due or if it is payable on demand until 
its presentment. 
If the instrument is dishonored action may 
be maintained on either the instrument or the obligation; dis-
charge of the underlying obligor on the instrument also discharges 
him on the obligation. 
(2) The taking in good faith of a check which is not postdated does 
not of itself so extend the time on the original obligation as to dis-
charge a surety. 
694 
PUBLIC LAW88-243-D1EC. 30, 1963 
[77 STAT. 
§28:3—803. Notice to third party 
Where a defendant is sued for breach of an obligation for which 
a third person is answerable over under this article he may give the 
third person written notice of the litigation, and the person notified 
may then give similar notice to any other person who is answerable 
over to him under this article. 
If the notice states that the person 
notified may come in and defend and that if the person notified does 
not do so he wull in any action against him by the person giving the 
notice be bound by any determination of fact common to the two 
litigations, then unless after seasonable receipt of the notice the person 
notified does come in and defend he is so bound. 
§ 28:3—804. Lost, destroyed or stolen instruments 
The owner of an instrument which is lost, whether by destruction, 
theft or otherwise, may maintain an action in his own name and 
recover from any party liable thereon upon due proof of his owner-
ship, the facts which prevent his production of the. instrument and 
its terms. The court may require security indemnifying the defendant 
against loss by reason of further claims on the instrument. 
§ 28:3—805. Instruments not payable to order or to bearer 
This article applies to any instrument whose terms do not preclude 
transfer and which is otherwise negotiable within this article but 
which is not payable to order or to hearer, except that there can be 
no holder in due course of such an instrument. 
ARTICLE 4—BANK DEPOSITS AND 
COLLECTIONS 
PAET 1—GENERAL PEOVISIONS AXD DEFINITIONS 
Sec. 
28:4—101. Short title. 
28:4—102. Applicability. 
28:4—103. Variation by agreement; measure of damages; certain action con-
stituting ordinary dare. 
28:4—104. Definitions and index of definitions. 
28:4—105. "Depositary bank"; intermediary bank"; "collecting bank"; "payor 
bank"; "presenting bank"; "remitting bank". 
28:4—106. Separate oflSce of a bank. 
28:4—107. Time of receipt of items. 
28:4—108. Delays. 
28:4—109. Process of posting. 
PART 2—^COLLECTION OF ITEMS : DEPOSITARY AND COLLECTING BANKS 
28:4—^201. Presumption and duration of agency status of collecting banks and 
provisional status of credits; applicability of article; item indorsed 
"pay any bank". 
28:4—202. Responsibility for collection; when action seasonable. 
28:4—203. Effe,ct of instructions. 
28:4—^204. Methods of sending and presenting; sending direct to payor bank.. 
, 28:4—^205. Supplying missing indorsement; no notice from prior indorsement. 
28:4—^206. Transfer between banks. 
28:4—207. Warranties of customer and collecting bank on transfer or present-
ment of items; time for claims. 
28:4—^208. Security interest of collecting bank in items, accompanying docu-
ments and proceeds. 
28:4—^209. When bank gives value for purposes of holder in due course. 
28:4—^210. Presentment by notice of item not payable by, through or at a bank; 
liability of secondary parties. 
28:4—^211. Media of remittance; provisional and final settlement in remittance 
cases. 
28:4—212. Right of charge-back or refund. 
28:4—^213. Final payment of item by payor bank; when provisional debits and 
credits become final; when certain credits become available for 
withdrawal. 
28:4—^214. Insolvency and preference. 
[77 STAT. 
PUBLIC L
A
W 88-243-DEC. 30, 1963 
695 
ARTICLE 4—BANK DEPOSITS AND 
COLLECTIONS—Continued 
PAUT 3—COM-ECTION Of ITEMS : PAYOR BANKS 
See. 
28:4—801. Deferred posting; recovery of paj'iuent by return of iteui.><; time of 
dishonor. 
2S :4—302. Payor banlc's responsibility for late return of item. 
28:-l—303. When items subject to notice, stop-order, legal process or setoff; 
order in which items may be charged or certified. 
PART 4—RELATION SHIP BETWEEN PAYOR BANK AND ITS CUSTOMER 
28:4—401. When bank may charge customer's account. 
28:4—402. Bank's liability to customer for wrongful dishonor. 
28:4—403. Customer's right to stop payment; burden of proof of loss. 
28:4—404. Bank not obligated to pay check more than six months old. 
28:4—405. Death or incompetence of customer. 
28:4—406. Customer's duty to discover and report unauthorized signaifurc or 
alteration. 
28:4—407. Payor bank's right to subrogation on improper payment. 
PART .'»—COIXECTION OF DOCUMENTARY DHAETS 
28:4—501. Handling of documentary drafts; duty to send for presentment and 
to notify customer of dishonor. 
28:4—502. Presentment of "on arrival" drafts. 
28:4—503. Responsibility of presenting bank for documents and goods; report 
of reasons for dishonor; referee in ease of need. 
28:4—504. Privilege of presenting bank to deal with goodi; security interest 
for expe;ises. 
PART 1—GENERAL PROVISIONS AND DEFINITIONS 
§28:4—lOL Short title 
This article shall be known and may be cited as Uniform Commercial 
Code—Bank Deposits and Collections. 
§28:4—102. Applicability 
(1) To the extent that items within this article are also within the 
scope of articles 3 and 8, the'y are subject to the provisions of those 
articles. In the event of conflict the provisions of this article govei-n 
those of article 3 but the provisions of article 8 govern those of this 
article. 
(2) The liability of a bank for action or non-action with respect to 
any item handled by it for purposes of presentment, payment or col-
lection is governed oy the law of the place where the oank is located. 
In the case of action or non-action by or at a branch or separate office 
of a bank, its liability is governed by the law of the place where the 
branch or separate office is located. 
§28:4—103. Variation by agreement; measure of damages; cer-
tain action constituting ordinary care 
(1) The effect of the provisions of this article may be varied by 
agreement except that no agreement can disclaim a bank's responsi-
bility for its own lack of good faith or failure to exercise ordinary care 
or can limit the measure of damages for such lack or failure: but the 
parties may by agreement determine the standards by which such 
responsibility is to be measured if such standards are not manifestly 
unreasonable. 
(2) Federal Reserve regulations and operating letters, clearing 
liouse rules, and the like, have the effect of agreements under sub-
section (1), whether or not specifically assented to by all parties 
interested in items handled. 
Citation of ar-
ticle. 
696 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(3) Action or non-action approved by this article or pui'siiant to 
Federal Reserve regulations or operating letters constitutes the exer-
cise of ordinary care and, in the absence of special instructions, action 
or non-action consistent with clearing house rules and the like or with 
a general banking usage not disapproved by this article, prima facie 
constitutes the exercise of ordinary care. 
(•i) The specification or approval of certain pr(X'edures by this 
article does not constitute disapproval of other procedures which may 
be reasonable under the circumstances. 
(5) The measure of damages for failure to exercise ordinary care 
in handling an item is the amount of the item reduced by an amount 
which could not have been realized by the use of ordinary care, and 
where there is bad faith it includes other damages, if any/suffered by 
the party as a proximate consequence, 
§ 28:4—104. Definitions and index of definitions 
(1) In this ai-ficle unless the context otherwise requires 
(a) "Account" means any account with a bank and includes 
a checking, time, interest or savings account; 
(b) "Afternoon" means the period of a day between noon and 
midnight; 
(c) "Banking day*' means that part of any day on which a 
bank is open to the public for carrying on substantially all of 
its banking functions; 
(d) "Clearing house" means any association of banks or other 
payors regularly clearing items; 
(e) "Customer"' means any person having an account with 
a bank or for whom a bank has agreed to collect items and 
includes a bank carrying an account with another bank; 
(f) "Documentary draft" means any negotiable or nonnego-
tiable draft with accompanying documents, securities or other 
papers to be delivered against honor of the draft; 
(g) "Item" means any instrument for the payment of money 
even though it is not negotiable but does not include money; 
(h) "Midnight deadline" with respect to a bank is midnight 
on its next banking day following the banking day on which it 
receives the relevant item or notice or from which the time for 
taking action commences to run, whichever is later; 
(i) "Properly payable" includes the availability of funds 
for payment at the time of decision to pay or dishonor; 
(j) "Settle" means to pay in cash, by clearing house settle-
ment, in a charge or credit or by remittance, or otherwise as 
instructed. 
A settlement may be either provisional or final; 
(k) "Suspends payments" with respect to a bank means that 
it has been closed by order of the supervisory authorities, that 
a public officer has been appointed to take it over or that it 
ceases or refuses to make payments in the ordinary course of 
business. 
(2) Other definitions applying to this article and the sections in 
which they appear are: 
"Collecting bank". Section 28:4—105. 
"Depositary bank". Section 28:4—105. 
"Intermediary bank". Section 28:4—105. 
"Payor bank". Section 28:4^105. 
"Presenting bank". Section 28:4—105. 
"Remitting bank". Section 28:4^105. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
697 
(3) The following definitions in other articles apply to this article: 
"Acceptance", Section 28:3—410. 
"Certificate of deposit". 
Section 28:3—lOi. 
"Certification". 
Section 28:3—411. 
"Check". 
Section 28:3—104. 
"Draft". 
Section 28:3—104. 
"Holder in due course". 
Section 28:3—302. 
"Notice of dishonor". 
Section 28:3—508. 
"Presentment". 
Section 28:3—504. 
"Protest". 
Section 28:3—509. 
"Secondary party". 
Section 28:3—102. 
(4) In addition article 1 contains general definitions and principles 
Of construction and interpretation applicable throughout this article. 
§28:4—105. "Depositary bank"; "intermediary bank"; "collect-
ing bank"; "payor bank"; "presenting bank"; 
"remitting bank" 
In this article unless the context otherwise requires: 
(a) "Depositary bank" means the first bank to which an it/em 
is transferred for collection even though it is also the payor bank: 
(b) "Payor bank" means a bank by which an item is payable 
as drawn or accepted; 
(c) "Intermediary bank" means any bank to which an item 
is transferred in course of collection except the depositary or 
payor bank; 
(d) "Collecting bank" means any bank handling the item for 
collection except the payor bank; 
(e) "Presenting bank" means any bank presenting an item 
except a payor bank; 
(f) "Remitting bank" means any payor or intennediary bank 
remitting for an item. 
§ 28:4—106. Separate office of a bank 
A branch or separate office of a bank is a sei)ai'ate bank foi* the pur-
pose of computing the time within which and determining the place 
at or to which action may be taken or notices or orders shall be given 
under this article and under article 3. The receipt of any notice or 
order by or the knowledge of one branch or separate office of a bank 
is not actual or constructive notice to or knowledge of any other branch 
or office of the same bank and does not impair the right of another 
branch or office to be a holder in due course of an item. 
§28:4—107. Time of receipt of items 
(1) For the purpose of allowing time to process items, prove bal-
ances and make the necessary entries on its books to determine its 
position for the day, a bank may fix an afternoon hour of two P.M. 
or later as a cut-off hour for the handling of money and items and the 
making of entries on its books. 
(2) Any item or deposit of money received on any day after a cut-
off hour so fixed or after the close of the banking day may be treated 
as being received at the openinjg of the next banking day. 
§28:4—108. Delays 
(1) Unless otherwise instructed, a collecting bank in a good faith 
effort to secure payment may, in the case of specific items and with or 
without the approval of any person involved, waive, modify or extend 
time limits imposed or permitted by this subtitle for a period not in 
excess of an additional banking day without discharge of secondary 
parties and without liability to its transferor or any prior party. 
(2) Delay by a collecting bank or payor bank beyond time limits 
prescribed or permitted by this subtitle or by instructions is excused if 
698 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
caused by interruption of communication facilities, suspension of pay-
ments by another bank, war, emergency conditions or other circum-
stances beyond the control of the bank provided it exercises such 
diligence as the circumstances require. 
§ 28:4—109. Process of posting 
The "process of posting" means the usual procedure followed by a 
payor bank in determining to pay an item and in recording tlie pay-
ment including one or more of the following or other steps as deter-
mined by the bank: 
(a) verification of any signature; 
(b) ascertaining that sufficient funds are available; 
(c) affixing a "paid" or other stamp; 
(d) entering a charge or entry to a custxDmer's account; 
(e) correcting or reversing an entry or erroneous action with 
respect to the item. 
PART 2—COLLECTION OF ITEMS: DEPOSITARY AND 
COLLECTING BANKS 
§28;4—^201. Presumption and duration of agency status of col-
lecting banks and provisional status of credits; 
applicability of article; item indorsed **pay any 
bank" 
(1) Unless a contrary intent clearly appears and prior to the time 
that a settlement given by a collecting bank for an item is or becomes 
final (subsection (3) of section 28:4-—211 and sections 28:4—212 and 
28:4—213) the bank is an agent or sub-agent of the owner of the item 
and any settlement given for the item is provisional. 
This provision 
applies regardless of the form of indorsement or lack of indorsement 
and even though credit given for the item is subject to immediate 
withdrawal as of right or is in fact withdrawn; but the continuance 
of ownership of an item by its owner and any rights of the owner 
to proceeds of the item are subject to rights of a collecting bank such 
as those resulting from outstanding advances on the item and valid 
rights of setoff. "V\Tien an item is handled by banks for purposes of 
presentment, payment and collection, the relevant provisions of this 
article apply even though action of parties clearly establishes that a 
particular bank has purchased the item and is the owner of it. 
(2) After an item has been indorsed with the w^ords "pay any 
bank" or the like, only a bank may acquire the rights of a holder 
(a) until the item has been returned to the customer initiating 
collection; or 
(b) until the item has been specially indorsed by a bank to a 
person who is not a bank. 
§ 28:4—^202. Responsibility for collection; when action seasonable 
(1) A collecting bank must use ordinary care in 
(a) presenting an item or sending it for presentment; and 
(b) sending notice of dishonor or non-payment or returning 
an item other than a documentary draft to the bank's transferor 
or directly to the depositary bank under subsection (2) of section 
28:4—212 after learning that the item has not been paid or 
accepted, as the case may be; and 
(c) settling for an item when the bank receives final settlement; 
and 
(d) making or providing for any necessaiy protest; and 
(e) notifying its transferor of any loss or delay in transit 
within a reasonable time after discovery thereof. 
(2) A collecting bank taking proper action before its midnight 
deadline following receipt of an item, notice or payment acts season-
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
699 
ably; taking proper action Avithin a reasonably longer time may be 
seasonable but the bank has the burden of so establishing. 
(3) Subject to subsection (l)(a), a bank is not liable for the 
insolvency, neglect, misconduct, mistake or default of another bank 
or person or for loss or destruction of an item in transit or in the 
])ossession of others. 
§ 28:4—203. Effect of instructions 
Subject to the provisions of article 3 concerning conversion of instru-
ments (section 28:3—419) and the provisions of both article 3 and 
(his article concerning restrictive indorsements only a collecting bank's 
transferor can give instructions which affect the bank or constitute 
notice to it and a collecting bank is not liable to prior parties for any 
action taken pursuant to such instructions or in accordance with any 
agreement with its transferor. 
§28:4—204. Methods of sending and presenting; sending direct 
to payor bank 
(1) A collecting bank must send items by reasonably prompt 
method taking into consideration any relevant instnictions, the nature 
of the item, the number of such items on hand, and the cost of collec-
tion involved and the method generally used by it or others to present 
such items. 
(2) A collectiiig bank may send 
(a) any item direct to the payor bank; 
(b) any item to any non-bank payor if authorized by its trans-
feror; and 
(c) any item other than documentary drafts to any non-bank 
payor, if authorized by Federal Reserve regulation or operating 
letter, clearing house rule or the like. 
(3) Presentment may be made by a presenting bank at a place where 
the payor bank has requested that presentment be nuide. 
§ 28:4—^205. Supplying missing indorsement; no notice from prior 
indorsement 
(1) A depositary bank which has taken an item for collection may 
supply any indorsement of the customer which is necessary to title 
unless the item contains the words "payee's indorsement required" 
or the like. In the absence of such a requirement a statement placed 
on the item by the depositaiy bank to the effect that the item was 
deposited by a customer or credited to his account is effective as the 
<'UStomer"s indorsement. 
(2) An intermediary bank, or payor bank which is not a depositary 
bank, is neither given notice nor otherwise affected by a restrictive 
indorsement of any person except the bank's immediate transferor. 
§28:4—206. Transfer between banks 
Any agreed method which identifies the transferor bank is sufficient 
for the item's further transfer to another bank. 
§ 28:4—^207. Warranties of customer and collecting bank on trans-
fer or presentment of items; time for claims 
(1) Each customer or collecting bank who obtains payment or 
acceptance of an item and each prior customer and collecting bank 
warrants to the payor bank or other payor who m good fait^ pays 
or accepts the item that 
(a) he has a good title to the item or is authoiized to obtain 
payment or acceptance on behalf of one who has a good title; 
and 
(b) he has no knowledge that the si^iature of the maker or 
drawer is unauthorized, except that this warranty is not given 
700 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
by any customer or collex'ting bank that is a holder in due course 
and acts in good faith 
(i) to a maker with respect to the maker's own signature; 
or 
(ii) to a drawer with respect to the drawer's own signa-
ture, whether or not the drawer is also the drawee; or 
(iii) to an acceptor of an item if the holder in due course 
took the item after the acceptance or obtained the acceptance 
without knowledge that the drawer's signature was unau-
thorized; and 
(c) the item has not been materially altered, except that this 
warranty is not given by any customer or collecting bank that is 
a holder in due course and acts in good faith 
(i) to the maker of a note; or 
(ii) to the drawer of a draft whether or not the drawer 
is also the drawee; or 
(iii) to the acceptor of an item with respect to an altera-
tion made prior to the acceptance if the holder in due course 
took the item after the acceptance, even though the accept-
ance provided "payable as originally drawn" or equivalent 
terms; or 
(iv) to the acceptor of an item with respect to an altera-
tion made after the acceptance. 
(2) Each customer and collecting bank who transfers an item and 
receives a settlement or other consideration for it warrants to his 
transferee and to any subsequent collecting bank wlio takes the item 
in good faith that 
(a) he has a good title to the item or is authorized to obtain 
payment or acceptance on behalf of one who lias a good title and 
the transfer is otherwise rightful; and 
(b) all signatures are genuine or authorized; and 
(c) the item has not been materially altered; and 
(d) no defense of any party is good against him; and 
(e) he has no knowledge of any insolvency proceeding insti-
tuted with respect to the maker or acceptor or the drawer of 
an unaccepted item. 
In addition each customer and collecting bank so transferring an 
item and receiving a settlement or other consideration engages that 
upon dishonor and any necessary notice of dishonor and protest he 
will take up the item. 
(3) The warranties and the engagement to honor set forth in the 
two preceding subsections arise notwithstanding the absence of 
indorsement of words of guaranty or warranty in the transfer or 
presentment and a collecting bank remains liable for their breach 
despite remittance to its transferor. 
Damages for breach of such 
warranties or engagement to. honor shall not exceed the consideration 
received by the customer or collecting bank responsible plus finance 
charges and expenses related to the item, if any. 
(4) Unless a claim for breach of warranty under this section is 
made within a reasonable time after the person claiming learns of 
the breach, the person liable is discharged to the extent of any loss 
caused by the delay in making claim. 
§28:4—^208. Security interest of collecting bank in items, accom-
panying documents and proceeds 
(1) A bank has a security interest in an item and any accompany-
ing documents or the proceeds of either 
(a) in case of an item deposited in an account to the extent 
to which credit given for the item has been withdrawn or applied; 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
701 
(b) in case of an item for wliioli it lias given credit available 
for withdrawal as of right, to the extent of the credit given 
whether or not the credit is drawn upon and whether or not there 
is a ri^ht of charge-back; or 
(c) if it makes an advance on or against the item. 
(2) When credit which has been given for several items received, 
at one time or pursuant to a single agreement is withdrawn or applied 
in part the security interest remains upon all the items, any accom-
panying documents or the proceeds of either. 
For the purpose of 
this section, credits first given are first withdrawn. 
(3) Receipt by a collecting bank of a final settlement for an item 
is a realization on its security interest in the item, accompanying docu-
ments and proceeds. To the extent and so long as the bank does not 
receive final settlement for the item or give up possession of the item 
or accompanying documents for purposes otlier than collection, tlie 
security interest continues and is subject to the provisions of article 9 
except that 
(a) no security agreement is necessary to make the security 
interest enforceable (subsection (1) (b) of section 28:9—203); 
and 
(b) no filing is required to perfect the security interest; and 
(c) the security interest has priority over conflicting perfected 
security interests in the item, accom])anying documents or 
proceeds. 
§ 28:4—^209. When bank gives value for purposes of holder in due 
course 
For purposes of determining its status as a holder in due course, the 
bank has ^iven value to the extent that it has a security interest in an 
item provided that the bank otherwise complies with the requirements 
of section 28:3—302 on what constitutes a holder in due course. 
§28:4—^210. Presentment by notice of item not payable by, 
through or at a bank; liability of secondary parties 
(1) Unless otherwise instiiicted, a collecting bank may present an 
item not payable by, through or at a bank by sending to the party to 
accept or pay a written notice that the bank holds the item for accept-
ance or payment. The notice must be sent in time to be received on or 
before the day when presentment is due and the bank must meet any 
requirement of the party to accept or pay under section 28:3—505 
by the close of the bank's next banking day after it knows of the 
requirement. 
(2) Where presentment is made by notice and neither honor nor 
request for compliance with a requirement under section 28:3—505 
is received by the close of business on the day after maturity or in 
the case of demand items by the close of business on the third banking 
day after notice was sent, the presenting bank may treat the item as 
dishonored and charge any secondary party by sending him notice of 
the facts. 
§ 28:4—211. Media of remittance; provisional and final settlement 
in remittance cases 
(1) A collecting bank may take in settlement of an item 
(a) a check of the remitting bank or of another bank on any 
bank except the remitting bank; or 
(b) a cashier's check or similar primary obligation of a remit-
ting bank which is a member of or clears through a member of the 
same clearing house or group as the collecting bank; or 
(c) appropriate authority to charge an account of the remitting 
bank or of another bank with the collectiiiir bank: or 
702 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(d) if tlie item is drawn upon or payable by a person other 
tlian a bank, a cashier's clieck, certified check or other bank check 
or obligation. 
(2) If before its midnight deadline the collecting bank properly 
dishonors a remittance check or authorization to charge on itself or 
presents or forwards for collection a remittance instrument of or on 
another bank which is of a kind approved by subsection (1) or has 
not been autliorized by it, the collecting bank is not liable to prior 
parties in the event of the dishonor of such check, instrument or 
authorization. 
(3) A settlement for an item by means of a remittance instrument 
or authorization to charge is or becomes a final settlement as to both 
the person making and the person receiving the settlement. 
(a) if the remittance instrument or authorization to charge 
is of a kind approved by subsection (1) or has not been authorized 
by the person receiving the settlement and in either case the per-
son receiving the settlement acts seasonably before its midnight 
deadline in presenting, forwarding for collection or paying the 
instrument or authorization,—at the time the remittance instru-
ment or authorization is finally paid by the payor by which it is 
payable; 
(b) if the person receiving the settlement has authorized 
remittance by a non-bank check or obligation or by a cashier's 
check or similar primary obligation of or a check upon the payor , 
or other remitting bank which is not of a kind approved by sub-
. section (l)(b),—at the time of the receipt of such remittance 
check or obligation; or 
(c) if in a case not covered by sub-paragraphs (a) or (b) the 
person receiving the settlement fails to seasonably present, for-
ward for collection, pay or return a remittance instrument or 
authorization to it to charge before its midnight deadline,—at 
such midnight deadline. 
§ 28:4—212. Right of charge-back or refund 
(,1) If a collecting bank has made provisional settlement with its 
customer for an item and itself fails by reason of dishonor, suspension 
of payments by a bank or otherwise to receive a settlement for the 
item which is or becomes final, the bank may revoke the settlement 
^iven bjr it, charge back the amount of any credit given for the 
item to its customer's account or obtain refund from its customer 
whether or not it is able to return the items if by its midnight 
deadline or within a longer reasonable time after it learns the facts 
it returns the item or sends notification of the facts. These rights to 
revoke, charge-back and obtain refund terminate if and when a 
settlement for the item received by the bank is or becomes final (sub-
section (3) of section 28:4—211 and subsections (2) and (3) of sec-
tion 28:4—213). 
(2^ (Omitted.) 
(3) A depositary bank which is also the payor may charge-back the 
amount of an item to its customer's account or obtain refund in 
accordance with the section governing return of an item received 
by a payor bank for credit on its books (section 28:4—301). 
(4) The ri^ht to charge-back is not affected by 
^a) prior use of the credit given for the item; or 
(b) failure by any bank to exercise ordinary care with respect 
to the item but any bank so failing remains liable. 
(5) A failure to charge-back or claim refund does not affect 
other rights of the bank against the customer or any other party. 
(6) If ci-edit is given in dollars as the equivalent of the value of 
an item payable in a foreign currency the dollar amount of any charge-
77 STAT. ] 
PUBLIC L
A
W 88-243-DEC. 30, 1963 
703 
back or refund shall be calculated on the basis of the buying sight 
rate for the foreign currency prevailing on the day when the person 
entitled to the charge-back or refund learns that it will not receive 
payment in ordinary course. 
§28:4—^213. Final payment of item by payor bank; when provi-
sional debits and credits become final; when certain 
credits become available for withdrawal 
(1) An item is finally paid by a payor bank when the bank has 
done any of the following, whichever happens first: 
(a) paid the item in cash; or 
(b) settled for the item without reserving a right to revoke 
the settlement and without having such right under statute, 
clearing house rule or agreement; or 
(c) completed the process of posting the item to the indicated 
account of the drawer, maker or other person to be charged 
therewith; or 
(d) made a provisional settlement for the item and failed to 
revoke the settlement in the time and manner permitted by stat-
ute, clearing house rule or agreement. 
I"^pon a final payment under subparagraphs (b), (c) or (d) the payor 
bank shall be accountable for the amount of the item. 
(2) If provisional settlement for an item between the presenting 
and payor banks is made through a clearing house or by debits or 
credits m an account between them, then to the extent that provisional 
debits or credits for the item are entered in accounts between the pre-
senting and payor banks or between the presenting and successive prior 
collecting banks seriatim, they become final upon final payment of 
the item by the paj^or bank. 
(3) If a collecting bank receives a settlement for an item which is 
or becomes final (subsection (3) of section 28:4—211, subsection (2) 
of section 28:4—213) the bank is accountable to its customer for the 
amount of the item and any provisional credit given for the item in 
an account with its customer becomes final. 
(4) Subject to any right of the bank to apply the credit to an obli-
gation of the customer, credit given by a bank for an item in an account 
with its customer becomes available for withdrawal gs of right 
(a) in any case where the bank has received a provisional 
settlement for the item,—when such settlement becomes final and 
the bank has had a reasonable time to learn that the settlement 
is final; 
(b) in any case where the bank is both a depositary bank and 
a payor bank and the item is finallj^ paid,—at the opening of the 
bank's second banking day following receipt of th,e item. 
(5) A deposit of money in a bank is final when made but, subject 
to any right of the bank to apply the deposit to an obligation of the 
customer, the deposit becomes available for withdrawal as of right 
at the opening of the bank's next banking day following receipt of the 
deposit. 
§28:4—^214. Insolvency and preference 
(1) Any item in or coming into the possession of a payor or collect-
ing bank which suspends payment and which item is not finally paid 
shall be returned by the receiver, trustee or agent in charge of the 
closed bank to the presenting bank or the closedl)ank's customer. 
(2) If a payor bank finally pays an item and suspends payments 
without making a settlement for the item with its customer or the 
presenting bank which settlement is or becomes final, the owner of the 
item has a preferred claim against the payor bank. 
704 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(3) If a payor bank gives or a collecting; bank gives or receives a 
provisional settlement for an item and thereafter suspends payments, 
the suspension does not prevent or interfere with the settlement becom-
ing final if such finality occurs automatically upon the lapse of certain 
time or the happening of certain events (subsection (3) of section 
28:4—211, subsections (1) (d), (2) and (3) of section 28:4—213). 
(4) If a collecting bank receives froni subsequent parties settle-
ment for an item which settlement is or becomes final and suspends 
payments without making a settlement for the item with its customer 
which is or becomes final, the owner of the item has a preferred claim 
against such collecting bank. 
PART 3—COLLECTION OF ITEMS: PAYOR BANKS 
§ 28:4—301. Deferred posting; recovery of payment by return of 
items; time of dishonor 
(1) Where an authorized settlement for a demand item (other than 
a documentary draft) received by a payor bank otherwise than for 
immediate payment over the counter has been made before midnight 
of the banking day of receipt the payor bank may revoke the settle-
ment and recover any payment if before it has made final payment 
(subsection (1) of section 28:4—213) and before its midnight dead-
line it 
(a) returns the item; or 
(b) sends written notice of dishonor or nonpayment if the 
item is held for protest or is otherwise unavailable for return. 
(2) If a demand item is received by a payor bank for credit on its 
books it may return such item or send notice of dishonor and may 
revoke any credit given or recover the amount thereof withdrawn 
by its customer, if it acts within the time limit and in the manner 
specified in the preceding subsection. 
(3) Unless previous notice of dishonor has been sent an item is 
dishonored at the time when for purposes of dishonor it is returned or 
notice sent in accordance with this section. 
(4) An item is returned: 
(a) as to an item received through a clearing house, when it 
is delivered to the presenting or last collecting bank or to the 
clearing house or is sent or delivered in accordance with its 
rules; or 
(b) in all other cases, when it is sent or delivered to the bank's 
customer or transferor or pursuant to his instructions. 
§ 28:4—302. Payor bank's responsibility for late return of item 
In the absence of a valid defense such as breach of a presentment 
warranty (subsection (1) of section 28:4—207), settlement effected or 
the like, if an item is presented on and i-eceived by a payor bank the 
bank is accountable for the amount of 
(a) a demand item other than a documentary draft whether 
properly payable or not if the bank, in any case where it is not 
also the depositary bank, retains the item beyond midnight of 
the banking day of receipt without settling for it or, regardless 
of whether it is also the depositary bank, does not pay or return 
the item or send notice of dishonor until after its midnight dead-
line; or 
(b) any other properly payable item unless within the time 
allowed for acceptance or payment of that item the bank either 
accepts or pays the item or returns it and accompanying 
documents. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
705 
§ 28:4—303. When items subject to notice, stop-order, legal process 
or setoff; order in which items may be charged or 
certified 
(1) Any kiiowledire, notice or stop-order received by, lejojal process 
served upon or setoff exercised by a payor bank, whether or not 
effective under other rules of hiw to terminate, suspend or modify 
the bank's right or duty to pay an item or to charge its customer's 
account for the item, comes too late to so terminate, suspend or modify 
such right or duty if the knowledge, notice, stop-order or legal process 
is received or serxed and a reasonable time for the bank to act thereon 
expires or the setoff is exercised after the bank has done any of the 
following: 
(a) accepted or certified the item; 
(b) paid the item in cash; 
(c) settled for the item without reserving a right to l'e^'oke 
the settlement and without having such right under statute, 
clearing house rule or agreement; 
(d) completed the process of posting the item to the indicated 
account of the drawer, maker or other person to be charged there-
with or otherwise has evidenced by examination of such indicated 
account and by action its decision to pay the item; or 
(e) become accountable for the amount of the item under 
subsection (1) (d) of section 28:4—213 and section 28:4—802 
dealing with the payor bank's resix)nsibility for late return items. 
(2) Subject to the provisions of subsection (1) items may be 
accepted, paid, certified or charged to the indicated account of its 
customer in any order convenient to the bank. 
PART 4--RELATI0NSHIP BETWEEN PAYOR BANK AND 
ITS CUSTOMER 
§ 28:4—401. When bank may charge customer's account 
(1) As against its customer, a bank may charge against his account 
any item which is otherwise properly payable from that account 
even though the charge creates an overdraft. 
(2) A bank which in good faith makes payment to a holder 
may charge the indicated account of its customer according to 
(a) the original tenor of his altered item; or 
(b) the tenor of his completed item, even though the bank 
knows the item has been completed unless the bank has notice that 
the completion was improper. 
§ 28:4—402. Bank's liability to customer for wrongful dishonor 
A payor bank is liable to its customer for damages proximately 
caused by the wrongful dishonor of an item. When the dishonor 
occurs through mistake liability is limited to actual damages proved. 
If so proximately caused and proved damages may include damages 
for an arrest or prosecution of the customer or other consequential 
damages. 
Whether any consequential damages are proximately 
caused by the wrongful dishonor is a question of fact to be determined 
in each case. 
§ 28:4—403. Customer's right to stop payment; burden of proof 
of loss 
(1) A customer may by order to his bank stop payment of any 
item payable for his account but the order must be received at such 
time and in such manner as to afford the bank a reasonable opportunity 
to act on it prior to any action by the bank with respect to the item 
described in section 28:4—303. No such order shall be Valid, how-
ever, unless it shall be in writing specifically describing the item to 
which it relates by stating the amount, date and payee thereof. 
93-025 0-64-47 
706 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) Anything- in this section 28:4—i08 to the contrary notwith-
standing, any stop payment order transmitted by telephone by a 
customer to an officer of a bank, while such officer is on the {jremises 
thereof, shall be accepted by such bank, upon such identification that 
will insure the order has been transmitted by such customer, as an 
effective order for a period of twenty-four hours, after which time 
it shall no longer be valid unless followed by a written order as pro-
vided in this section 28 'A—i03. 
A written order is effective for only 
six months unless renewed in writing. The bank may, at its option 
and without liability, stop payment of an item after the expiration of 
a stop payment order or any renewal thereof relating to such item. 
(3) The burden of establishing the fact and amount of loss result-
ing from the payment of an item contrary to a binding stop payment 
order is on the customer. 
§ 28:4—404. Bank not obligated to pay check more than six months 
old 
A bank is under no obligation to a customer having a checking 
account to pay a check, other than a certified check, which is pre-
sented more than six months after its date, but it may charge its 
customer's account for a payment made thereafter in the absence of 
an effective stop payment order in accordance with section 28:4—i03. 
§ 28:4—405. Death or incompetence of customer 
(1) A payor or collecting bank's authority to accept, pay or collect 
an item or to account for proceeds of its collection if otherwise effec-
tive is not rendered ineffective by incompetence of a customer of 
either bank existing at the time the item is issued or its collection is 
undertaken if the bank does not know of an adjudication of incom-
petence. Xeither death nor incompetence of a customer revokes such 
authority to accept, pay, collect or account until the bank knows of 
the fact of death or of an adjudication of incompetence and has rea-
sonable opportunity to act on it. 
(2) Even with knowledge a bank may for ten days after the date of 
death pay or certify checks drawn on or prior to that date unless 
ordered to stop payment by a person claiming an interest in the 
account. 
§28:4—406. Customer's duty to discover and report unauthor-
ized signature or alteration 
(1) When a bank sends to its customer a statement of account 
accompanied by items paid in good faith in support of the debit entries 
or holds the statement and items pursuant to a request or instructions 
of its customer or otherwise in a reasonable manner makes the state-
ment and items available to the customer, the customer must exercise 
reasonable care and promptness to examine the statement and items 
to discover his unauthorized signature or any alteration on an item and 
must notify the bank promptly after discovery thereof. 
(2) If the bank establishes that the customer failed with respect to 
an item to comply with the duties imposed on the customer by sub-
section (1) the customer is precluded from asserting against the bank 
(a) his unauthorized signature or any alteration on the item if 
the bank also establishes that it suffered a loss by reason of such 
failure; and 
(b) an unauthorized signature or alteration by the same wrong-
doer on any other item paid in good faith by the bank after the 
first item and statement was available to the customer for a 
reasonable period not exceeding fourteen calendar days and before 
the bank receives notification from the customer of any such 
unauthorized signature or alteration. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
707 
(3) The preclusion under subsection (2) does not apply if the 
customer establishes lack of ordinary care on the part of the bank 
in paying the item (s). 
(4) Without regard to care or lack of care of either the customer 
or the bank a customer who does not within one year from the time 
the statement and items are made available to the customer (subsection 
(1)) discover and report his unauthorized signature or any alteration 
on the face or back of the item or does not within three years from 
that time discover and report any unauthorized indorsement is 
precluded from asserting against the bank such unauthorized signature 
or indorsement or such alteration. 
(5) If under this section a payor bank has a valid defense against 
n claim of a customer upon or resulting from payment of an item and 
waives or fails upon request to assert the defense the bank may not 
fissert against any collecting bank or other prior party presenting or 
transferring the item a claim based upon the miauthorized signature or 
alteration giving rise to the customer's claim. 
§ 28:4—407. Payor bank's right to subrogation on improper pay-
ment 
If a payor bank has paid an item over the stop payment order of the 
drawer or maker or otherwise under circumstances giving a basis for 
objection by the drawer or maker, to prevent unjust enrichment and 
only to the extent necessary to prevent loss to the bank by reason of 
its payment of the item, the payor bank shall be subrogated to the 
rights 
(a) of any holder in due course on the item against the drawer 
or maker; and 
(b) of the payee or any other holder of the item against the 
drawer or maker either on the item or under the transaction out 
of which the item arose; and 
(c) of the drawer or maker against the payee or any other 
holder of the item with respect to the transaction out of which 
the item arose. 
PART 5—COLLECTION OF DOCUMENTARY DRAFTS 
§28:4—501. Handling of documentary drafts; duty to send for 
presentment and to notify customer of dishonor 
A bank which takes a documentary draft for collection must present 
or send the draft and accompanying documents for presentment and 
upon learning that the draft has not been paid or accepted in due 
course must seasonably notify its customer of such fact even though 
it may have discounted or bought tlie draft or extended credit avail-
able for withdrawal as of right. 
§ 28:4—502, Presentment of "on arrival" drafts 
When a draft or the relevant instructions require presentment "on 
arrival", "when goods arrive" or the like, the collecting bank need not 
present until in its judgment a reasonable time for arrival of the 
goods has expired. Refusal to pay or accept because the goods have 
not arrived'is not dishonor; the bank must notify its transferor of such 
refusal but need not present the draft again until it is instructed to do 
so or learns of the arrival of the goods. 
§ 28:4—503. Responsibility of presenting bank for documents and 
goods; report of reasons for dishonor; referee in 
case of need 
Unless otherwise instructed and except as provided in article 5 a 
bank presenting a documentary draft 
708 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(a) must deliver the documents to the drawee on acceptance 
of the draft if it is payable more than three days after present-
ment; otherwise, only on payment; and 
(b) upon dishonor, either in the case of presentment for 
acceptance or presentment for payment, may seek and follow 
instructions from any referee in case of need designated in the 
draft or if the presenting bank does not choose to utilize his 
services it must use diligence and good faith to ascertain the rea-
son for dishonor, must notify its transferor of the dishonor and 
of the results of its effort to ascertain the reasons therefor and 
must request instructions. 
But the presenting bank is under no obligation with respect to goods 
represented by the documents except to follow any reasonable instruc-
tions seasonably received; it has a right to reimbursement for any 
expense incurred in following instructions and to prepayment of or 
indemnity for such expenses. 
§28:4—504. Privilege of presenting bank to deal with goods; 
security interest for expenses 
(1) A presenting bank which, following the dishonor of a docu-
mentary draft, has seasonably requested instructions but does not 
receive them within a reasonable time may store, sell, or otherwise 
deal with the goods in any reasonable manner. 
(2) For its reasonable expenses incurred by action under subsection 
(1) the presenting bank has a lien upon the goods or their proceeds, 
which may be foreclosed in the same manner as an unpaid seller's lien. 
ARTICLE 5—LETTERS OF CREDIT 
Sec. 
28: 5—101. Short title. 
28:5—102. Scope. 
28:5—103. Definitions. 
28 : 5—104. Formal requirements; signing. 
28: 5—105. Consideration. 
28: 5—106. Time and effect of establishment of credit. 
28: 5—107. Advice of credit; confirmation ; error in statement of terms. 
28: 5—108. "Notation credit" ; exhaustion of credit. 
28: 5—109. Issuer's obligation to its customer. 
28: 5—110. Availability of credit in portions; presenter's reservation of lien or 
claim. 
28: 5—111. Warranties on transfer and presentment. 
28: 5—112. Time allowed for honor or rejection; withholding honor or rejection 
by consent; "presenter". 
28:5—113. Indemnities. 
28: 5—114. Issuer's duty and privilege to honor; right to reimbursement. 
28: 5—115. Remedy for improper dishonor or anticipatory repudiation. 
28 : 5—116. Transfer and assignment. 
28: 5—117. Insolvency of bank holding funds for documentary credit. 
§28:5—101. Short title 
Citation o
f ai- 
The article shall be known and mav be cited as Uniform Commercial 
"'^i^- 
Code—Letters of Credit. 
§28:5—102. Scope 
(1) This article applies 
(a) to a credit issued by a bank if the credit requires a docu-
mentary draft or a documentary demand for payment; and 
(b) to a credit issued by a person other than a bank if the 
credit requires that the draft or demand for payment be accom-
panied by a document of title; and 
(c) to a credit issued by a bank or other person if the credit is 
not within subparagraphs (a) or (b) but conspicuously states 
that it is a letter of credit or is conspicuously so entitled. 
77 STAT,. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
709 
(2) Unless the eii^ragenient meets the requirements of subsection 
(1), this article does not Jipply to enofagements to make advances or 
to honor drafts or demands for payment, to authorities to pay or pur-
cliase, to guarantees or to general agreements. 
(3) This article deals with some but not all of the rules and con-
cepts of letters of credit as such rules or concepts have developed prior 
to this subtitle or may hereafter develop. The fact that this article 
states a rule does not by itself require, imply or negate application of 
the same or a converse rule to a situation not provided for or to a 
person not specified by this ai-ticle. 
§28:5—103. Definitions 
(1) In this article unless the context otherwise requires 
(a) "Credit" or "letter of credit'' means an engagement by a 
bank or other person made at the request of a customer and of a 
kind within the scope of this article (section 28:5—102) that the 
issuer will honor drafts or other demands for payment upon 
compliance with the conditions specified in the credit. A credit 
may be either revocable or irrevocable. The engagement may be 
either an agreement to honor or a statement that the bank or 
other person is authorized to honor. 
(b) A "documentary draft"' or a "documentary demand for 
payment" is one honor of which is conditioned upon the presenta-
tion of a document or documents. "Document" means any paper 
including document of title, security, invoice, certificate, notice 
of default and the like. 
(c) An "issuer" is a bank or other person issuing a credit. 
(d) A "beneficiary" of a credit is a person who is entitled under 
its terms to draw or demand payment. 
(e) An "advising bank" is a bank which gives notification of 
the issuance of a credit by another bank. 
(f) A "confirming bank'" is a bank which engages either that 
it will itself honor a credit already issued by another bank or 
that such a credit will be honored by the issuer or a third bank. 
(g) A "customer" is a buyer or other person who causes an 
issuer to issue a credit. 
The terai also includes a bank which 
procures issuance or confirmation on behalf of that bank's 
customer. 
(2) Other definitions applying to this article and the sections in 
which they appear are: 
"Notation of credit". Section 28:5—108. 
"Presenter"._ Section 28:5—112(3). 
(3) Definitions in other articles applying to this article and the 
sections in which they appear are: 
"Accept" or "Acceptance". Section 28:3—410. 
"Contract for sale". Section 28:2—106. 
"Draft". 
Section 28:3—104. 
"Holder in due course". Section 28:3—302. 
"Midnight deadline". Section 28:4—104. 
"Security". Section 28:8—102. 
(4) In addition, article 1 contains general definitions and principles 
of construction and interpretation applicable throughout this article. 
§28:5—104. Formal requirements; signing 
(1) Except as otherwise required in subsection (l)(c) of section 
28:5—102 on scope, no particular form of phrasing is required for a 
credit. A credit must be in writing and signed by the issuer and a 
confirmation must be in writing and signed by the confirming bank. 
A modification of the terms of a credit or confirmation must be signed 
by the issuer or confirming bank. 
710 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) A telegram may be a sufficient signed writing if it identifies its 
sender by an authorized authentication. The authentication may be 
in code and the authorized naming of the issuer in an advice of credit 
is a sufficient signing. 
§28:5—105. Consideration 
No consideration is necessary to establisli a credit or to enlarge or 
otherwise modify its terms. 
§ 28:5—106. Time and effect of establishment of credit 
(1) Unless otherwise agreed a credit is established 
(a) as regards the customer as soon as a letter of credit is 
sent to him or the letter of credit or an authorized written advice 
of its issuance is sent to the beneficiary; and 
(b) as regards the beneficiary when he receives a letter of 
credit or an authorized written advice of its issuance. 
(2) Unless otherwise agreed once an irrevocable credit is estab-
lished as regards the customer it can be modified or revoked only with 
the consent of the customer and once it is established as regards the 
beneficiary it can be modified or revoked only with his consent. 
(3) Unless otherwise agreed after a revocable credit is established 
it may be modified or revoked by the issuer without notice to or con-
sent from the customer or beneficiary. 
(4) Notwithstanding any modification or revocation of a revocable 
credit any person authorized to lionor or negotiate under the terms 
of the orignial credit is entitled to reimbursement for or honor of 
any draft or demand for payment duly honored or negotiated before 
receipt of notice of the modification or revocation and the issuer in 
turn is entitled to reimbursement from its customer. 
§28:5—107. Advice of credit; confirmation; error in statement of 
terms 
(1) Unless otherw^ise specified an advising bank by advising a 
credit issued by another bank does not assume any obligation to honor 
drafts drawn or demands for payment made under the credit but it 
does assume obligation for the accuracy of its owm statement. 
(2) A confirming bank by confirming a credit becomes directly 
obligated on the credit to the extent of its confirmation as though it 
were its issuer and acquires the rights of an issuer. 
(3) Even though an advising bank incorrectly advises the terms 
of a credit it has been authorized to advise the credit is established 
as against the issuer to the extent of its original terms. 
(4) Unless otherwise specified tlie customer bears as against the 
issuer all risks of transmission and reasonable translation or inter-
pretation of any message relating to a credit. 
§ 28:5—108. "Notation credit"; exhaustion of credit 
(1) A credit which specifies that any person purchasing or paying 
drafts drawn or demands for payment made under it must note the 
amount of the draft or demand on the letter or advice of credit is a 
"notation credit". 
(2) Under a notation credit 
(a) a person paying the beneficiary or purchasing a draft or 
demand for payment from liim acquires a right to honor only if 
the appropriate notation is made and by transferring or forward-
ing for honor the documents under the credit such a person war-
rants to the issuer that the notation has been made; and 
(b) unless the credit or a signed statement that an appropriate 
notation has been made accompanies the draft or demand for pay-
ment the issuer may delay honor until evidence of notation has 
been procured which is satisfactory to it but its obligation and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
711 
that of its cnstoivier coutiniie for a reasonable time not exceeding!; 
thirty days to obtain such evidence. 
(8) If the credit is not a notation credit 
(a) the issuer may honor complying drafts or demands for 
payment presented to it in the order in wliich they are presented 
and is discharged pro tanto by honor of any such draft or 
demand; 
(b) as between competing good faith purchasei-s of complying 
drafts or demands the person first purchasing has priority over 
a subsequent purchaser even though the later purchased draft or 
demand has been first honored. 
§28:5^109. Issuer's obligation to its customer 
(1) An issuer's obligation to its customer includes good faith and 
observance of any general banking usage but unless otherwise agreed 
does not include liability or responsibility 
(a) for performance of the underlying contract for sale or 
other transaction between the customer and the beneficiary; or 
(b) for any act or omission of any person other than itself or 
its ow^n branch or for loss or destruction of a draft, demand 
or document in transit or in the possession of others; or 
(c) based on knowledge or lack of knowledge of any usage 
of any particular trade. 
(2) An issuer must examine documents with care so as to ascertain 
that on their face they appear to comply with the terms of the 
credit but unless otherwise agreed assumes no liability or respon-
sibility for the genuineness, falsification or effect of any document 
which appears on such examination to be regular on its face. 
(3) A non-bank issuer is not bound by any banking usage of 
which it has no knowledge. 
§ 28:5—110. Availability of credit in portions; presenter's reserva-
tion of lien or claiin 
(1) Unless otherwise specified a credit may be used in portions 
in the discretion of the beneficiary. 
(2)| Unless otherwise specified a person by presenting a docu-
mentaiy draft or demand for payment under a credit relinquishes 
upon its honor all claims to the documents and a person by trans-
ferring such draft or demand or causing such presentment authorizes 
such relinquishment. 
An explicit reservation of claim makes the 
draft or demand non-complying. 
§ 28:5—111. Warranties on transfer and presentment 
(1) Unless otherwise agreed the beneficiary by transferring or 
presenting a documentary draft or demand for payment warrants 
to all interested parties that the necessary conditions of the credit 
have been complied with. 
This is in addition to any warranties 
arising under articles 3,4,7 and 8-. 
(2) Unless otherwise agreed a negotiating, advising, confirming, 
collecting or issuing bank presenting or transferring a draft or demand 
for payment under a credit warrants only the matters warranted 
by a collecting bank under article 4 and any such bank transferring 
a document warrants only the matters warranted by an intermediary 
under articles 7 and 8. 
§28:5—112. Time allowed for honor or rejection; withholding 
honor or rejection by consent; "presenter" 
(1) A bank to which a documentary draft or demand for payment 
is presented under a credit may without dishonor of the draft, demand, 
or credit 
712 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(a) defer honor until the close of the tliird banking- day follow-
ing- receipt of the documents; and 
(b) further defer honor if the presenter lias expressly or 
impliedly consented thereto. 
Failure to honor within the time here specified constitutes dishonor of 
tlie draft or demand and of the credit. 
(2) Upoi; dishonor the bank may unless otherwise instructed ful-
fill its duty to return tlie draft or demand and the documents by hold-
ing them at the disposal of the presenter and sending him an advice to 
that effect. 
(3) "Presenter" means any person presenting a draft oi' demand for 
payment for honor under a credit even though that person is a confinn-
ing bank or other coiTespondent wliich is acting under an issuer's 
authorization. 
§ 28:5—113. Indemnities 
(1) A bank seeking to obtain (whether for itself or another) honor, 
negotiation or reimbursement under a credit may give an indemnity 
to induce such honor, negotiation or reimbursement. 
(2) An indemnity agreement inducing honor, negotiation or reim-
))ursement 
(a) unless otherwise explicitly agreed applies to defects in. 
the documents but not in the goods; and 
(b) unless a longer time is explicitly agreed expires at the end 
of ten business days following receipt of the documents by the 
ultimate customer unless notice of objection is sent before such 
expiration date. 
The ultimate customer may send notice of objec-
tion to the person from whom he received the documents and any 
bank receiving such notice is under a duty to send notice to its 
transferor before its midnight deadline. 
§28:5—114. Issuer's duty and privilege to honor; right to reim-
bursement 
(1) An issuer must honor a draft or demand for payment which 
complies with the terms of the relevant credit regai-dless of whether 
the goods or documents conform to the underlying contract for sale 
or other contract between the customer and the beneficiary. 
The 
issuer is not excused from honor of such a draft or demand by reason 
of an additional general term that all documents must be satisfactory 
to the issuer, but an issuer may require that specified documents must 
be satisfactory to it. 
(2) Unless otherwise agreed when documents appear on their face 
to comply with the terms of a credit but a required document does not 
in fact conform to the warranties made on negotiation or transfer of 
a document of title (section 28:7—507) or of a security (section 
28:8—306) or is forged or fraudulent or there is fraud in the trans-
action 
(a) the issuer must honor the draft or demand for payment 
if honor is demanded by a negotiating bank or other holder of 
the draft or demand which has taken the draft or demand under 
the credit and under circumstances which would make it a holder 
in due course (section 28:3—302) and in an appropriate case would 
make it a person to whom a document of title has been duly 
negotiated (section 28:7—502) or a bona fide purchaser of a 
security (section 28:8—302) ; and 
(b) in all other cases as against its customer, an issuer acting 
in good faith may honor the draft or demand for payment despite 
notification from the customer of fraud, forgery or other detect 
not apparent on the face of the documents but a court of appro-
priate jurisdiction may enjoin such honor. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
713 
(3) L'nless otlierwise agreed an issuer which has duly lioiiored a 
draft or demand for payment is entitled to immediate reimbursement 
of any payment made under the credit and to be put in effectively 
available funds not later than the day before maturity of any ac^-ept-
ance made under the credit. 
(4) (5) (Omitted.) 
§28:5^115. Remedy for improper dishonor or anticipatory re-
pudiation 
(1) "When an issuer wrongfully dishonors a draft or demand for 
payment presented under a credit the person entitled to honor has with 
respect to any documents the rights of a person in the position of a 
seller (section 28:2—707) and may recover from the issuer the face 
amount of the draft or demand together with incidental damages 
under section 28:2—710 on seller's incidental damages and interest 
but less any amount realized by resale or other use or disposition of 
the subject matter of the transaction. In the event no resale or other 
utilization is made the documents, goods or other subject matter 
involved in the transaction must be turned over to the issuer on pay-
ment of judgment. 
(2) When an issuer wrongfully cancels or otherwise repudiates 
a credit before presentment of a draft or demand for payment drawn 
under it the beneficiary has the rights of a seller after anticipatory 
repudiation by the buyer under section 28:2—610 if he learns of the 
repudiation in time reasonably to avoid procurement of the required 
documents. Otherwise the beneficiary has an immediate right of action 
for wrongful dishonor. 
§ 28:5—116. Transfer and assignment 
(1) The right to draw under a credit can be transferred or assigned 
only when the credit is expressly designated as transferable or 
assignable. 
(2) Even though the credit specifically states that it is nontransfer-
able or nonassignable the beneficiary may before performance of the 
conditions of the credit assign his right to proceeds. Such an assign-
ment is an assignment of a contract right under article 9 on secured 
transactions and is governed by that article except that 
(a) the assignment is ineffective until the letter of credit or 
advice of credit is delivered to the assignee which delivery con-
stitutes perfection of the security interest under article 9; and 
(b) the issuer may honor drafts or demands for payment drawn 
under the credit until it receives a notification of the assignment 
signed by the beneficiary which reasonably identifies the credit 
involved in the assignment and contains a request to pay the 
assignee; and 
(c) after what reasonably appears to be such a notification has 
been received the issuer may without dishonor refuse to accept 
or pay even to a person otherwise entitled to honor until the letter 
of credit or advice of credit is exhibited to the issuer. 
(3) Except where the beneficiary has effectively assigned his right 
to draw or his right to proceeds, nothing in this section limits his right 
to transfer or negotiate drafts or demands drawn under the credit. 
§ 28:5—117. Insolvency of bank holding funds for documentary 
credit 
(1) Where an issuer or an advising or confirming bank or a bank 
which has for a customer procured issuance of a credit by another 
bank becomes insolvent before final payment under the credit and the 
credit is one to which this article is made applicable by paragraphs 
(a) or (b) of section 28:5—102(1) on scope, the receipt or allocation 
714 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
of funds or collateral to secure or meet obligations under the credit 
shall have the following results: 
(a) to the extent of any funds or collateral turned over after 
or before the insolvency as indemnity against or specifically for 
the purpose of payment of drafts or demands for payment drawn 
under the designated credit, the drafts or demands are entitled 
to payment in preference over depositors or other general creditors 
of the issuer or bank; and 
(b) on expiration of the credit or surrender of the beneficiary's 
rights under it unused any person who has given such funds or 
collateral is similarly entitled to return thereof; and 
(c) a charge to a general or current account with a bank if 
specifically consented to for the purpose of indemnity against 
or payment of drafts or demands for payment drawn under 
the designated credit falls under the same rules as if the funds 
had been drawn out in cash and then turned over with specific 
instructions. 
(2) After honor or reimbursement under this section the customer 
or other person for whose account the insolvent bank has acted is 
entitled to receive the documents involved. 
ARTICLE 6—BULK TRANSFERS 
Sec, 
28:6—101. Short title. 
28:6—102. "Bulk transfer" ; transfers of eciuipnient; enterprises subject to this 
article; bulk transfers subject to this article. 
28 -.6—103. Transfers excepted from this article. 
28:6—104. Schedule of property, list of creditors. 
28:6—105. Notice to creditors. 
28:6—106. (Omitted.) 
28:6—107. The notice. 
28:6—108. Auction sales; "auctioneer" 
28:6—109. What creditors protected. 
28:6—110. Subsequent transfers, 
28:6—111. Limitation of actions and levies. 
§28:6—101. Short title 
Citation of a«- 
Tliis articlc shall be known and may be cited as Uniform Com-
"'=^*- 
mercial Code—Bulk Transfers. 
§ 28:6—102. "Bulk transfer"; transfers of equipment; enterprises 
subject to this article; bulk transfers subject to 
this article 
(1) A "bulk transfer" is any transfer in bulk and not in the 
ordinary coui-se of the transferor's business of a major part of the 
materials, supplies, merchandise or other inventory (section 28:9— 
109) of an enterprise subject to this article. 
(2) A transfer of a substantial part of the equipment (section 
28:9—109) of such an enterprise is a bulk transfer if it is made in 
connection with a bulk transfer of inventory, but not otherwise. 
(3) The enterprises subject to this article are all those whose 
principal business is the sale of merchandise from stock, including 
tliose who manufacture what they sell. 
(4) Except as limited by the following section all bulk transfers 
of goods located within the District are subject to this article. 
§ 28:6—103. Transfers excepted from this article 
The following transfers are not subject to this article: 
(1) Those made to give security for the performance of an 
obligation; 
(2) General assignments for the benefit of all the creditors of the 
transferor, and subsequent transfers by the assignee thereunder; 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
715 
(3) Tnmsfers in settlement or realization of a lien or other security 
interest; 
(4) Sales by executors, administrators, receivers, trustees in bank-
ruptcy, or any public officer under judicial process; 
(5) Sales made in the course of judicial or administrative proceed-
ings for the dissolution or reorganization of a corporation and of 
which notice is sent to the creditors of the corporation pursuant to 
order of the court or administrative agency; 
(6) Transfers to a person maintaining a known place of business 
in the District who becomes bound to pay the debts of the transferor 
in full and gives public notice of that fact, and who is solvent after 
becoming so bound; 
(7) A transfer to a new business enterprise organized to take over 
and continue the business, if public notice of the transaction is given 
and the new enterprise assumes the debts of the transferor and he 
receives nothing fi'om the transaction except an interest in the new 
enterprise junior to the claims of creditors; 
(8) Transfers of property which is exempt from execution. 
Public notice under subsection (6) or subsection (T) may be given 
l>y publishing once a week for two consecutive weeks in a newspaper 
of general circulation where the transferor had its principal place of 
business in the District an advertisement including the names and 
addresses of the transferor and transferee and the effective date of 
the transfer. 
§28:6—104. Schedule of property, list of creditors 
(1) Except as provided with respect to auction sales (section 28:6— 
108), a bulk transfer subject to this article is ineffective against any 
creditor of the transferor unless: 
(a) The transferee requires the transferor to furnish a list of 
his existing creditors prepared as stated in this section; and 
(b) The parties prepare a schedule of the property transferred 
sufficient to identify it; and 
(c) The transferee preserves the list and schedule for six 
months next following the transfer and permits inspection of 
either or both and copying therefrom at all reasonable hours by 
any creditor of the transferor, or files the list and schedule in the 
office of the Kecorder of Deeds of the District. 
(2) The list of creditors must be signed and sworn to or affirmed 
by the transferor or his agent. It must contain the names and business 
addresses of all creditors of the transferor, with the amounts when 
known, and also the names of all persons who are known to the trans-
feror to jissert claims against him even though such claims are 
disputed. If the transferor is the obligor of an outstanding issue of 
bonds, debentures or the like as to which there is an indenture trustee, 
the list of creditors need include only the name and address of the 
indenture trustee and the aggregate outstanding principal amount of 
the issue. 
(3) Responsibility for the completeness and accuracy of the list 
of creditors rests on the transferor, and the transfer is not rendered 
ineffective by errors or omissions therein unless the transferee is 
shown to have had knowledge, 
§28:6—105. Notice to creditors 
In addition to the requirements of the preceding section, any 
bulk transfer subject to this article except one made by auction sale 
(section 28:6—108) is ineffective against any creditor of the trans-
feror unless at least ten days before he takes possession of the goods 
or pays for them, whichever happens first, the transferee gives notice 
of the transfer in the manner and to the persons hereafter provided 
(section 28:6—107). 
716 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:6—106. (Omitted.) 
§28:6—107. The notice 
(1) The notice to creditors (section 28:6—105) shall state: 
(a) that a bulk transfer is about to be made; and 
(b) the names and business addresses of the transferor and 
transferee, and all other business names and addresses used 
by the transferor within three years last past so far as known to 
the transferee; and 
(c) whether or not all the debts of the transferor are to be 
paid in full as they fall due as a result of the transaction, and 
if so, the address to which creditors should send their bills. 
(2) If the debts of the transferor are not to be paid in full as they 
fall due or if the transferee is in doubt on that point then the notice 
shall state further: 
(a) the location and general description of the property to 
be transferred and the estimated total of the 
transferor's 
debts; 
(b) the address where the schedule of property and list of 
creditors (section 28 :6—104) may be inspected; 
(c) whether the transfer is to pay existing debts and if so 
the amount of such debts and to whom owing; 
(d) whether the transfer is for new consideration and if so 
the amount of such consideration and the time and place of 
payment. 
(8) The notice in any case shall l)e delivered personally or sent 
by registered or certified mail to all the persons shown on the list of 
creditors furnished by the transferor (section 28:6—104) and to all 
other persons who are known to the transferee to hold or assert claims 
against the transferor. 
§ 28:6—108. Auction sales; "auctioneer" 
(1) A bulk transfer is subject to this article even though it is by 
sale at auction, but only in the manner and with the results stated in 
tliis section. 
(2) The transferor shall furnish a list of his creditors and assist 
in the preparation of a schedule of the property to be sold, both pre-
pared as before stated (section 28:6—104). 
(3) The person or persons other than the transferor who direct, 
control or are responsible for the auction are collectively called the 
'•auctioneer". 
The auctioneer shall: 
(a) receive and retain the list of creditors and prepare and 
retain the schedule of property for the period stated in this article 
(section 28:6—104) ; 
(b) give notice of the auction personally or by registered or 
certified mail at least ten days before it occurs to all persons 
shown on the list of creditors and to all other persons who are 
known to him to hold or assert claims against the transferor. 
(4) Failure of the auctioneer to perform any of these duties does 
not affect the validity of the sale or the title of the purchasers, but 
if the auctioneer knows that the auction constitutes a bulk transfer 
such failure renders the auctioneer liable to the creditors of the 
transferor as a class for the sums owing to them from the transferor 
up to but not exceeding the net proceeds of the auction. If the auc-
tioneer consists of several persons their liability is joint and several. 
§28:6—109. What creditors protected 
(1) The creditors of the transferor mentioned in this article are 
those holding claims based on transactions or events occurring before 
the bulk transfer, but creditors who become such after notice to 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
717 
creditors is given (sections 28:6—105 and 28:6—107) are not entitled 
to notice. 
(2) (Omitted.) 
§28:6—110. Subsequent transfers 
When the title of a transferee to property is subject to a defect by 
reason of his non-compliance with the requirements of this article, 
then: 
(1) a purchaser of any of such property from such transferee 
who pays no value or who takes with notice of such non-com-
pliance takes subject to such defect, but 
(2) a purchaser for value in good faith and without such 
notice takes free of such defect. 
§28:6—111. Limitation of actions and levies 
I
S
T
o action under this article shall be brought nor levy made more 
than six months after the date on which the transferee took posses-
sion of the goods unless the transfer has been concealed. 
If the 
transfer has oeen concealed, actions may be brought or levies made 
within six months after its discovery. 
ARTICLE 7—WAREHOUSE RECEIPTS, BILLS OF 
LADING AND OTHER DOCUMENTS OF TITLE 
PABT 1—GENEEAL 
Sec. 
28:7—101. Short title, 
28:7—102. Definitions and index of definitions. 
28:7—103. Relation of article to treaty, statute, tariff, classification or regulation. 
28 :7—104. Negotiable and non-negotiable warehouse receipt, bill of lading or 
other docunient of title. 
28:7—105. Construction against negative implication. 
PART 2—WAREHOUSE RECEIPTS : SPECIAL PROVISIONS 
28:7—201. Who may issue a warehouse receipt; storage under government 
bond. 
28:7—202. Form of warehouse receipt; essential terms; optional terms. 
28:7—203. Liability for non-receipt or misdescription. 
28:7—204. Duty of care; contractual limitation of warehouseman's liability. 
28:7—205. Title under warehouse receipt defeated in certain cases. 
28 ;7—206. Termination of storage at warehouseman's option. 
28:7—207. Goods must be kept separate; fungible goods. 
28 :7—208. Altered warehouse receipts. 
28 :7—209. Lien of warehouseman. 
28:7—^210. Enforcement of warehouseman's lien. 
PART 3—BILLS OF LADING : SPECIAL PROVISIONS 
28:7—301. Liability for 
non-receipt or misdescription; "said to 
contain"; 
"shipper's load and count"; improper handling. 
28:7—302. Through bills of lading and similar documents. 
28:7—303. Diversion; reconsignment; change of instructions. 
28:7—304. Bills of lading in a set. 
28:7—305. Destination bills. 
28 :7—306. Altered bills of lading. 
28:7—307. Lien of carrier. 
28:7—308. Enforcement of carrier's lien. 
28:7—309. Duty of care; contractual limitation of carrier's liability. 
PART 4—WAREHOUSE RECEIPTS AND BILLS OF LADING : GENERAL OBLIGATIONS 
28:7—401. Irregularities in issue of receipt or bill or conduct of issuer. 
28:7—402. Duplicate receipt or bill; overissue. 
28:7—403. Obligation of warehouseman or carrier to deliver; excuse. 
28:7—404. No liability for good faith delivery pursuant to receipt or bill. 
718 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
ARTICLE 7—WAREHOUSE RECEIPTS, BILLS OF 
LADING AND OTHER DOCUMENTS OF TITLE— 
Continued 
PART O—WAREHOI'SK RECKIPTS AND BILLS OF LADING : NEGOTIATION AND TRANSFER 
Sec. 
28:7—501. Form of negotiation and requirements of "due negotiation". 
28:7—502. Rights acquired bj* due negotiation. 
28:7—503. Document of title to goods defeated in certain cases. 
28 :7—504. Rights acquired in the absence of due negotiation ; effect of diversion; 
seller's stoppage of delivery. 
28 :7—505. Indorser not a guarantor for other parties. 
28:7—506. Delivers' without indorsement: right to comijel indorsement. 
28:7—507. Warranties on negotiation or transfer of receipt or bill. 
28 :7—508. Warranties of collecting bank as to documents. 
28:7—509. Receipt or bill: when adequate compliance with commercial contract. 
PART 6—WAREHOUSE RECEIPTS AND BILLS OF LADING : MISCELLANEOUS PROVISIONS 
28:7—601. Lost and missing documents. 
28 :7—602. Attachment of goods covered by a negotiable document. 
28:7—603. Conflicting claims; interpleader. 
PART 1—GENERAL 
§ 28:7—101. Short title 
Citation of at^ 
Tliis article shall be known and may be cited as Unifonn Commer-
ti''!*- 
oial Code—Documents of Title. 
§28:7—102. Definitions and index of definitions 
(1) In this article, unless the context otherwise requires: 
(a) "Bailee'- means the pei'son who by a warehouse receipt, 
bill of lading or other document of title acknowledges possession 
of goods and contracts to deliver them. 
(b) "Consignee" means the person named in a bill to whom 
or to whose order the bill promises delivery. 
(c) "Consignor" means the person named in a bill as the 
pei*son from whom the goods have been received for shipment. 
(d) "Delivery order' means a written order to deliver goods 
directed to a warehouseman, carrier or other person who in the 
ordinary course of business issues warehouse receipts or bills of 
lading. 
(e) "Document" means document of title as defined in the 
general definitions in article 1 (section 28:1—201). 
(f) "Goods" means all things which are treated as movable 
for the purposes of a contract of storage or transportation. 
(g) "Issuer" means a bailee who issues a document except 
that in relation to an unaccepted delivery order it means the 
person who orders the possessor of goods to deliver. 
Issuer in-
cludes any person for whom an agent or employee purports to act 
in issuing a document if the agent or employee has real or ap-
parent authority to issue documents, notwithstanding that the 
issuer received no goods or that the goods were misdescribed or 
that in any other respect the agent or employee violated his 
instructions. 
(h) "Warehouseman" is a person engaged in the business of 
storing goods for hire. 
(2) Other definitions applying to this article or to specified parts 
thereof, and the sections in which they appear are: 
"Duly negotiate" section 28:7—501. 
"Person entitled under the document" section 28:7—403(4). 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
719 
(8) Definitions in otlier articles applying to lliis article and the 
sections in •vvliicli tliey appear are: 
"Contract for sale'' section 28:2—106. 
"Overseas" section 28:2—323. 
"Receipt-' of goods section 28:2—103. 
(4) In addition article 1 contains general definitions and principles 
of construction and interpretation applicable throughout this ai-ticle. 
§28:7—103. Relation of article to treaty, statute, tariff, classifi-
cation or regulation 
To the extent that any treaty or statute of the l"J"nited States, regula-
tory statute of the District or tariff, classification or i-egulation filed 
or issued pursuant thereto is applicable, the provisions of this article 
are subject thereto. 
§ 28:7—104. Negotiable and non-negotiable warehouse receipt, bill 
of lading or other document of title 
(1) A warehouse receipt, bill of lading or other document of title is 
negotiable 
(a) if by its terms the goods are to be delivered to bearer or to 
the order of a named person; or 
(b) where recognized in overseas trade, if it runs to a named 
person or assigns. 
(2) Any other document is non-negotiable. 
A bill of lading in 
wliich it is stated that the goods are consigned to a named person is 
not made negotiable by a provision that the goods are to be delivered 
only against a written order signed by the same or another named 
person. 
§28:7—105. Construction against negative implication 
The omission from either part 2 or part 3 of this article of a pro-
vision corresponding to a provision made in the other part does not 
imply that a coiresponding rule of law is not applicable. 
PART 2—WAREHOUSE RECEIPTS: SPECIAL PROVISIONS 
§ 28:7—201. Who may issue a warehouse receipt; storage under 
government bond 
(1) A warehouse receipt may be issued by any warehouseman. 
(2) Where goods including distilled spirits and agricultural com-
modities are stored under a statute requiring a bond against with-
drawal or a license for the issuance of receipts in the nature of ware-
house receipts, a receipt issued for the goods has like effect as a ware-
house receipt even though issued by a person who is the owner of the 
goods and is not a warehouseman. 
§ 28:7—202. Form of warehouse receipt; essential terms; optional 
terms 
(1) A warehouse receipt need not be in any particular form. 
(2) Unless a warehouse receipt embodies within its written or 
printed terms each of the following, the warehouseman is liable for 
damages caused by the omission to a person injured thereby: 
(a) the location of the warehouse where the goods are stored; 
^b) the date of issue of the receipt; 
(c) the consecutive number of the receipt; 
(d) a statement whether the goods received will be delivered 
to the bearer, to a specified person, or to a specified person or his 
order; 
(e) the rate of storage and handling charges, except that where 
goods are stored under a field warehousing arrangement a state-
ment of that fact is sufficient on a non-negotiable receipt; 
720 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(f) a des('i'ii)tion of the goods or of the packages containing 
them; 
(g) the signature of the warehouseman, which may be made 
by his authorized agent; 
(h) if tlie receipt is issued for goods of which the warehouse-
man IS owner, either solely or jointly or in common with others, 
the fact of such ownership; and 
(i) a statement of the amount of advances made and of lia-
bilities incurred for which the warehouseman claims a lien or 
security interest (section 28:7—209). 
If the precise amount of 
such advances made or of such liabilities incurred is, at the time 
of the issue of the receipt, unknown to the warehouseman or to 
his agent who issues it, a statement of the fact that advances have 
been made or liabilities incurred and the purpose thereof is 
sufficient. 
(3) A warehouseman may insert in his receipt any other terms which 
are not contrary to the provisions of this subtitle and do not impair 
his obligation of delivery (section 28:7—±08) or his duty of care (sec-
tion 28:7—204). Any contrary provisions shall be inetfective. 
§28:7—203. Liability for non-receipt or misdescription 
A party to or purchaser for value in good faith of a document of 
title other than a bill of lading relying in either case upon the de-
scription therein of the goods may recover from the issuer damages 
caused by the non-receipt or misdescription of the goods, except to 
the extent that the document conspicuously indicates that the issuer 
does not know whether any part or all of the goods in fact were^ 
received or conform to the description, as where the description is in 
terms of marks or labels or kind, quantity or condition, or the receipt 
or description is qualified by "contents, condition and quality un-
known", "said to contain" or the like, if such indication be true, or 
the party or purchaser otherwise has notice. 
§28:7—^204. Duty of care; contractual limitation of warehouse-
man's liability 
(1) A warehouseman is liable for damages for loss of or injury to 
the goods caused by his failure to exercise such care in regard to 
them as a reasonably careful man would exercise under like cir-
cumstances but unless otherwise agreed he is not liable for damages 
which could not have been avoided by the exercise of such care. 
(2) Damages may be limited by a term in the warehouse receipt 
or storage agreement limiting the amount of liability in case of loss 
or damage, and setting forth a specific liability per article or item, 
or value per unit of weight, beyond which the warehouseman shall 
not be liable: Provided^ however^ That such liability may on written 
request of the bailor at the time of signing such storage agreement 
or within a reasonable time after receipt of the warehouse receipt 
be increased on part or all of the goods thereunder, in which event 
increased rates may be charged based on such increased valuation, but 
that no such increase shall be permitted contrary to a lawful limita-
tion of liability contained in the warehouseman's tariff, if any. 
No such limitation is effective with respect to the warehouseman's 
liability for conversion to his own use. 
(3) Reasonable provisions as to the time and manner of present-
ing claims and instituting actions based on the bailment may be in-
cluded in the warehouse receipt or tariff. 
(4) (Omitted.) 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
721 
§28:7—^205. Title under warehouse receipt defeated in certain 
cases 
A buyer in the ordinary course of business of fungible goods sold 
and delivered by a warehouseman who is also in the business of buy-
ing and selling such goods takes free of any claim under a warehouse 
receipt even though it has been duly negotiated. 
§ 28:7—206. Termination of storage at warehouseman's option 
(1) A warehouseman may on notifying the person on whose account 
the goods are held and any other person known to claim an interest 
in the ,goods require payment of any charges and removal of the goods 
from the warehouse at the termination of the period of storage fixed 
by the document, or, if no period is fixed, within a stated period not 
less than thirty days after the notification. 
If the goods are not 
removed before the date specified in the notification, the warehouse-
man may sell them in accordance with the provisions of the section 
on enforcement of a warehouseman's lien (section 28:7—210). 
(2) If a warehouseman in good faith believes that the goods are 
about to deteriorate or decline in value to less than the amount of his 
lien within the time prescribed in subsection (1) for notification, 
advertisement and sale, the warehouseman may specify in the notifica-
tion any reasonable shorter time for removal of the goods and in case 
the goods are not removed, may sell them at public sale held not less 
than one week after a single advertisement or posting. 
(3) If as a result of a quality or condition of the goods of which 
the warehouseman had no notice at the time of deposit the goods are 
a hazard to other property or to the warehouse or to persons, the 
warehouseman may sell the goods at public or private sale without 
advertisement on reasonable notification to all persons known to claim 
an interest in the goods. If the warehouseman after a reasonable 
effort is unable to sell the goods he may dispose of them in any lawful 
manner and shall incur no liability by reason of such disposition. 
(4) The warehouseman must d.eliver the goods to any person en-
titled to them under this article upon due demand made at any time 
prior to sale or other disposition under this section. 
(5) The warehouseman may satisfy his lien from the proceeds of 
any sale or disposition under this section but must hold the balance 
for delivery on the demand of any person to whom he would have 
been bound to deliver the goods. 
§ 28:7—207. Goods must be kept separate; fungible goods 
(1) Unless the warehouse receipt otherwise provides, a warehouse-
man must keep separate the ^oods covered by each receipt so as to 
permit at all times identification and delivery of those goods except 
that different lots of fungible goods may be conuningled. 
(2) Fungible goods so commingled are owned in common by the 
persons entitled thereto and tKe warehouseman is severally liable to 
each owner for that owner's share. Where because of overissue a 
mass of fungible goods is insufficient to meet all the receipts which the 
warehouseman has issued against it, the persons entitled include all 
holders to whom overissued receipts have been duly negotiated. 
§28:7—208. Altered warehouse receipts 
Where a blank in a negotiable warehouse receipt has been filled in 
without authority, a purchaser for value and without notice of the 
want of authority, may treat the insertion as authorized. Any other 
unauthorized alteration leaves any receipt enforceable against the 
issuer according to its original tenor. 
93-025 0-64-48 
722 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:7—209. Lien of warehouseman 
(1) A warelioiisemau has a lien against the bailor on the goods 
covered by a warehouse receipt or on the proceeds thereof in his pos-
session for charges for storage or transportation (including demurrage 
and terminal charges), insurance, labor, or charges present or future 
ii'i relation to the goods, and for expenses necessary for preservation 
of the goods or reasonably incurred in their sale pursuant to law. 
If 
the person on whose account the goods are held is liable for like 
charges or expenses in relation to other goods whenever deposited 
and it is stated in the receipt that a lien is claimed for charges and 
expenses in relation to other goods, the warehouseman also has a lien 
against him for such charges and expenses whether or not the other 
goods have been delivered by the warehouseman. 
But against a person 
to whom a negotiable warehouse receipt is duly negotiated a ware-
liouseman's lien is limited to charges in an amount or at a rate specified 
on the receipt or if no charges are so specified then to a reasonable 
charge for storage of the goods covered by the receipt subsequent to 
the date of the receipt. 
(2) The warehouseman may also reserve a security interest against 
the bailor for a maximum amount specified on the receipt for charges 
other than those specified in subsection (1), such as for money 
advanced and interest. 
Such a security interest is governed by the 
article on secured transactions (article 9). 
(3) A warehouseman's lien for charges and expenses under subsec-
tion (1) or a security interest under subsection (2) is also effective 
against any person who so entrusted the bailor with possession of the 
goods that a pledge of them by him to a good faith purchaser for 
value would have been valid but is not effective against a person as to 
whom the document confers no right in the goods covered by it under 
section 28:7—503. 
(4) A warehouseman loses his lien on any goods which he volun-
tai-ily delivers or which he unjustifiably refuses to deliver. 
§28:7—210. Enforcement of warehouseman's lien 
(1) Except as provided in subsection (2), a warehouseman's lien 
may be enforced by public or private sale of the goods in bloc or in 
parcels, at any time or place and on any terms which are commercially 
reasonable, after notifying all persons known to claim an interest in 
the goods. 
Such notification must include a statement of the amount 
due, the nature of the proposed sale and the time and place of any 
public sale. The fact that a better price could have been obtained by 
a sale at a different time or in a different method from that selected 
by the warehouseman is not of itself sufficient to establish that the 
sale was not made in a commercially reasonable manner. 
If the 
warehouseman either sells the goods in the usual manner in any rec-
ognized market therefor, or if he sells at the price current in such 
market at the time of his sale, or if he has otherwise sold in conformity 
with commercially reasonable practices among dealers in the type of 
goods sold, he has sold in a commercially reasonable manner. 
A sale 
of more goods than apparently necessary to be offered ^o insure satis-
faction of the obligation is not commercially reasonable except in 
cases covered by the preceding sentence. 
(2) A warehouseman's lien on goods other than goods stored by a 
merchant in the course of his business may be enforced only as follows: 
(a) All persons known to claim an interest in the goods must 
be notified. 
(b) The notification must be delivered in person or sent by 
registered or certified letter to the last known address of any 
person to be notified. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
723 
(c) The notification nuist include an itemized statement of 
the claim, a description of the ^oods subject to the lien, a demand 
for payment within a specified time not less than ten days after 
receipt of the notification, and a conspicuous statement that unless 
the claim is paid within that time the goods will be advertised for 
sale and sold by auction at a specified time and place. 
(d) The sale must conform to the terms of the notification. 
(e) The sale must be held at the nearest suitable place to that 
where the goods are held or stored. 
(f) After the expiration of the time given in the notification, 
an advertisement of the sale must be published once a week for 
two weeks consecutively in a newspaper of general circulation 
where the sale is to be held. 
The advertisement must include a 
description of the goods, the name of the person on whose account 
they are being held, and the time and place of the sale. 
The 
sale must take place at least fifteen days after the first publica-
tion. 
If there is no newspaper of general circulation where the 
sale is to be held, the advertisement must be posted at least ten 
days before the sale in not less than six conspicuous places in the 
neighborhood of the proposed sale. 
(3) Before any sale pursuant to this section any person claiming a 
right in the goods may pay the amount necessary to satisfy the lien 
and the reasonable expenses incurred under this section. 
In that event 
the goods must not be sold, but must be retained by the w^arehouseman 
subject to the terms of the receipt and this article. 
(4) The warehouseman may buy at any public sale pursuant to 
this section. 
(5) A purchaser in good faith of goods sold to enforce a ware-
houseman s lien takes the goods free of any rights of persons against 
w^hom the lien was valid, despite noncompliance by the warehouseman 
w^ith the requirements of this section. 
(6) The warehouseman may satisfy his lien from the proceeds of 
any sale pursuant to this section but must hold the balance, if any, for 
delivery on demand to any person to whom he would have been bound 
to deliver the goods. 
(7) The rights provided by this section shall be in addition to all 
other rights allowed by law to a creditor against his debtor. 
(8) Where a lien is on goods stored by a merchant in the course 
of his business the lien may be enforced in accordance with either sub-
section (1) or (2). 
(9) The warehouseman is liable for damages caused by failure to 
comply with the requirements for sale under this section and in case 
of willful violation is liable for conversion. 
PART 3—BILLS OF LADING: SPECIAL PROVISIONS 
§28:7—301. Liability for non-receipt or misdescription; "said to 
contain"; "shipper's load and count"; improper 
handling 
(1) A consignee of a non-negotiable bill who has given value in 
good faith or a holder to whom a negotiable bill has been duly 
negotiated relying in either case upon the description therein of the 
goods, or upon the date therein shown, may recover from the issuer 
damages caused by the misdating of the bill or the non-receipt or mis-
description of the goods, except to the extent that the document indi-
cates that the issuer does not know whether any part or all of the 
goods in fact were received or conform to the description, as where the 
description is in terms of marks or labels or kind, quantity, or con-
dition or the receipt or description is qualified by "contents or con-
724 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
dition of contents of pacJ^ages unknown", "said to contain'", "shipper's 
weight, load and count" or the like, if such indication be true. 
(2) When goods are loaded by an issuer who is a common carrier, 
the issuer must count the packages of goods if package freight and 
ascertain the kind and quantity if bulk freight. In such cases "ship-
l)er"s weight, load and count"' or other words indicatuig that tlie 
description was made by the shipper are ineffective except as to 
freight concealed by packages. 
(3) When bulk freight is loaded by a shipper who makes available 
to the issuer adequate facilities for Aveighing such freight, an issuer 
who is a common carrier must ascertain the kind and quantity within 
a reasonable time after receiving the written request of the shipper 
to do so. In such cases "shipper's weight/' or other words of like 
pui"port are ineffective. 
(4) The issuer may by inserting in the bill the words "shipper's 
weight, load and count'' or other words of like purport indicate that 
the goods were loaded by the shipper; and if such statement be true 
the issuer shall not be liable for damages caused by the improper 
loading. But their omission does not imply liability for such damages. 
(5) The shipper shall be deemed to have guaranteed to the issuer 
the accuracy at the time of shipment of the description, marks, labels, 
number, kind, quantity, condition and weight, as furnished by him; 
and the shipper shall indemnify the issuer against damage caused by 
inaccuracies in such particulars. 
The right of the issuer to such 
indemnity shall in no way limit his responsibility and liability under 
the contract of carriage to any person other than the shipper. 
§ 28:7—302. Through bills of lading and similar documents 
(1) The issuer of a tlirough bill of lading or other document embody-
ing an undertaking to be performed in part by persons acting 
as its agents or by connecting carriers is liable to anyone entitled to 
recover on the document for any breach by such other persons or by 
a connecting carrier of its obligation under the document but to the 
extent that the bill covers an undertaking to be performed overseas 
or in territory not contiguous to tlie continental United States or an 
undertakin|r including matters other than transportation this liability 
may be varied by agreement of the parties. 
(2) Where goods covered by a through bill of lading oi- other docu-
ment embodying an undertaking to be performed in part by persons 
other than the issuer are received by any such person, he is subject 
with respect to his own performance while the goods are in his pos-
session to the obligation of the issuer. His obligation is discharged 
by delivery of the goods to another such person pursuant to the docu-
ment, and does not include liability for breach by any other such 
persons or by the issuer. 
(3) The issuer of such through bill of lading or other document shall 
be entitled to recover from the connecting carrier or such other person 
in possession of the goods when the breach of the obligation under the 
dociiment occurred, the amount it may be required to pay to anyone 
entitled to recover on the document therefor, as may be evidenced by 
any receipt, judgment, or transcript thereof, and the amount of any 
expense reasonably incurred by it in defending any action brought 
by anyone entitled to recover on the document therefor. 
§28:s7—303. Diversion; reconsignment; change of instructions 
(1) Unless the bill of lading otherwise provides, the carrier may 
deliver the goods to a person or destination other than that stated in 
the bill or may otherwise dispose of the goods on instructions from 
(a) the holder of a negotiable bill; or 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
725 
(b) the consignor on a non-negotiable bill notwithstanding 
contraiy histructions from the consignee; or 
(c) the consignee on a non-negotiable bill in the absence of 
contrary instructions from the consignor, if the goods have 
arrived at the billed destination or if the consignee is in posses-
sion of tlie bill; or 
(d) the consignee on a non-negotiable bill if he is entitled as 
against the consignor to dispose of them. 
(2) Unless such instructions are noted on a negotiable bill of lad-
ing, a person to whom the bill is duly negotiated can hold the bailee 
according to the original terms. 
§ 28:7—304. Bills of lading in a set 
(1) Except where customary in overseas transportation, a bill of 
lading must not be issued in a set of parts. The issuer is liable for 
damages caused by violation of this subsection. 
(2) Where a bill of lading is lawfully drawn in a set of parts, each 
of which is numbered and expressed to be valid only if the goods 
have not been delivered against any other part, the whole of the parts 
constitute one bill. 
(3) Where a bill of lading is lawfully issued in a set of parts and 
different parts are negotiated to different persons, the title of the 
holder to whom thei first due negotiation is made prevails as to both 
the document and the goods even though any later holder may have 
received the goods from the carrier in good faith and discharged 
the carrier's obligation by surrender of his part. 
(4) Any person who negotiates or transfers a single part, of a bill of 
lading drawn in a set is liable to holders of that part as if it were the 
whole set. 
(5) The bailee is obliged to deliver in accordance with part 4 of this 
article against the first presented part of a bill of lading lawfully 
drawn in a set. Such delivery discharges the bailee's obligation on the 
whole bill. 
§28:7—305. Destination bills 
(1) Instead of issuing a bill of lading to the consignor at the place 
of shipment a carrier may at the request of the consignor procure 
the bill to be issued at destination or at any other place designated in 
the request. 
(2) Upon request of anyone entitled as against the carrier to control 
the goods while in transit and on surrender of any outstanding bill of 
lading or other receipt covering such goods, the issuer may procure 
a substitute bill to be issued at any place designated in the request. 
§28:7—306. Altered bills of lading 
An unauthorized alteration or filling in of a blank in a bill of lading 
leaves the bill enforceable according to its original tenor. 
§28:7—307. Lien of carrier 
(1) A carrier has a lien on the goods covered by a bill of lading for 
charges subsequent to the date of its receipt of the goods for storage 
or transportation (including demurrage and terminal charges) and 
for expenses necessary for preservation of the goods incident to their 
transportation or reasonably incurred in their sale pursuant to law. 
But against a purchaser for value of a negotiable bill of lading a 
carrier's lien is limited to charges stated in the bill or the applicable 
tariffs, or if no charges are stated then to a reasonable charge. 
(2) A lien for charges and expenses under subsection (1) on goods 
which the carrier was required by law to receive for transportation is 
effective against the consignor or any person entitled to the goods 
unless the carrier had notice that the consignor lacked authority to 
726 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
subject the goods to sucli charges and expenses. Any other lien under 
subsection. (1) is effective against the consignor and any person who 
permitted the bailor to have control or possession of the goods unless 
the carrier had notice that the bailor lacked sucli authority. 
(3) A carrier loses his lien on any goods which he voluntarily 
delivers or which he unjustifiably refuses to deliver. 
§28:7—308. Enforcement of carrier's lien 
(1) A carrier's lien may be enforced by public or private sale of 
the goods, in bloc or in parcels, at any time or place and on any terms 
which are commercially reasonable, after notifying all persons known 
to claim an interest in the goods. 
Such notification must include a 
statement of the amount due, the nature of the proposed sale and the 
time and place of any public sale. The fact that a better price could 
have been obtained by a sale at a different time or in a different method 
from that selected by the carrier is not of itself sufficient to establish 
that the sale was not made in a commercially reasonable manner. If 
the carrier either sells the goods in the usual manner in any recognized 
market therefor or if he sells at the price current in such market at 
the time of his sale or if he has otherwise sold in conformity with 
commercially reasonable practices among dealers in the type oi goods 
sold he has sold in a commercially reasonable manner. A sale of more 
goods than apparently necessary to be offered to ensure satisfaction 
of the obligation is not commercially reasonable except in cases cov-
ered by the preceding sentence. 
(2) Before any sale pursuant to this section any person claiming 
a right in the goods may pay the amount necessary to satisfy the 
lien and the reasonable expenses incurred under this section. 
In 
that event the goods must not be sold, but must be retained by the 
carrier subject to the terms of the bill and this Article. 
(3) The carrier may buy at any public sale pursuant to this 
section. 
(4) A purchaser in good faith o
f
*
^ goods sold to enforce a carrier's 
lien takes the goods free of any rights of persons against whom the 
lien was valid, despite noncompliance by the carrier with the require-
ments of this section. 
(5) The carrier may satisfy his lien from the proceeds of any sale 
pursuant to this section but must hold the balance, if any, for delivery 
on demand to any person to whom he would have been bound to 
deliver the goods. 
(6) The rights provided by this section shall be in addition to 
all other rights allowed by law to a creditor against his debtor. 
(7) A carrier's lien may be enforced in accordance with either 
subsection (1) or the procedure set forth in subsection (2) of section 
28:7—210. 
(8) The carrier is liable for damages caused by failure to comply 
with the requirements for sale under this section and in case of willful 
violation is liable for conversion. 
§28:7—309. Duty of care; contractual limitation of carrier's 
liability 
(1) A carrier who issues a bill of lading whether negotiable or 
non-negotiable must exercise the degree of care in relation to the goods 
which a reasonably careful man would exercise under like circum-
stances. This subsection does not repeal or change any law or rule 
of law which imposes liability upon a common carrier for damages not 
caused by its negligence. 
(2) Damages may be limited by a provision that the carrier's lia-
bility shall not exceed a value stated in the document if the carrier's 
rates are dependent upon value and the consignor by the carrier's 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
727 
tariff is afforded an opportunity to declare a higher value or a value 
as lawfully provided in the tariff, or where no tariff is filed he is other-
wise advised of such opportunity; but no such limitation is effective 
with respect to the carrier's liability for conversion to its own use. 
(3) Reasonable provisions as to the time and manner of presenting 
claims and institutmg actions based on the shipment may be included 
in a bill of lading or tariff. 
PART 4—WAREHOUSE RECEIPTS AND BILLS OF LADING: 
GENERAL OBLIGATIONS 
§28:7—401. Irregularities in issue of receipt or bill or conduct of 
issuer 
The obligations imposed by this article on an issuer apply to a docu-
jnent of title regardless of the fact that 
(a) the document may not comply with the requirements of 
this article or of any other law or regulation regarding its issue, 
form or content; or 
(b) the issuer may have violated laws regulating the conduct 
of his business; or 
(c) the goods covered by the document were owned by the 
bailee at the time the document was issued; or 
(d) the person issuing the document does not come within the 
I 
definition of warehouseman if it purports to be a warehouse 
receipt. 
§28:7—402. Duplicate receipt or bill; overissue 
Neither a duplicate nor any other document of title purporting to 
cover goods already represented by an outstanding document of the 
same issuer confers any right in the goods, except as provided in the 
case of bills in a set, overissue of documents for fungible goods and 
substitutes for lost, stolen or destroyed documents. But the issuer is 
- liable for damages caused by his overissue or failure to identify a 
duplicate document as such by conspicuous notation on its face. 
§28:7—403. Obligation of warehouseman or carrier to deliver; 
excuse 
(1) The bailee must deliver the goods to a person entitled under the 
document who complies with subsections (2) and (3), unless and to 
the extent that the bailee establishes any of the following: 
(a) delivery of the goods to a person whose receipt was rightful 
as against the claimant; 
(b) damage to or delay, loss or destruction of the goods for 
which the bailee is not liable; 
(c) previous sale or other disposition of the goods in lawful 
enforcement of a lien or on warehouseman's lawful termination 
of storage; 
(d) the exercise by a seller of his right to stop delivery pur-
suant to the provisions of the article on sales (section 28:2— 
'^05); 
. 
. 
(e) a diversion, reconsignment or other disposition pursuant 
to the provisions of this article (section 28:7—303) or tariff 
regulating such right; 
(f) release, satisfaction or any other fact affording a personal 
defense against the claimant; 
(g) any other lawful excuse. 
(2) A person claiming goods covered by a document of title must 
satisfy the bailee's lien where the bailee so requests or where the bailee 
is prohibited by law from delivering the goods until the charges are 
paid. 
728 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(3) Unless the person claiming is one against whom the document 
confers no right under section 28:7—503(1), he must surrender for 
cancellation or notation of partial deliveries any outstanding negoti-
able document covering the goods, and the bailee must cancel the docu-
ment or conspicuously note the partial delivery thereon or be liable to 
any person to whom the document is duly negotiated. 
(4) "Person entitled under the document means holder in the case 
of a negotiable document, or the person to whom delivery is to be 
made by the terms of or pursuant to written instructions under a non-
negotiable document. 
§ 28:7—404. No liability for good faith delivery pursuant to receipt 
or bill 
A bailee who in good faith including observance of reasonable com-
mercial standards has received goods and delivered or otherwise dis-
posed of them according to the terms of the document of title or pur-
suant to this article is not liable therefor. 
This rule applies even 
though the person from whom he received the goods had no authority 
to procure the document or to dispose of the goods and even though 
the person to whom he delivered the goods had no authority to receive 
them. 
PART 5—WAREHOUSE RECEIPTS AND BILLS OF LADING: 
NEGOTIATION AND TRANSFER 
§28:7—501. Form of negotiation and requirements of "due 
negotiation" 
(1) A negotiable document of title running to the order of a named 
person is negotiated by his indorsement and delivery. After his in-
dorsement in blank or to bearer any person can negotiate it by delivery 
alone. 
(2) (a) A negotiable document of title is also negotiated by delivery 
alone when by its original terms it runs to bearer. 
(b) When a document running to the order of a named person is 
delivered to him the effect is the same as if the document had been 
negotiated. 
(3) Negotiation of a negotiable document of title after it has 
been indorsed to a specified person requires indorsement by the 
special indorsee as well as delivery. 
(4) A negotiable document of title is "duly negotiated" when it is 
negotiated in the manner stated in this section to a holder who 
purchases it in good faith without notice of any defense against or 
claim to it on the part of any person and for value, unless it is estab-
lished that the negotiation is not in the regular course of business 
or financing or involves receiving the document in settlement or 
payment of a money obligation. 
(5) Indorsement of a non-negotiable document neither makes it 
negotiable nor adds to the transferee's rights. 
(6) The naming in a negotiable bill of a person to be notified 
of the arrival of the goods does not limit the negotiability of the bill 
nor constitute notice to a purchaser thereof of any interest of such 
person in the goods. 
§28:7—502. Rights acquired by due negotiation 
(1) Subject to the following section and to the provisions of 
section 28:7—205 on fungible goods, a holder to whom a negotiable 
document of title has been duly negotiated acquires thereby: 
(a) title to the document ; 
(b) title to the goods; 
(c) all rights accruing under the law of agency or estoppel, 
including rights to goods delivered to the bailee after the docu-
ment was issued; and 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
729 
(d) tlie direct oblipition of the issuer to liold or deliver the 
tfoods according to the terms of the document fi'ee of any defense 
or chiini by him excej)t those arising under the terms of the 
document or under tliis article. 
In the case of a delivery order 
the bailee's obligation accrues only upon acceptance and the obli-
gation acquired by the holder is that the issuer and any indorser 
will procure the acceptance of the bailee. 
{'2) Subject to the following section, title and rights so acquired 
are not defeated by any stoppage of the goods represented by the 
document or by surrender of such goods by the bailee, and are not 
impaired even though the negotiation or any prior negotiation con-
situted a breach of duty or even though any person has been 
deprived of possession of the document by misrepresentation, fraud, 
accident, mistake, duress, loss, theft or conversion, or even though 
a previous sale or other transfer of the goods or document has been 
nuide to a third person. 
§ 28:7—503. Document of title to goods defeated in certain cases 
(1) A document of title confers no right in goods against a person 
who before issuance of the document had a legal interest or a 
perfected security interest in them and who neither 
(a) delivered or entrusted them or any document of title cover-
ing them to the bailor or his nominee with actual or apparent 
authority to ship, store or sell or with power to obtain delivery 
under this article (section 28:7—403) or with power of disposition 
under this subtitle (sections 28:2—403 and 28:9—307) or other 
statute or rule of law; nor 
(b) acquiesced in the procurement by the bailor or his nominee 
of any document of title. 
(2) Title to goods based upon an unaccepted delivery order is 
subject to the rights of anyone to whom a negotiable warehouse receipt 
or bill of lading covering the goods has been duly negotiated. 
Such 
a title may be defeated under the next section to the same extent as 
the rights of the issuer or a transferee from the issuer. 
(3) Title to goods based upon a bill of lading issued to a (freight 
forwarder is subject to the rights of anyone to whom a bill issued by 
the freight forwarder is duly negotiated; but delivery by the carrier 
in accordance -with, part 4 of this article pursuant to its own bill of 
lading discharges the carrier's obligation to deliver. 
§28:7—504. Rights acquired in the absence of due negotiation; 
effect of diversion; seller's stoppage of delivery 
(1) A transferee of a document, whether negotiable or non-
negotiable, to whom the document has been delivered but not duly 
negotiated, acquires the title and rights which his transferor had or 
had actual authority to convey. 
(2) In the case of a non-negotiable document, until but not after 
the bailee receives notification of the transfer, the rights of the trans-
feree may be defeated 
(a) by those creditors of the transferor who could treat the 
sale as void under section 28:2—402; or 
(b) by a buyer from the transferor in ordinary course of 
business if the bailee has delivered the goods to the buyer or 
received notification of his rights; or 
(c) as against the bailee by good faith dealings of the bailee 
with the transferor. 
(3) A diversion or other change of shipping instructions by the 
consignor in a non-negotiable bill of lading which causes the bailee 
not to deliver to the consignee defeats the consignee's title to the goods 
if they have been delivered to a buyer in ordinary course of business 
and in any event defeats the consignee's rights against the bailee. 
730 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(4) Delivery pursuant to a non-negotiable document may be stopped 
by a seller under sex'.tion 28:2—705, and subject to the requirement of 
due notification there provided. A bailee honoring the seller's instruc-
tions is entitled to be indemnified by the seller against any resulting 
loss or expense. 
§ 28:1'—505. Indorser not a guarantor for other parties 
The indorsement of a document of title issued by a bailee dims not 
make the indoi-ser liable for any default by the bailee or by previous 
indorsers. 
§28:7—506. Delivery vt^ithout indorsement: right to 
compel 
indorsement 
The transferee of a negotiable document of title has a specifically 
enforceable right to haveliis transferor supply any necessary indoi-se-
ment but the transfer becomes a negotiation only as of the time the 
indorsement is supplied. 
§28:7—507. Warranties on negotiation or transfer of receipt or 
bill 
Where a, person negotiates or transfers a document of title for value 
otherwise than as a mere intermediary under the next following sec-
tion, then unless otherwise agreed he warrants to his immediate pur-
chaser only in addition to any warranty made in selling the goods 
(a) that the document is ijenuine; and 
(b) that he has no knowledge of any fact which would impair 
its validity or worth; and 
(c) that his negotiation or transfer is rightful and fully effec-
tive with respect to the title to the documeivt and the goods it 
represents. 
§ 28:7—508. Warranties of collecting bank as to documents 
A collecting bank or other intermediary known to be entrusted with 
documents on behalf of another or with collection of a draft or other 
claim against delivery of documents warrants by such deliveiy of the 
documents only its own good faith and authority. This rule applies 
even though the intermediary has purchased or made advances against 
the claim or draft to be collected. 
§28:7—509. Receipt or bill: when adequate compliance with com-
mercial contract 
The question whether a document is adequate to fulfill the obliga-
tions of a contract for sale or the conditions of a credit is governed by 
the articles on sales (article 2) and on letters of credit (article 5). 
PART 6—WAREHOUSE RECEIPTS AND BILLS OF LADING: 
MISCELLANEOUS PROVISIONS 
§28:7—601. Lost and missing documents 
(1) If a document has been lost, stolen, or destroyed, a court may 
order delivery of the goods or issuance of a substitute document 
and the bailee may without liability to any person comply with such 
order. 
If the document was negotiable the claimant must post 
security approved by the court to indemnify any person who may 
suffer loss as a result of non-surrender of the document. 
If the docu-
ment was not negotiable, such security may be required at the discre-
tion of the court. The court may also in its discretion order payment 
of the bailee's reasonable costs and counsel fees. 
(2) A bailee who without court order delivei-s goods to a person 
claiming under a missing negotiable document is liable to any person 
injured thereby, and if the delivery is not in good faith becomes liable 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
731 
for conversion. Delivery in good faith is not conversion if made in 
accordance with a filed classification or tariff or, where no classification 
or tariff is filed, if the claimant posts security with the bailee in an 
amount at least double the value of the goods at the time of posting to 
indemnify any person injured by the delivery who files a notice of 
claim within one year after the delivery. 
§28:7—602. Attachment of goods covered by a negotiable docu-
ment 
Except where the document was originally issued upon delivery 
of the goods by a person who had no power to dispose of them, no 
lien attaches by virtue of any judicial process to goods in the possession 
of a bailee for which a negotiable dx)cument of title is outstanding 
unless the document be first surrendered to the bailee or its negotiation 
enjoined, and the bailee shall not be compelled to deliver the goods 
pursuant to process until the document is surrendered to him or 
impounded by the court. One who purchases the document for value 
without notice of the process or injunction takes free of the lien im-
posed by judicial process. 
§28:7—603. Conflicting claims; interpleader 
If more than one person claims title or possession of the goods, the 
bailee is excused from delivery until he has had a reasonable time 
to ascertain the validity of the adverse claims or to bring an action 
to compel all claimants to interplead and may compel such inter-
gleader, either in defending an action for non-delivery of the goods, or 
y original action, whichever is appropriate. 
ARTICLE 8—INVESTMENT SECURITIES 
PART 1—SHOET TITLE AND GENEEAL MATTEES 
Sec 
28:8—101. Short title. 
28:8—102. Definitions and index of definitions. 
28:8—103. Issuer's lien. 
28:8—104. Effect of overissue; "overissue". 
28:8—105. Securities negotiable; presumptions. 
28:8—106. Applicability. 
28:8—107. Securities deliverable; action for price. 
PAET 2—ISSUE—ISSUEE 
28:8—201. "Issuer". 
28:8—^202. Issuer's responsibility and defenses; notice of defect or defense. 
28:8—^203. Staleness as notice of defects or defenses. 
28:8—^204. Effect of issuer's restrictions on transfer. 
28:8—^205. Effect of unauthorized signature on issue. 
28:8—^206. Completion or alteration of instrument. 
28:8—^207. Rights of issuer with respect to registered owners. 
28:8—^208. Effect of signature of authenticating trustee, registrar or transfer 
agent. 
PAET 3—PUECHASE 
28:8—301. Rights acquired by purchaser; "adverse claim"; title acquired by 
bona fide purchaser. 
28:8—302. "Bona fide purchaser". 
28:8—303. "Broker". 
28:8—304. Notice to purchaser of adverse claims. 
28:8—305. Staleness as notice of adverse claims. 
28:8—306. Warranties on presentment and transfer. 
28:8—307. Effect of delivery without indorsement; right to compel indorsement. 
28:8—308. Indorsement, how made; special indorsement; indorser not a guar-
antor ; partial assignment. 
28:8—309. Effect of indorsement without delivery. 
28:8—310. Indorsement of security in bearer form. 
28:8—311. Effect of unauthorized indorsement. 
28:8—312. Effect of guaranteeing signature or indorsement. 
732 
PUBLIC LAW 88-243-DEC. 30, 1%3 
[77 STAT. 
ARTICLE 8—INVESTMENT SECURITIES— 
Continued 
PART 3—PURCHASE^—Continued 
Sec. 
28:8—313. When delivery to the purchaser occurs ; purchaser's broker as holder. 
28:8—314. Duty to deliver, when completed. 
28:8—315. Action against purchaser based upon v^•rongful transfer. 
28:8—316. Purchaser's right to requisites for registration of transfer on books. 
28:8—317. Attachment or levy upon security. 
28:8—318. No conversion by good faith delivery. 
28:8—319. Statute of frauds. 
28:8—320. Transfer or pledge within a central depository system. 
PART 4—REGISTRATION 
28:8—401. Duty of issuer to register transfer. 
28:8—402. Assurance that indorsements are effective. 
28:8—403. Limited duty of inquiry. 
28:8—404. Liability and non-liability for registration. 
28:8—405. Lost, destroyed, and stolen securities. 
28:8—406. Duty of authenticating trustee, transfer agent or registrar. 
28:8—407. Limitation of actions. 
PART 1—SHORT TITLE AND GENERAL MATTERS 
§28:8—101. Short title 
Citation o
f ai- 
This article shall be known and may be cited as Uniform Commer-
^
^
'
^
^
^
^ 
cial Code—Investment Securities. 
§ 28:8—102. Definitions and index of definitions 
(1) In this article unless the context otherwise requires 
(a) A "security" is an instrument which 
(i) is issued in bearer or registered form; and 
(ii) is of a type commonly dealt in upon securities ex-
changes or markets or commonly recognized in any area in 
which it is issued or dealt in as a medium for investment; and 
(iii) is either one of a class or series or by its terms is divis-
ible into a class or series of instruments; and 
(iv) evidences a share, participation or other interest in 
property or in an enterprise or evidences an obligation of the 
issuer. 
(b) A writing which is a security is governed by this article and 
not by Uniform Commercial Code—Commercial Paper even 
though it also meets the requirements of that article. This article 
does not apply to money. 
(c) A security is in "registered form" when it specifies a person 
entitled to the security or to the rights it evidences and when its 
transfer may be registered upon books maintained for that pur-
pose by or on behalf of an issuer or the security so states. 
(d) A security is in "bearer form" when it runs to bearer ac-
cording to its terms and not by reason of any indorsement. 
(2) A "subsequent purchaser" is a person who takes other than by 
original issue. 
(3) A "clearing corporation" is a corporation all of the capital stock 
of which is held by or for a national securities exchange or association 
registered under a statute of the United States such as the Securities 
p:xchange Act of 1934. 
(4) A "custodian bank" is any bank or trust company which is 
supervised and examined by state or federal authority having super-
vision over banks and which is acting as custodian for a clearing 
corporation. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
733 
(5) Other definitions applying to this article or to s[)ecifie(l i)<irls 
thereof and the sections in which they appear are: 
"Adverse claim". Section 28:8—301. 
"Bona fide purchaser". Section 28:8—302. 
"Broker". Section 28:8—303. 
"Guarantee of the signature". Section 28 :8—102. 
"Intermediary bank". Section 28:4—105. 
"Issuer". 
Section 28:8—201. 
"Overissue". Section 28:8—104. 
(6) In addition article 1 contains general definitions and principles 
of construction and interpretation applicable througliout this article. 
§28:8—103. Issuer's lien 
A lien upon a security in favor of an issuer thereof is valid against 
a purchaser only if the right of the issuer to such lien is noted con-
spicuously on the security. 
§28:8—104. Effect of overissue; "overissue" 
(1) The provisions of this article which validate a security or com-
pel its issue or reissue do not apply to the extent that validation, issue 
or reissue would result in overissue; but 
(a) if an identical security which does not constitute an over-
issue is reasonably available for purchase, the person entitled to 
issue or validation may compel the issuer to purchase and deliver 
such a security to him against surrender of the security, if any, 
which he holds; or 
(b) if a security is not so available for purchase, the person 
entitled to issue or validation may recover from the issuer the 
price he or the last purchaser for value paid for it with interest 
from the date of his demand. 
(2) "Overissue" means the issue of securities in excess of the amount 
which the issuer has corporate power to issue. 
§ 28:8—105. Securities negotiable; presumptions 
(1) Securities governed by this article are negotiable instruments. 
(2) In any action on a security 
(a) unless specifically denied in the pleadings, each signature 
on the security or in a necessary indorsement is admitted; 
(b) when the effectiveness of a signature is put in issue the 
burden of establishing it is on the party claiming under the sig-
nature but the signature is presumed to be genuine or authorized; 
(c) when signatures are admitted or established production 
of the instrument entitles a holder to recover on it unless the 
defendant establishes a defense or a defect going to the validity 
of the security; and 
(d) after it is shown that a defense or defect exists the plain-
tiff has the burden of establishing that he or some person under 
whom he claims is a person against whom the defense or defect 
is ineffective (section 28:8—202). 
§28:8—106. Applicability 
The validity of a security and the rights and duties of the issuer 
with respect to registration of transfer are governed by the law 
(including the conflict of laws rules) of the jurisdiction of organiza-
tion of the issuer. 
§ 28:8—107. Securities deliverable; action for price 
(1) Unless otherwise agreed and subject to any applicable law or 
regulation respecting short sales, a person obligated to deliver securi-
ties may deliver any security of the specified issue in bearer form or 
registered in the name of the transferee or indorsed to him or in 
blank. 
734 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(2) When the buyer fails to pay the price as it comes due under a 
contract of sale the seller may recover the price 
(a) of securities accepted by the buyer; and 
(b) of other securities if efforts at their resale would be unduly 
burdensome or if there is no readily available market for their 
resale. 
PART 2—ISSUE—ISSUER 
§28:8—201. "Issuer" 
(1) With respect to obligations on or defenses to a security "issuer" 
includes a person who 
(a) places or authorizes the placing of his name on a security 
(otherwise than as authenticating trustee, registrar, transfer 
agent or the like) to evidence that it represents a share, participa-
tion or other interest in his property or in an enterprise or to evi-
dence his duty to perform an obligation evidenced by the 
security; or 
(b) directly or indirectly creates fractional interests in his 
rights or property which fractional interests are evidenced by 
securities; or 
(c) becomes i-esponsible for or in place of any other person 
described as an issuer in this section. 
(2) With respect to obligations on or defenses to a security a 
guarantor is an issuer to the extent of his guaranty whetlier or not 
his obligation is noted on the security. 
(3) With respect to registration of transfer (part 4 of this article) 
"issuer" means a person on whose behalf transfer b(K)ks are 
maintained. 
§ 28:8—^202. Issuer's responsibility and defenses; notice of defect 
or defense 
(1) Even against a purchaser for value and without notice, the 
terms of a security include those stated on the security and those made 
part of the security by reference to another instrument, indenture or 
document or to a constitution, statute, ordinance, rule, regulation, 
order or the like to the extent that the terms so referred to do not 
conflict with the stated terms. 
Such a reference does not of itself 
charge a purchaser for value with notice of a defect going to the 
validity of the security even though the security expressly states that 
a person accepting it admits such notice. 
(2) (a) A security other than one issued by a goverimient or gov-
ernmental agency or unit even though issued with a defect going to its 
validity is valid in the hands of a purchaser for value and without 
notice of the particular defect unless the defect involves a violation 
of constitutional provisions in which case the security is valid in the 
hands of a subsequent purchaser for value and without notice of the 
defect. 
(b) The rule of subparagraph (a) applies to an issuer which is a 
government or governmental agency or unit only if either there has 
been substantial compliance with the legal requirements governing 
the issue or the issuer has received a substantial consideration for the 
issue as a whole or for the particular security and a stated purpose 
of the issue is one for which the issuer has power to borrow money or 
issue the security. 
(3) Except as otherwise provided in the case of certain unauthor-
ized signatures on issue (section 28 :8—205), lack of genuineness of a 
security is a complete defense even against a purchaser for value and 
without notice. 
(4) All other defenses of the issuer including nondelivery and 
conditional delivery of the security are ineffective against a purchaser 
for value who has taken without notice of the particular defense. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
735 
(5) Nothing in this section shall be construed to affect the right 
of a party to a "when, as and. if issued" or a "when distributed" 
contract to cancel the contract in the event of a material change in 
the character of the security which is the subject of the contract or 
in the plan or arrangement pursuant to which such security is to 
be issued or distributed. 
§ 28:8—^203. Staleness as notice of defects or defenses 
(1) After an act or event which creates a right to immediate per-
formance of the principal obligation evidenced by the security or 
which sets a date on or after which the security is to be presented or 
surrendered for redemption or exchange, a purchaser is charged with 
notice of any defect in its issue or defense of the issuer 
(a) if the act or event is one requiring the payment of money 
or the delivery of securities or both on presentation or surrender 
of the security and such funds or securities are available on the 
date set for payment or exchange and he takes the security more 
than one year after that date; and 
(b) if the act or event is not covered by paragraph (a) and 
he takes the security more than two years after the date set for 
surrender or presentation or the date on which such performance 
became due. 
(2) A call which has been revoked is not within subsection (1). 
§ 28:8—^204. Effect of issuer's restrictions on transfer 
Unless noted conspicuously on the security a restriction on trans-
fer imposed by the issuer even though otherwise lawful is ineffective 
except against a person with actual Imowledge of it. 
§ 28:8—^205. Effect of unauthorized signature on issue 
An unauthorized signature placed on a security prior to or in the 
course of issue is ineffective except that the signature is effective 
in favor of a purchaser for value and without notice of the lapk of 
authority if the signing has been done by 
(a) an authenticating trustee, registrar, transfer agent or other 
person entrusted by the issuer with the signing of the security or 
of similar securities or their immediate preparation for signing; 
or 
(b) an employee of the issuer or of any of the foregoing 
entrusted with responsible handling of the security. 
§28:8—^206. Completion or alteration of instrument 
(1) Where a security contains the signatures necessary to its issue 
or transfer but is incomplete in any other respect 
(a) any person may complete it by filling in the blanks as 
authorized; and 
(b) even though the blanks are incorrectly filled in, the security 
as completed is enforceable by a purchaser who took it for value 
and without notice of such incorrectness. 
(2) A complete security which has been improperly altered even 
though fraudulently remains enforceable but only according to its 
original terms. 
§28:8—^207. Rights of issuer with respect to registered owners 
(1) Prior to due presentment for registriation of transfer of a 
security in registered form the issuer or indenture trustee may treat 
the registered owner as the person exclusively entitled to vote, to 
I'eceive notifications and otherwise to exercise all the rights and 
powers of an owner. 
(2) Nothing in this article shall be construed to affect the liability 
of the registered owner of a security for calls, assessments or the 
like. 
736 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:8—^208. Effect of signature of authenticating trustee, regis-
trar or transfer agent 
(1) A person placing his signature upon a security as authenti-
cating trustee, registrar, transfer ageiit or tlie like wan-ants to a 
purchaser for value without notice of the particular defect tliat 
(a) the security is genuine; and 
(b) his own participation in the issue of the security is within 
his capacity and witliin the scope of the authorization received 
by him from the issuer; and 
(c) lie has reasonable grounds to believe that the security is in 
the form and within the amount the issuer is authorized to 
issue. 
(2) Unless otherwise agreed, a person by so placing his signature 
does not assume responsibility for the validity of the secui'ity in other 
respects. 
PART 3—PURCHASE 
§ 28:8—301. Rights acquired by purchaser; "adverse claim"; title 
acquired by bona fide purchaser 
(1) Upon delivery of a security the purchaser acquires the rights 
in the security which his transferor had or had actual authority to 
convey except that a purchaser who has himself been a party to any 
fraud or illegality affecting the security or w^ho as a prior holder 
had notice of an adverse claim cannot improve his position by taking 
from a later bona fide purchaser. 
"Adverse claim" includes a claim 
that a transfer was or would be wrongful or that a particular adverse 
person is the owner of or has an interest in the security. 
(2) A bona fide purchaser in addition to acquiring the rights of 
a purchaser also acquires the security free of any adverse claim. 
(3) A purchaser of a limited interest acquires rights only to the 
extent of the interest purchased. 
§28:8—302. "Bona fide purchaser" 
A "bona fide purchaser'' is a purchaser for vakie in good faith and 
without notice of any adverse claim who takes delivery of a security 
in bearer form or of one in registered form issued to him or indorsed 
to him or in blank. 
§28:8—303. "Broker" 
"Broker" means a person engaged for all or part of his time in the 
business of buying and selling securities, who in the transaction con-
cerned acts for, or buys a security from or sells a security to a customer. 
Nothing in this article determines the capacity in which a person acts 
for purposes of any other statute or rule to which such person is 
subject. 
§ 28:8—304. Notice to purchaser of adverse claims 
(1) A purchaser (including a broker for the seller or buyer but 
excluding an intermediary bank) of a security is charged with notice 
of adverse claims if 
(a) the security whether in bearer or registered form has been 
indorsed "for collection" or "for surrender" or for some other 
purpose not involving transfer; or 
(b) the security is m bearer form and has on it an unambiguous 
statement that it is the property of a person other than the 
transferor. 
The mere writing of a name on a security is not such 
a statement. 
(2) The fact that the purchaser (including a broker for the seller 
or buyer) has notice that the security is held for a third person or is 
registered in the name of or indorsed by a fiduciary does not create a 
duty of inquiry into the rightfulness of the transfer or constitute 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
737 
notice of adverse claims. If, however, the purchaser (exchiding an 
intermediary bank) lias knowledge that the proceeds are being used 
or that the transaction is for the individual benefit of the fiduciary or 
otherwise in breach of duty, the purchaser is charged with notice of 
adverse claims. 
§28:8—305. Stateness as notice of adverse claims 
An act or event which creates a right to immediate performance of 
the principal obligation evidenced by the security or which sets a date 
on or after which the security is to be presented or surrendered for 
redemption or exchange does not of itself constitute any notice of 
adverse claims except in the case of a purchase 
(a) after one year from any date set for such presentment or 
surrender for redemption or exchange; or 
(b) after six months from any date set for payment of money 
against presentation or surrender of the security if funds are 
available for payment on that date. 
§28:8—306. Warranties on presentment and transfer 
(1) A person who presents a security for registration of transfer 
or for payment or exchange warrants to the issuer that he is entitled to 
Ihe registration, payment or exchange. 
But a purchaser for value 
without notice of adverse claims who receives a new, reissued or re-reg-
istered security on registration of transfer warrants only that he has no 
loiowiedge of any unauthorized signature (section 28:8—311) in a 
necessary indorsement. 
(2) A person by transferring a security to a purchaser for value 
warrants only that 
(a) his transfer is effective and rightful; and 
(b) the security is genuine and has not been materially altered; 
and 
(c) he knows no fact which might impair the validity of the 
security. 
(3) Where a security is delivered by an intermediary known to be 
entrusted with delivery of the security on behalf of another or with 
collection of a draft or other claim against such delivery, the inter-
mediary by such delivery warrants only his own good faith and 
authority even though he has purchased or made advances against 
the claim to be collected against the delivery. 
(4) A pledgee or other holder for security who redelivers the secu-
lity received, or after payment and on order of the debtor delivers 
that security to a third person makes only the warranties of an inter-
mediary under subsection (3). 
(5) A broker gives to his customer and to the issuer and a purchaser 
the warranties provided in this section and has the rights and privi-
leges of a purchaser under this section. 
The warranties of and in 
favor of the broker acting as an agent are in addition to applicable 
warranties given by and in favor of his customer. 
§ 28:8—307. Effect of delivery without indorsement; right to com-
pel indorsement 
Where a security in registered form has been delivered to a pur-
chaser without a necessary indorsement he may become a bona fide 
purchaser only as of the time the indorsement is supplied, but against 
the transferor the transfer is complete upon delivery and the pur-
chaser has a specifically enforceable right to have any necessary 
indorsement supplied. 
93-025 0-64-49 
738 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:8—308. Indorsement, how made; special indorsement; in-
dorser not a guarantor; partial assignment 
(1) An indorsement of a security in registered form is made when 
an appropriate person signs on it or on a separate document an 
assignment or transfer of tlie security or a power to assign or transfer 
it or when the signature of such person is written without more upon 
tlie back of the security. 
(2) An indorsement may be in blank or speciah 
An indorsement 
in blank includes an indorsement to bearer. A special indorsement 
specifies the person to whom the security is to be transferred, or who 
has power to transfer it. 
A holder may convert a blank indorsement 
into a special indorsement. 
(3) "An appropriate person'" in subsection (1) means 
(a) thfi person specified by the security or by special indorse-
ment to be entitled to the security; or 
(b) where the person so specified is described as a fiduciai-y 
but is no longer serving in the described capacity,—either that 
person or his successor; or 
(c) where the security or indorsement so specifies more than 
one person as fiduciaries and one or more are no longer serving 
in the described capacity,—the remaining fiduciary or fiduciaries, 
whether or not a successor has been appomted or qualified; or 
(d) where the person so specified is an individual and is with-
out capacity to act by virtue of death, incompetence, infancy or 
otherwise,—his 
executor, 
administrator, 
guardian 
or 
like 
fiduciary; or 
(e) where the security or indorsement so specifies more than 
one person as tenants by the entirety or with right of survivorship 
and by reason of death all cannot sign,—the survivor or survivors; 
or 
(f) a person having power to sign under applicable law or 
controlling instrument; or 
(g) to the extent that any of the foregoing persons may act 
through an agent,—his authorized agent. 
(4) Unless otherwise agreed the indorser by his indorsement 
assumes no obligation that the security will be honored by the issuer. 
(5) An indorsement purporting to be only of part of a security 
representing units intended by the issuer to be separately transferable 
is effective to the extent of the indorsement. 
(6) Whether the person signing is appropriate is determined as of 
the date of signing and an indorsement by such a person does not 
become unauthorized for the purposes of this article by virtue of any 
subsequent change of circumstances. 
(7) Failure of a fiduciary to comply with a controlling instrument 
or with the law of the state having jurisdiction of the fiduciary rela-
tionship, including any law requiring the fiduciary to obtain court 
approval of the transfer, does not render his indorsement unauthorized 
for the purposes of this article. 
§28:8—309. Effect of indorsement without delivery 
An indorsement of a security whether special or in blank does not 
constitute a transfer until delivery of the security on which it appears 
or if the indorsement is on a separate document until delivery of both 
the document and the security. 
§ 28:8—310. Indorsement of security in bearer form 
An indorsement of a security in bearer form may give notice 
of adverse claims (section 28:8—304) but does not otherwise affect 
any right to registration the holder may possess. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
739 
§28:8—311. Effect of unauthorized indorsement 
Unless the owner has ratified an unauthorized indorsement or is 
otherwise precluded from asserting its ineffectiveness 
(a) he may assert its ineffectiveness against the issuer or any 
purchaser other than a purchaser for value and without notice 
of adverse claims who has in good faith received a new, reissued 
or re-registered security on registration of transfer; and 
(b) an issuer who registers the transfer of a security upon the 
unauthorized indorsement is subject to liability for improper 
registration (section 28:8—404). 
§ 28:8—312. Effect of guaranteeing signature or indorsement 
(1) Any person guaranteeing a signature of an indorser of a 
security warrants that at the time of signing 
(a) the signature was genuine; and 
(b) the signer was an appropriate person to indorse (section 
28:8—308); and 
(c) the signer had legal capacity to sign. 
But the guarantor does not otherwise warrant the rightfulness of the 
|)articular transfer. 
(2) Any person may guarantee an indorsement of a security and by 
so doing warrants not only the signature (subsection 1) but also the 
rightfulness of the particular transfer in all respects. But no issuer 
may require a guarantee of indorsement as a condition to registration 
of transfer. 
(3) The foregoing warranties are made to any person taking or 
dealing with the security in reliance on the guarantee and the guaran-
tor is liable to sucli person for any loss resulting from breach of the 
warranties. 
§28:8—313. When delivery to the purchaser occurs; purchaser's 
broker as holder 
(1) Delivery to a purchaser occurs when 
(a) he or a pereon designated by him acquires possession of a 
security; or 
(b) his broker acquires possession of a security specially 
indorsed to or issued in the name of the purchaser; or 
(c) his broker sends him confirmation of the purchase and also 
by book entry or otherwise identifies a specific security in the 
broker's possession as belonging to the purchaser; or 
(d) with respect to an identified security to be delivered while 
still in the possession of a third person when that person acknowl-
edges that he holds for the purchaser; or 
(e) appropriate entries on the books of a clearing corporation 
are made under section 28:8—320. 
(2) The purchaser is the owner of a security held for him by his 
broker, but is not the holder except as specified in subparagraphs 
(b), (c) and (e) of subsection (1). Where a security is part of a 
fungible bulk the purchaser is the owner of a proportionate property 
interest in the fungible bulk. 
(3) Notice of an adverse claim received by the broker or by the 
l)urcliaser after the broker takes delivery as a holder for value is not 
effective either as to the broker or as to the purchaser. 
However, as 
between the broker and the purchaser the purchaser may demand 
delivery of an equivalent security as to which no notice of an adverse 
claim has been received. 
740 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:8—314. Duty to deliver, when completed 
(1) Unless otherwise agreed where a sale of a security is made on 
an exchange or otherwise through brokers 
(a) the selling customer fulfills his duty to deliver when he 
places such a security in the possession of the selling broker or 
of a person designated by the broker or if requested causes an 
acknowledgment to be made to the selling broker that it is held 
for him; and 
(b) the selling^broker including a correspondent broker acting 
for a selling customer fulfills his duty to deliver by placing the 
security or a like security in the possession of the buying broker 
or a person designated by him or by effecting clearance of the sale 
in accordance with the rules of the exchange on which the trans-
action took place. 
(2) Except as otherwise provided in this section and unless other-
wise agreed, a transferor's duty to deliver a security under a contract 
of purchase is not fulfilled until he places the security in form to be 
negotiated by the purchaser in the possession of the purchaser or of a 
person designated by him or at the purcliaser's request causes an 
acknowledgment to be made to the purchaser that it is held for him. 
r^nless made on an exchange a sale to a broker purchasing for his 
own account is within this subsection and not within subsection (1). 
§28:8—315. Action against 
purchaser based upon 
wrongful 
transfer 
(1) Any person against whom tlie transfer of a security is wrong-
ful for any reason, including his incapacity, may against anyone 
except a bona fide pui'chaser reclaim ])ossession of the security or 
obtain possession of any new security evidencing all or part of the 
same rights or have damages. 
(2) If the transfer is wrongful because of an unautliorized indorse-
ment, the owner may also reclaim or obtain possession of the security 
or new security even from a bona fide purchaser if the ineffectiveness 
of the purported indoi-sement can be asserted against him under the 
provisions of this article on unauthorized indorsements (section 
28:8-^311). 
(3) The right to obtain or reclaim possession of a security may be 
specifically enforced and its transfer enjoined and the security im-
pounded pending the litigation. 
§28:8—316. Purchaser's right to requisites for registration of 
transfer on books 
LTnless otherwise agreed the tranferor must on due demand sup-
ply his purchaser with any proof of his authority to transfer or with 
any other requisite which nuiy be necessary to obtain registration of 
the transfer of the security but if the transfer is not for value a trans-
feror need not do so unless the purchaser furnishes the necessary 
expenses. Failure to comply with a demand made within a reasonable 
time gives the purchaser the right to reject or rescind the transfer. 
§28:8—317. Attachment or levy upon security 
(1) No attachment or levy upon a security or any share or other 
interest evidenced thereby which is outstanding shall be valid until 
the security is actually seized by the officer making the attachment 
or levy but a security which has been surrendered to the issuer may 
be attached or levied upon at the source. 
(2) A creditor whose debtor is the owner of a security shall be en-
titled to such aid from courts of appropriate jurisdiction, by in-
junction or otherwise, in reaching such security or in satisfying the 
claim by means thereof as is allowed at law or in equity in regard 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
741 
to property which cannot, readily be attached or levied upon by or-
dinary legal process. 
§ 28:8—318. No conversion by good faith delivery 
An agent or bailee who in good faith (including observance of rea-
sonable commercial standards if he is in the business of buying, selling 
or otherwise dealing with securities) has received securities and sold, 
pledged or delivered them according to the instructions of his prin-
cipal is not liable for conversion or for participation in breach of 
fiduciary duty although the principal had no right to dispose of them. 
§28:8-^19. Statute of frauds 
A contract for the sale of securities is not enforceable by way of 
action or defense unless 
(a) there is some writing signed by the party against whom 
enforcement is sought or by his authorized agent or broker suf-
ficient to indicate that a contract has been made for sale of a stated 
quantity of described securities at a defined or stated price; or 
(b) delivery of the security has been accepted or payment has 
been made but the contract is enforceable under this provision 
only to the extent of such delivery or payment; or 
(c) within a reasonable time a writing in confirmation of the 
sale or purchase and sufficient against the sender under paragraph 
(a) has been received by the party against whom enforcement is 
sought and he has failed to send written objection to its contents 
within ten days after its receipt; or 
(d) the party against whom enforcement is sought admits in 
his pleading, testimony or otherwise in court that a contract was 
made for sale of a stated quantity of described securities at a 
defined or stated price. 
§28:8—320. Transfer or pledge within a central 
depository 
system 
(1) If a security 
(a) is in the custody of a clearing corporation or of a custodian 
bank or a nominee of either subject to the instructions of the 
clearing corporation; and 
(b) is in bearer form or indorsed in blank by an appropriate 
person or registered in the name of the clearing corporation or 
custodian bank or a nominee of either; and 
(c) is shown on the account of a transferor or pledgor on the 
books of the clearing corporation; 
then, in addition to other methods, a transfer or pledge of the security 
or any interest therein may be effected by the making of appropriate 
entries on the books of the clearing corporation reducing the account 
of the transferor or pledgor and increasing the account of the trans-
feree or pledgee by the amount of the obligation or the number of 
shares or rights transferred or pledged. 
(2) Under this section entries may be with respect to like securities 
or interests therein as a part of a fungible bulk and may refer merely 
to a quantity of a particular security without reference to the name of 
the registered owner, certificate or bond number or the like and, in 
appropriate cases, may be on a net basis taking into account other 
transfers or pledges of the same security. 
(3) A transfer or pledge under this section has the effect of a de-
livery of a security in bearer form or duly indorsed in blank (section 
28:8—301) representing the amount of the obligation or the number 
of shares or rights transferred or pledged. If a pledge or the creation 
of a security interest is intended, the making of entries has the effect 
of a taking of delivery by the pledgee or a secured party (sections 
28:9—304 and 28:9—305). A transferee or pledgee under this section 
is a holder. 
742 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(4) A transfer or pledge imder this section does not constitute a 
registration of transfer under part 4 of this article. 
(5) That entries made on the books of the clearing corporation as 
provided in subsection (1) are not appropriate does not affect the 
validity or effect of the entries nor the liabilities or obligations of the 
clearing corporation to any person adversely affected thereby. 
PART 4—REGISTRATION 
§28:8—401. Duty of issuer to register transfer 
(1) Where a security in registered form is presented to the issuer 
with a request to register transfer, the issuer is under a duty to register 
the transfer as requested if 
(a) the security is indorsed by the appropriate person or per-
sons (section 28:8—308) ; and 
(b) reasonable assurance is given that those indorsements are 
genuine and effective (section 28:8—402) ; and 
(c) the issuer has no duty to inquire into adverse claims or has 
discharged any such duty (section 28:8—i03); and 
(d) any applicable law relating to the collection of taxes has 
been complied with; and 
(e) the transfer is in fact rightful or is to a bona fide purchaser. 
(2) Where an issuer is under a duty to register a transfer of a 
security the issuer is also liable to the person presenting it for regis-
tration or his principal for loss resulting from any unreasonable delay 
in registration or from failure or refusal to register the transfer. 
§ 28:8—402. Assurance that indorsements are effective 
(1) The issuer may require the following assurance tliat each neces-
sary indorsement (section 28:8—308) is genuine and effective 
(a) in all cases, a guarantee of the signature (subsection (1) 
of section 28:8—312) of the person indorsing; and 
(b) where the indorsement is by an agent, appropriate assur-
ance of authority to sign; 
(c) where the indorsement is by a fiduciary, appropriate evi-
dence of appointment or incumbency; 
(d) where there is more than one fiduciary, reasonable assur-
ance that all who are required to sign have done so; 
(e) where the indorsement is by a person not covered by any 
of the foregoing, assurance appropriate to the case corresponding 
as nearly as may be to the foregoing. 
(2) A "guarantee of the signature"' in subsection (1) means a 
guarantee signed by or on behalf of a person reasonably believed by 
the issuer to be responsible. 
The issuer may adopt standards with 
respect to responsibility provided such standards are not manifestly 
inireasonable. 
(3) "Appropriate evidence of appointment or incumbency" in sub-
section (1) means 
(a) in the case of a fiduciary appointed or qualified by a court, 
a certificate issued by or under the direction or supervision of that 
court or an officer thereof and dated within sixty days before the 
date of presentation for transfer; or 
(b) in any other case, a copy of a document showing the ap-
pointment or a certificate issued by or on behalf of a person 
reasonably believed by the issuer to be responsible or, in the 
absence of such a document or certificate, other evidence reason-
ably deemed by the issuer to be appropriate. 
The issuer may 
adopt standards with respect to such evidence provided such 
standards are not manifestly unreasonable. 
The issuer is not 
charged with notice of the contents of any document obtained 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
743 
pursuant to this paragraph (b) except to tlie extent tliat the 
contents relate directly to the appointment or incumbency. 
(4) The issuer may elect to require reasonable assurance beyond 
that specified in this section but if it does so and for a purpose other 
than that specified in subsection 3(b) both requires and obtains a copy 
of a Avill, trust, indenture, articles of co-partnership, by-laws or other 
controlling instrument it is charged with notice of all matters con-
tained therein affecting the transfer. 
§28:8—403. Limited duty of inquiry 
(1) An issuer to whom a security is presented for registration is 
under a duty to inquire into adverse claims if 
(a) a written notification of an adverse claim is received at a 
time and in a manner which affords the issuer a reasonable 
opportunity to act on it prior to the issuance of a new, reissued 
or re-registered security and the notification identifies the claim-
ant, the registered owner and the issue of which the security is 
a part and provides an address for communications directed to 
the claimant; or 
(b) the issuer is charged with notice of an adverse claim from 
a controlling instrument which it has elected to require under 
subsection (4) of section 28:8—402. 
(2) The issuer may discharge any duty of inquiry by any reason-
able means, including notifying an adverse claimant by registered 
or certified mail at the address furnished by him or if there be no such 
address at his residence or regular place of business that the security 
has been presented for registration of transfer by a named person, and 
that the transfer will be registered unless within thirty days from the 
date of mailing the notification, either 
(a) an appropriate restraining order, injunction or other 
process issues from a court of competent jurisdiction; or 
(b) an indemnity bond sufficient in the issuer's judgment to 
protect the issuer and any transfer agent, registrar or other agent 
of the issuer involved, from any loss which it or they may suft'er 
by complying with the adverse claim is filed with the issuer. 
(3) Unless an issuer is charged with notice of an adverse claim 
from a controlling instrument which it has elected to require mider 
subsection (4) of section 28:8—402 or receives notification of an 
adverse claim under subsection (1) of this section, where a security 
presented for registration is indorsed by the appropriate person or 
persons the issuer is under no duty to inquire into adverse claims. 
In particular 
(a) an issuer registering a security in the name of a ])erson 
who is a fiduciary or who is described as a fiduciary is not bound 
to inquire into the existence, extent, or correct description of the 
fiduciary relationship and thereafter the issuer may assume with-
out inquiry that the newly registered owner continues to be the 
fiduciary until the issuer receives written notice that the fiduciary 
is no longer acting as such with respect to the particular security; 
(b) an issuer registering transfer on an indorsement by a 
fiduciary is not bound to inquire whether the transfer is made 
in compliance with a controlling instrument or with the law of the 
state having jurisdiction of the fiduciary relationship, including 
any law requiring the fiduciary to obtain court approval of the 
transfer; and 
(c) the issuer is not charged with notice of the contents of any 
court record or file or other recorded or unrecorded document even 
though the document is in its possession and even though the 
transfer is made on the indorsement of a fiduciary to the ,fidu-
ciary himself or to his nominee. 
744 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:8—404. Liability and non-liability for registration 
(1) Except as otherwise provided in any law i-elating to the collec-
tion of taxes, the issuer is not liable to the owner or any other person 
sutfering loss as a result of the registration of a transfer of a secu-
(a) there Avere on or with the security the necessary indorse-
ments (section 28:8—308) ; and 
(b) the issuer had no duty to inquire into adverse claims or 
has discharged any such duty (section 28:8—1:08). 
(2) Where an issuer has registered a transfer of a security to a 
person not entitled to it the issuer on demand must deliver a like 
security to the true owner unless 
(a) the registration was pursuant to subsection (1) ; or 
(b) the owner is precluded from asserting any claim for regis-
tering the transfer under subsection (1) of the following section; 
or 
J 
(c) such deliveiy would result in overissue, in which case the 
I 
issuer's liability is governed by section 28:8—10-1. 
§28:8—405. Lost, destroyed and stolen securities 
(1) Where a security has been lost, apparently destroyed or wrong-
fully taken and the owner fails to notify the issuer of that fact within, 
a reasonable time after he has notice of it and the issuer registers a 
transfer of the security before receiving such a notification, the owner 
is precluded from asserting against the issuer any claim for registering 
the transfer under the preceding section or any claim to a new security 
under this section. 
(2) Where the owner of a security claims that the security has been 
lost, destroyed or wrongfully taken, the issuer must issue a new secu-
rity in place of the original security if the owner 
(a) so requests before the issuer has notice that the security has 
been acquired by a bona fide purchaser; and 
(b) files with the issuer a sufficient indemnity bond; and 
(c) satisfies any other reasonable requirements imposed by the 
issuer. 
(3) If, after the issue of the new security, a bona fide purchaser of 
<:he original security presents it for registration of transfer, the issuer 
must register the transfer unless registration would result in overissue, 
in which event the issuer's liability is governed by section 28:8—104. 
In addition to any rights on the indemnity bond, the issuer may 
recover the new security from the person to whom it was issued or any 
person taking under him except a bona fide purchaser. 
§28:8—406. Duty of authenticating trustee, transfer agent or 
registrar 
(1) Where a person acts as authenticating trustee, transfer agent, 
registrar, or other agent for an issuer in the registration of transfere 
of its securities or in the issue of new securities or in the cancellation 
of surrendered securities 
(a) he is under a duty to the issuer to exercise good faith and 
due diligence in performing his functions; and 
(b) he has with regard to the particular functions he performs 
the same obligation to the holder or owner of the security and has 
the same rights and privileges as the issuer has in regard to those 
functions. 
(2) Notice to an authenticating trustee, transfer agent, registrar 
or other such agent is notice to the issuer with respect to the functions 
performed by the agent. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
745 
§28:8—407. Limitation of actions 
(1) In the exenf of registration, either before or after this subtitle 
becomes effective, of a transfer or purported transfer of a security to 
a person not entitled to it, no action of any kind, legal or equitable, 
to compel the issue, reissue or delivery of a like security or to obtain 
damages or any other relief as a result of or in connection with such 
registration may be brought, subject to subsection (2), by the true 
owner or any other person against an issuer, authenticating trustee, 
transfer agent, registrar, or other agent for an issuer in the registration 
of transfers of its securities, more than eight years after the date on 
which such registration to a person not entitled has taken place. 
(2) The time limitations in subsections (1) and (8) of this section 
may not be tolled or suspended for any reason. 
This section is addi-
tional to, and does not prevent or art'ect the application of, any other 
statute of limitations as a defense to any action. 
This section applies 
to claims or causes of action which have accrued before this subtitle 
becomes effective as well as to those which accrue after this subtitle 
becomes effective. 
This section does not apply to any action against an 
issuer which at the time of such registration has fewer than fifty per-
sons registered upon books maintained for that purpose as holders of 
the class and series, if any, of the security so registered to the person 
not entitled to it. 
(3) If the eight year period specified in this section expires prior 
to one year after the effective date of this subtitle, such period is ex-
tended to one year after such effective date. 
ARTICLE 9—SECURED TRANSACTIONS; SALES 
OF ACCOUNTS, CONTRACT RIGHTS AND 
CHATTEL PAPER 
PART 1—SHORT TITLE, APPLICABILITY AND DEFINITIONS 
Sec. 
28:9—101. Short title. 
28:9—102. Policy and scope of article. 
28:9—103. Accounts, contract rights, general intangibles and equipment relating 
to another jurisdiction; and incoming goods already subject to a 
security interest. 
28 :9—104. Transactions excluded from article. 
28:9—105. Definitions and index of definitions. 
28 :9—106. Definitions : "account" ; "contract right" ; "general intangibles". 
28 :9—107. Definitions : "purchase money security interest". 
28:9—108. When after-acquired collateral not security for antecedent debt. 
28:9—109. Classification 
of goods; "consumer goods"; "equipment"; 
"farm 
products"; "inventory". 
28 :9—110. Sufficiency of description. 
28:9—111. Applicability of bulk transfer laws. 
28 :9—^112. Where collateral is not owned by debtor. 
28:9—113. Security interests arising under article on sales. 
PART 2—VALIDITY OF SECURITY AGREEMENT AND RIGHTS OF PARTIES THERETO 
28:9—201. General validity of security agreement. 
28:9—202. Title to collateral immaterial. 
28:9—203. Enforceability of security interest; proceeds, formal requisites. 
28:9—204. When security interest attaches; after-acquired property; future 
advances. 
28:9—205. Use or disposition of collateral without accounting permissible. 
28:9—206. Agreement not to assert defenses against assignee; modification of 
sales warranties where security agreement exists. 
28:9—207. Rights and duties when collateral is in secured party's possession. 
28 :9—208. Request for statement of account or list of collateral. 
746 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
ARTICLE 9—SECURED TRANSACTIONS; SALES 
OF ACCOUNTS, CONTRACT RIGHTS AND 
CHATTEL PAPER—Continued 
I'ART 3—KuniTs OF THIRD 1'ARTIKS ; I'KRFKCTKD AXD r.\PKRKECTKU 
SKCURITY 
INTKRESTS; IUI.KS OF PRIORITY 
SKf. 
28 :9—301. I'ersoiis who take priority over uuperfected .seouritj' interests; "lieu 
creditor". 
28 :S)—302. AN'heii tiling is required to perfect security interest; security interests 
to which filing provisions of this article do not apply. 
28 :"J—303. When security interest is perfected; continuity of perfection. 
28:9—304. Perfection of security interest in instruments, documents, and goods 
covered by documents; perfection by permissive filing; temporary 
perfection without filing or transfer of possession. 
28:1)—3or». When ix)ssession by secured, party perfects security interest without 
filing. 
28 ;l)—30(5. "I'roceeds"; secured party's rights on disposition of collateral. 
28 :9—307. I'rotectiou (•f buyers of goods. 
28:1)—308. Purchase (»f chattel paper and non-negotiable instruments. 
28:9—309. Protection of purchasers of instruments and documents. 
28:9—310. Priority of certain liens arising by operation of law. 
28 :i)—311. Alienability of debtor's Tights: judicial process. 
28 :9—312. Priorities among conflicting security interests in the Same collateial. 
28:9—313. Priority of security interests in fixtures. 
28:9--314. Accessions. 
28 :J)—3ir>. Priority when goods are commingled or processed. 
28:9—316. Priority subject to subordination, 
28:9—317. Secured party not obligated on contract of debtor. 
28:9—318. Defenses against assignee; modification of contract after notification 
of assignment; term prohibiting assignment ineffective; identifica-
tion and proof of assignment. 
PART 4—FILING 
28:9—401. Place of filing; erroneous filing; removal of collateral. 
28:9—402. Formal requisites of financing statement; amendments. 
28:9—403. What constitutes filing; duration of filing; effect of lapsed 
filing; 
duties of filing oflBcer. 
28:9—404. Termination statement. 
28:9—405. Assignment of security interest; duties of filing officer; fees. 
28:9—406. Release of collateral; duties of filing officer; fees. 
28:9—407. Information from filing officer. 
PART 5—DEFAULT 
28:9—501. Default; procedure when security agreement covers both real and 
personal property. 
28:9—502. Collection rights of secured party. 
28:9—503. Secured party's right to take possession after default. 
28:9—504. Secured party's right to dispose of collateral after default; effect of 
disposition. 
28:9—505. Compulsory disposition of collateral; acceptance of the collateral as 
discharge of obligation. 
28:9—506. Debtor's right to redeem collateral. 
28:9—507. Secured party's liability for failure to comply with this part. 
PART 1—SHORT TITLE, APPLICABILITY AND 
DEFINITIONS 
§28:9—101. Short title 
Citation o
f ar- 
This aiticle shall be known and may be cited as Uniform Commer-
'^'^^^- 
cial Code—Secured Transactions. 
§28:9—102. Policy and scope of article 
(1) Except as otherwise provided in section 28:9—103 on multiple 
state transactions and in section 28:9—104 on excluded transactions, 
this article applies so far as concerns any personal property and fix-
tures within the jurisdiction of the District 
77 STAT. 1 
PUBLIC LAW 88-243-DEC. 30, 1963 
747 
(a) to any transaction (regardless of its form) "which is 
intended to create a security interest in personal property or fix-
tures including goods, documents, instruments, general intangi-
bles, chattel paper, accounts or contract rights; and also 
(b) to any sale of accounts, contract rights or chattel paper. 
(2) This article applies to security interests created by contract 
including pledge, assignment, chattel mortgage, chattel trust, trust 
deed, factor's lien, equipment trust, conditional sale, trust receipt, 
other lien or title retention contract and lease or consignment intended 
as security. 
This article does not apply to statutory liens except as 
provided in section 28:9—310. 
(3) The application of this article to a security interest in a secured 
obligation is not affected 'by the fact that the obligation is itself 
secured by a transaction or interest to Avhich this article does not 
apply. 
§28;9—103. Accounts, contract rights, general intangibles and 
equipment relating to another jurisdiction; and in-
coming goods already subject to a security interest 
(1) If the office where the assignor of accounts or contract rights 
keep his records concerning them is in the District, the validity and 
I)erfection of a security interest therein and the possibility and effect 
of proper filing is governed by this article; otherwise by the law 
(including the conflict of laws rules) of the jurisdiction where such 
office is located. 
(2) If the chief place of business of a debtor is in the District, 
this article governs the validity and perfection of a security interest 
and the possibility and effect of proper filing with regard to general 
intangibles or with regard to goods of a type which are normally used 
in more than one jurisdiction (such as automotive equipment, rolling 
stock, airplanes, road building equipment, commercial harvesting 
equipment, construction machinery and the like) if such goods are 
classified as equipment or classified as inventory by reason of their 
being leased by the debtor to others. 
Otherwise, the law (including 
the conflict of laws rules) of the jurisdiction where such chief place 
of business is located shall govern. 
If the chief place of business is 
located in a jurisdiction which does not provide for perfection of the 
security interest by filing or recording in that jurisdiction, then the 
security interest may be perfected by filing in the District. 
For the 
I)urpose of determining the validity and perfection of a security inter-
est in an airplane, the chief place of business of a debtor who is a 
foreign air carrier under the Federal Aviation Act of 1958, as amended, 
is the designated office of the agent upon whom service of process may 
be made on behalf of the debtor. 
(3) If personal property other than that governed by subsections 
(1) and (2) is already subject to a security interest when it is brought 
into the District, the validity of the security interest in the District 
is to be determined by the law (including tlie conflict of laws rules) 
of the jurisdiction where the property was when the security interest 
attached. 
However, if the parties to the transaction understood at 
the time that the security interest attached that the property would 
be kept in the District and it was brought into the District within 
30 days after the security interest attached for purposes other than 
transportation through the District, then the validity of the security 
interest in the District is to be determined by the law of the District. 
If the security interest was already perfected under the law of the 
jurisdiction where the property was when the security interest attached 
and before being brought into the District, the security interest con-
tinues perfected in the District for four months and also thereafter 
if within the four month period it is perfected in the District. The se-
748 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
ciirity interest'niay also be perfected in tlie District after tlie expiration 
of the four month period; in such case j)erfectioii dates from the time 
of perfection in the District. If the security interest was not perfected 
under the law of the jurisdiction where the property was when the 
security interest attached and before being brought into the District, 
it may be perfected in the District; in such case perfection dates 
from the time of perfection in the District. 
(4) Notwithstanding subsections (2) and (8), if pei*sonal property 
is covered by a certificate of title issued under a statute of the District 
or any other jurisdiction which requires indication on a certificate of 
title of any security interest in the property as a condition of per-
fection, then the perfection is governed by the law of the jurisdiction 
which issued the certificate. 
(5) Notwithstanding subsection (1) and section 28:9—802, if the 
office where the assignor of accounts or contracts rights keeps his 
records concerning them is not located in a jurisdiction which is a 
part of the United States, its territories or possessions, and the 
accounts or contract rights are within the jurisdiction of the District 
or the transaction which creates the security interest otherwise bears 
an appropriate relation to the District, this article governs the validity 
and perfection of the security interest and the security interest may 
only be perfected by notification to the account debtor. 
§28:9—104. Transactions excluded from article 
This article does not apply 
(a) to a security interest subject to any statute of the United 
States such as the Ship Mortgage Act, 1920, to the extent that 
such statute governs the rights of parties to and third parties 
affected by transactions in particular types of property; or 
(b) to a landlord's lien; or 
(c) to a lien given by statute or other rule of law for services 
or materials except as provided in section 2S :9—810 on priority 
of such liens; or 
(d) to a transfer of a claim for wages, salary or other compen-
sation of an employee; or 
(e) to an equipment trust covering railway rolling stock; or 
(f) to a sale of accounts, contract rights or chattel paper as 
part of a sale of the business out of which they arose, or an 
assignment of accounts, contract rights or chattel paper which 
is for the purpose of collection only, or a transfer of a contract 
right to an assignee who is also to do the performance under 
the contract; or 
(g) to a transfer of an interest or claim in or under any policy 
of insurance; or 
(h) to a right represented by a judgment; or 
(i) to any right of set-off; or 
(j) except to the extent that provision is made for fixtures in 
section 28:9—813, to the creation or transfer of an interest in or 
lien on real estate, including a lease or rents thereunder; or 
(k) to a transfer in whole or in part of any of the following: 
any claim arising out of tort; any deposit, savings, passbook or 
like account maintained with a bank, savings and loan association, 
credit union or like organization. 
§ 28:9—105. Definitions and index of definitions 
(1) In this article unless the context otherwise requires: 
(a) "Account debtor" means the person who is obligated on an 
account, chattel paper, contract right or general intangible; 
(b) "Chattel paper" means a writing or writings which evi-
dence both a monetary obligation and a security interest in or a 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
749 
lease of specific goods. When a transaclion is evideiu'ed holli by 
such a security agreement or a lease and by an instrunieut or a 
series of instruments, the group of writings taken together con-
stitutes chattel paper; 
(c) "Collateral'' means the property subject to a secm-ity in-
terest, and includes accounts, contract rights and chattel paper 
which have been sold; 
(d) "Debtor" means the person who owes ])ayment or other 
performance of the obligation secured, whether or not he owns 
or has rights in the collateral, and includes the seller of accounts, 
contract rights or chattel paper. 
Where the debtor and the owner 
of the collateral are not the same person, the term "debtor'' means 
the owner of the collateral in any proA'ision of the article dealing 
with the collateral, the obligor in any provision dealing with the 
obligation, and may include both where the context so requires: 
(e) "Document" means document of title as defined in the gen-
eral definitions of article 1 (section 28:1—201) ; 
(f) "Goods" includes all things which are movable at the time 
the security interest attaches or which are fixtures (section 28 :9— 
813), but does not include money, documents, instruments, ac-
counts, chattel paper, general intangibles, contract rights and 
other things in action, "Goods" also include the unborn young 
of animals and growing crops; 
(g) "Instrument" means a negotiable instrument (defined in 
section 28:3—104), or a security (defined in section 28:8—102) 
or any other w'riting which evidences a right to the payment of 
money and is not itself a security agreement or lease and is of a 
type which is in ordinary course of business transferred by deliv-
ery with any necessary indorsement or assignment; 
(h) "Security agreement" means an agreement which creates 
or provides for a security interest; 
(i) "Secured party" means a lender, seller or other person in 
whose favor there is a security interest, including a person to 
whom accounts, contract rights or chattel paper have been sold. 
When the holders of obligations issued under an indenture of trust, 
equipment trust agreement or the like are represented by a trustee 
or other person, the representative is the secured party. 
(2) Other definitions applying to this article and the sections in 
which they appear are: 
"Account". Section 28:9—106. 
"Consumer goods". 
Section 28:9—109 (1). 
"Contract right". 
Section 28:9—106. 
"Equipment". 
Section 28:9—109(2). 
"Farm products". 
Section 28:9—109 (3). 
"Filing Office". 
Section 28:9—401 (1). 
"General intangibles". 
Section 28:9—106. 
."Inventory". 
Section 28:9—109 (4). 
"Lien creditor". 
Section 28:9—301 (3). 
"Proceeds". 
Section 28:9—306 (1). 
"Purchase money security interest". Section 28:9—107. 
(3) The following definitions in other articles apply to this article: 
"Check". 
Section 28:3—104. 
"Contract for sale". 
Section 28:2—106. 
"Holder in due course". 
Section 28:3~302. 
"Note". 
Section 28:3—104. 
"Sale". 
Section 28:2—106. 
(4) In addition article 1 contains general definitions and principles 
of construction and interpretation applicable throughout this article. 
750 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§28:9—106. Definitions: "account"; "contract right"; "general 
intangibles" 
"Account*' means any right to payment for goods sold or leased or 
for services rendered which is not evidenced by an instrument or 
chattel paper. 
"Contract right" means any right to payment under 
a contract not yet earned by performance and not evidenced by an 
instrument or chattel paper, 
"(xeneral intangibles" means any ])er-
sonal property (including things in action) other than goods, accounts, 
contract rights, chattel paper, documents and insti'uments. 
§ 28:9—107. Definitions: "purchase money security interest" 
A security interest is a "purchase money secuiity interest" to the 
extent that it is 
(a) taken or retained by the seller of the collateral to secure 
all or part of its price; or 
(b) taken by a person who by making advances or incurring 
an obligation gives value to enable the debtor to acquii-e rights 
in or the use of collateral if such value is in fact so used. 
§28:9—108. When after-acquired collateral not security for ante-
cedent debt 
AVhere a secured party makes an advance, incurs an obligation, 
releases a perfected security interest, or otherwise gives new value 
which is to be secured in whole or in part by after-acquired property 
his security interest in the after-acquired collateral shall be deemed 
to be taken for new value and not as security for an antecedent debt 
if the debtor acquires his rights in such collateral either in the ordi-
nary course of his business or under a contract of purchase made pur-
suant to the security agreement within a reasonable time after new 
value is given. 
§28:9—109. Classification of goods; "consumer goods"; "equip-
ment"; "farm products"; "inventory" 
Goods are 
(1) "consumer goods" if they are used or bought for use primarily 
for personal, family or household purposes; 
(2) "equipment" if they are used or bought for use primarily in 
business (including farming or a profession) or by a debtor who is a 
non-profit organization or a governmental subdivision or agency or 
if the goods are not included in the definitions of inventory, farm 
products or consumer goods; 
(3) "farm products" if they are crops or livestock or supplies used 
or produced in farming operations or if they are products of crops or 
livestock in their unmanufactured states (such as ginned cotton, wool-
clip, maple syrup, milk and eggs), and if they are in the possession of 
a debtor engaged in raising, fattening, grazing or other farming opera-
tions. If goods are farm products they are neither equipment nor 
inventory; 
(4) "inventory" if they are held by a person who holds them for sale 
or lease or to be furnished under contracts of service or if he has so 
furnished them, or if they are raw materials, work in process or mate-
rials used or consumed in a business. Inventory of a person is not to 
be classified as his equipment. 
§ 28:9—110. Sufficiency of description 
For the purposes of this article any description of pereonal prop-
erty or real estate is sufficient whether or not it is specific if it reason-
ably identifies what is described. 
§28:9—111. Applicability of bulk transfer laws 
The creation of a security interest is not a bulk transfer under article 
6 (see section 28:6—103). 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
751 
§ 28:9—112. Where collateral is not owned by debtor 
Unless otherwise agreed, when a secured party knows that collateral 
is owned by a person who is not the debtor, the owner of the collateral 
is entitled to receive from the secured party any surplus under section 
28:9—502(2) or under section 28:9—504(1), and is not liable for the 
debt or for any deficiency after resale, and he has the same right as 
the debtor 
(a) to receive statements under section 28:9—208; 
(b) to receive notice of and to object to a secured party's pro-
posal to retain the collateral in satisfaction of the indebtedness 
under section 28:9—505; 
(c) to redeem the collateral under section 28:9—506; 
(d) to obtain injunctive or other relief under section 28:9— 
507(1) ; and 
(e) to recover losses caused to him under section 28:9—208 (2). 
§28:9—113. Security interests arising under article on sales 
A security interest arising solely under the article on sales (article 
2) is subject to the provisions of this article except that to the extent 
that and so long as the debtor does not have or does not lawfully ob-
tain possession of the goods 
(a) no security agreement is necessary to make the security in-
terest enforceable; and 
(b) no filing is required to perfect the security interest; and 
(c) the rights of the secured party on default by the debtor are 
governed by the article on sales (article 2). 
PART 2—VALIDITY OF SECURITY AGREEMENT AND 
RIGHTS OF PARTIES THERETO 
§28:9—201. General validity of security agreement 
Except as otherwise provided by this title a security agreement is 
effective according to its terms between the parties, against purchasers 
of the collateral and against creditors. Nothing in this article vali-
dates any charge or practice illegal under any statute or regulation 
thereunder governing usury, small loans, retail installment sales, or 
the like, or extends the application of any such statute or regulation 
to any transaction not otherwise subject thereto. 
§28:9—202. Title to collateral immaterial 
Each provision of this article with regard to rights, obligations and 
remedies applies whether title to collateral is in the secured party or 
in the debtor. 
§28:9—^203. Enforceability of security interest; proceeds, formal 
requisites 
(1) Subject to the provisions of section 28:4—208 on the security 
interest of a collecting bank and section 28:9—113 on a security inter-
est arising under the article on sales, a security interest is not enforce-
able against the debtor or third parties unless 
(a) the collateral is in the possession of the secured party; or 
(b) the debtor has signed a security agreement which con-
tains a description of the collateral and in addition, when the 
security interest covers crops or oil, gas or minerals to be extracted 
or timber to be cut, a description of the land concerned. 
In 
describing collateral, the word "proceeds" is sufficient without 
further description to cover proceeds of any character. 
(2) A transaction, although subject to this article, is also subject 
to chapter 20 of Title 2, relating to pawnbrokei's, chapter (
> of Title 
D.C. code 2 
26, relating to money lenders, chai^ter 7 of Title 40, relating to liens 26-601°to 2019; 
26-611; 
40-701 to 40-715. 
752 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
D.c, Code 40- 
on iiiotor vehicles, and chapter 9 of Title 40, relatinjr to installment 
901 to 40-910. 
sales of motor vehicles, and in the case of conflict between the provi-
sions of this article and any such statute, the provisions of such statute 
control. Failure to comply with any applicable statute has only the 
effect which is specified therein. 
§ 28:9—204. When security interest attaches; after-acquired prop-
erty; future advances 
(1) A security interest cannot attach until there is agreement (sub-
section (3) of section 28:1—201) that it attach and value is given and 
the debtor has rights in the collateral. It attaches as soon as all of 
the events in the preceding sentence have taken place iniless explicit 
agreement postpones the time of attaching. 
(2) For the purposes of this section the debtor has no rights 
(a) in crops until they are planted or otherwise become grow-
ing crops, in the young of livestock until they are conceived; 
(b) in fish until caught, in oil, gas or minerals until they are 
extracted, in timber until it is cut; 
(c) in a contract right until the contract has been made; 
(d) in an account until it comes into existence. 
(3) Except as provided in subsection (4) a security agreement may 
provide that collateral, whenever actjuired, shall secure all obligations 
covered by the security agreement. 
(4) Xo security interest attaches under an after-acquired property 
clause 
(a) to crops w^hich become such more than one year after the 
security agreement is executed except that a security interest in 
crops which is given in conjunction with a lease or a land purchase 
or improvement transaction evidenced by a contract, mortgage or 
deed of trust may if so agreed attach to crops to be grown on the 
land concerned during the period of such real estate transaction; 
(b) to consumer goods other than accessions (section 28:9— 
314) when given as additional security unless the debtor acquires 
rights in them within ten days after the secured party gives value. 
(5) Obligations covered by a security agreement may include future 
advances or other value whether or not the advances or value are given 
pursuant to commitment. 
§28:9—205. Use or disposition of collateral without accounting 
permissible 
A security interest is not invalid or fraudulent against creditors by 
reason of liberty in the debtor to use, commingle or dispose of all or 
part of the collateral (including returned or repossessed goods) or to 
collect or compromise accounts, contract rights or chattel paper, or 
to accept the retui-n of goods or make repossessions, or to use, com-
mingle or dispose of proceeds, or by reason of the failure of the secured 
party to require the debtor to account for proceeds or replace collat-
eral. This section does not relax the requirements of possession where 
perfection of a security interest depends upon possession of the col-
lateral by the secured party or by a bailee. 
§28:9—^206. Agreement not to assert defenses against assignee; 
modification of sales warranties where security 
agreement exists 
(1) Subject to any statute or decision which establishes a different 
rule for buyers or lessees of consumer goods, an agreement by a buyer 
or lessee that he will not assert against an assignee any Claim or defense 
which he may have against the seller or lessor is enforceable by an 
assignee who takes his assignment for value, in good faith and with-
out notice of a claim or defense, except as to defenses of a type which 
may be asserted against a holder in due course of a negotiable instru-
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
753 
nient under the article on commercial paper (article 3). A buyer MIIO 
as pait of one transaction signs both a negotiable instrument and a 
security agreement makes such an agreement. 
(2) When a seller retains a purchase money security interest in 
goods the article on sales (article 2) governs the sale and any dis-
claimer, limitation or modification of the seller's warranties. 
§ 28:9—^207. Rights and duties when collateral is in secured party's 
possession 
(1) A secured party must use reasonable care in the custody and 
])reservation of collateral in his possession. 
In the case of an instru-
ment or chattel paper reasonable care includes taking necessary steps 
to preserve rights against prior parties unless otherwise agreed. 
(2) Unless otherwise agreed, when collateral is in the secured party's 
possession 
(a) reasonable expenses (including tlie cost of any insurance 
and payment of taxes or other charges) incurred in the custody, 
preservation, use or operation of the collateral are chargeable to 
the debtor and are secured by the collateral; 
(b) the risk of accidental loss or damage is on the debtor to 
the extent of any deficiency in any effective insurance coverage; 
(c) the secured party may hold as additional security any 
increase or profits (except money) received from the collateral, 
but money so received, unless remitted to the debtor, shall be 
applied in reduction of the secured obligation; 
(d) the secured party must keep the collateral identifiable but 
fungible collateral may he commingled; 
(e) the secured party may repledge the collateral upon t-enns 
which do not impair the debtor's right to redeem it. 
(3) A secured party is liable for any loss caused by his failure to 
meet any obligation imposed by the preceding subsections but does not 
lose his security interest. 
(4) A secured party may use or operate the collateral for the pur-
pose of preserving the collateral or its value or pursuant to the order 
of a court of appropriate jurisdiction or, except in the case of con-
sumer goods, in tlie manner and to the extent provided in the security 
agreement. 
§ 28:9—^208. Request for statement of account or list of collateral 
(1) A debtor may sign a statement indicating what he believes t-o 
be the aggregate amount of unpaid indebtedness as of a specified date 
and may send it to the secured party with a request that the statement 
be approved or corrected and returned to the debtor. Allien the se-
<urity agreement or any other record kept by the secured party identi-
fies the collateral a debtor may similarly re(j[uest the secured party to 
approve or correct a list of the collateral. 
(2) The secured party must comply with such a request within two 
weeks after receipt by sending a written correction or approval. 
If 
the secured party clanns a security interest in all of a particular type 
of collateral owned by the debtor he may indicate that fact in his reply , 
and need not approve or correct an itemized list of such collateral. If 
the secured party without reasonable excuse fails to comply he is liable 
for any loss caused to the debtor thereby; and if the debtor has prop-
erly included in his request a good faith statement of the obligation 
or a list of the collateral or both the secured party may claim a security 
interest only as shoAvn in the statement agamst persons misled by his 
failure to comply. If he no longer has an interest in the obligation 
or collateral at the time the request is received he must disclose the 
name and address of any successor in interest known to him and he 
is liable for any loss caused to the debtor as a result of failure to dis-
93-025 O-64-50 
754 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
close. A successor in interest is not subject to this section until a re-
quest is received by liini. 
(8) A debtor is entitled to such a statement once every six months 
without charge. The secured party may require payment of a cliarge 
not exceeding $10 for eacli additional statement furnished. 
PART 3~RIGHTS OF THIRD PARTIES; PERFECTED AND 
UNPERFECTED SECURITY INTERESTS; RULES OF PRI-
ORITY 
§28:9—301. Persons who take priority over unperfected security 
interests; "lien creditor" 
(1) Except as otherwise provided in subsection (2), an unper-
fected security interest is subordinate to the rights of 
(a) persons entitled to priority under section 28:9—312; 
(b) a person who becomes a lien creditor without knowledge 
of the security interest and before it is perfected; 
(c) in the case of goods, instruments, documents, and chattel 
paper, a person who is not a secured party and who is a transferee 
ni bulk or other buyer not in ordinary course of business to the 
extent that he gives value and receives delivery of the collateral 
without knowledge of the security interest and before it is 
perfected; 
(d) in the case of accounts, contract rights, and general intan-
gibles, a person who is not a secured party and who is a transferee 
to the extent that he gives value without knowledge of the security 
interest and before it is perfected. 
(2) If the secured party files with respect to a purchase money 
security interest before or within ten days after the collateral comes 
into possession of the debtor, he takes priority over the rights of a 
transferee in bulk or of a lien creditor which arise between the time 
the security interest attaches and the time of filing. 
(3) A "lien creditor" means a creditor who has acquired a lien on 
the property involved by attachment, levy or the like and includes an 
assignee for benefit of creditors from the time of assignment, and a 
trustee in bankruptcy from the date of the filing of the petition or a 
receiver in equity from the time of appointment. 
Unless all the 
creditors represented had knowledge of the security interest such a 
representative of creditors is a lien creditor without knowledge even 
though he personally has knowledge of the security interest. 
§28:9—302. When filing is required to perfect security interest; 
security interests to which filing provisions of this 
article do not apply 
(1) A financing statement must be filed to perfect all security 
interests except the following: 
(a) a security interest in collateral in possession of the secured 
party under section 28:9—805; 
(b) a security interest temporarily perfected in instruments or 
documents without delivery under section 28:9—804 or in proceeds 
for a 10 day period under section 28:9—806; 
(c) a purchase money security interest in farm equipment 
having a purchase price not in excess of $2,500; but filmg is 
required for a fixture under section 28:9—818 or for a motor 
vehicle required to be licensed; 
(d) a purchase money security interest in consumer goods; but 
filing is required for a fixture under section 28:9—313 or for 
a motor vehicle required to be licensed; 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
755 
(e) an assignment of accounts or contract rights which does 
not alone or in conjunction with other assignments to the same 
assignee transfer a significant part of the outstanding accounts 
or contract rights of the assignor; 
(f) a security interest of a collecting bank (section 28:4— 
208) or arising under the article on sales (see section 28:9—113) 
or covered in subsection (3) of this section. 
(2) If a secured party assigns a perfected security interest, no filing 
under this article is required in order to continue the perfected status 
of the security interest against creditoi's of and transferees from the 
original debtor. 
(3) The filing provisions of this article do not apply to a security 
interest in property subject to a statute 
(a) of the L^nited States which provides for a national reg-
istration or filing of all security interests in such property; or 
(b) of the United States pertaining to the District which pro-
vides for central filing of security interests in a motor vehicle or 
trailer which is not inventory held for sale for which a certificate 
of title is required to be issued under the provisions of chapter 7 
of Title 40. 
(4) A security interest in property covered by a statute described 
in subsection (3) can be perfected only by registration or filing under 
that statute or by indication of the security interest on a certificate of 
title or a duplicate thereof by a public official. 
§28:9—303. When security interest is perfected; continuity of 
perfection 
(1) A security interest is perfected when it has attached and when 
all of the applicable steps required for perfection have been taken. 
Such steps are specified in sections 28:9—302, 28:9—304, 28:9—305, 
and 28:9—306. If such steps are taken before the security interest 
attaches, it is perfected at the time when it attaches. 
(2) If a security interest is originally perfected in any way per-
mitted under this article and is subsequently perfected in some other 
way under this article, without an intermediate period when it was un-
perfected, the security interest shall be deemed to be perfected con-
tinuously for the purposes of this article. 
§ 28:9—304. Perfection of security interest in instruments, docu-
ments, and goods covered by documents; perfection 
by permissive filing; temporary perfection without 
filing or transfer of possession 
(1) A security interest in chattel paper or negotiable documents 
may be perfected by filing. A security interest in instruments (other 
than instruments which constitute part of chattel paper) can be per-
fected only by the secured party's taking possession, except as pro-
vided in subsections (4^ and (5). 
(2) During the period that goods are in the possession of the 
issuer of a negotiable document therefor, a security interest in the 
goods is perfected by perfecting a security interest in the document, 
and any security interest in the goods otherwise perfected during such 
period is subject thereto. 
(3) A security interest in goods in the possession of a bailee other 
than one who has issued a negotiable document therefor is perfected 
by issuance of a document in the name of the secured party or by the 
bailee's receipt of notification of the secured party's interest or by 
filing as to the goods. 
(4) A security interest in instruments or negotiable documents is 
perfected without filing or the taking of possession for a period of 
756 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
21 clays from the time it attaches to the extent that it arises for new 
value given under a written security agreement. 
(5) A security interest remains perfected for a period of 21 days 
without filing where a secured party having a perfected security 
interest in an instrument, a negotiable document oi" goods in posses-
sion of a bailee other than one who has issued a negotiable document 
therefor 
(a) makes available to the debtor the goods or documents 
representing the goods for the purpose of ultimate sale or 
exchange or for the purpose of loading, unloading, storing, ship-
ping, transshipping, manufacturing, processing or otherwise deal-
ing with them in a manner preliminary to their sale or exchange; 
or 
(b) delivers the instrument to the debtor for the purpose of 
ultimate sale or exchange or of presentation, collection, renewal 
or registration of transfer. 
(6) After the 21 day period in subsections (4) and (5) perfection 
depends upon compliance with applicable provisions of this article. 
§ 28:9—305. When possession by secured party perfects security 
interest without filing 
A security interest in letters of credit and advices of credit (sub-
section (2) (a) of section 28:5—116), goods, instruments, negotiable 
documents or chattel paper may be perfected by the secured party's 
i taking possession of the collateral. If such collateral other than goods 
covered by a negotiable document is held by a bailee, the secured party 
is deemed to have possession from the time the bailee receives notifica-
tion of the secured party's interest. A security interest is perfected 
by possession from the tiipie possession is taken without relation back 
and continues only so long as possession is retained, unless otherwise 
specified in this article. The security interest may be otherwise per-
fected as provided in this article before or after the period of posses-
sion by the secured party. 
§28:9—306. "Proceeds"; secured party's rights on disposition of 
collateral 
(1) "Proceeds'' includes whatever is received when collateral or 
proceeds is sold, exchanged, collected or otherwise disposed of. 
The 
term also includes the account arising when the right to payment 
is earned under a contract right. 
Money, checks and the like are 
"cash proceeds". All other proceeds are "non-cash proceeds". 
(2) Except where this article otherwise provides, a security interest 
<'ontiniies in collateral notwithstanding sale, exchange or other dis-
position thereof by the debtor unless his action was authorized by 
the secured party in the security agreement or otherwise, and also 
continues in any identifiable proceeds including collections received 
by the debtor. 
(3) The security interest in proceeds is a continuously perfected 
security interest if the interest in the original collateral was perfected 
but it ceases to be a perfected security interest and becomes unper-
fected ten days after receipt of the proceeds by the debtor unless 
(a) a filed financing statement covering the original collateral 
also covers proceeds; or 
(b) the security interest in the proceeds is perfected before the 
expiration of the ten day period. 
(4) In the event of insolvency proceedings instituted by or against 
a debtor, a secured party with a perfected security interest in proceeds 
has a perfected security interest 
(a) in identifiable non-cash proceeds; 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
757 
(I)) in identifiable cash proceeds in tlie form of money wliich is 
not commingled with other money or deposited in a bank account 
[)rior to the insolvency proceedings; 
(c) in identifiable cash proceeds in the form of checks and the 
like which are not deposited in a bank accoimt prior to the 
insolvency proceedings; and 
(d) in all cash and bank accounts of the debtor, if other cash 
j)r()ceeds have been commingled or deposited in a bank account, 
but the perfected security interest under this paragraph (d) is 
(i) subject to any right of set-off; and 
(ii) limited to an amount not greater than the amount of 
any cash proceeds received by the debtor within ten days 
before the institution of the insolvency proceedings and com-
mingled or deposited in a bank account prior to the insolvency 
proceedings less the amount of cash proceeds received by the 
debtor and paid over to the secured party during the ten day 
period. 
(5) If a sale of goods results in an account or chattel paper which 
is transferred by the seller to a secured party, and if the goods are 
i-eturned to or are repossessed by the seller or the secured party, 
the following rules determine priorities: 
(a) If the goods were collateral at the time of sale for an in-
debtedness of the seller which is still unpaid, the original security 
interest attaches again to the goods and continues as a psrfected 
security interest if it was perfected at the time when the goods 
were sold. 
If the security interest was orig.nally perfected by a 
filing which is still elective, nothing further is required to con-
tinue the perfected status; in any other case, the secured party 
must take possession of the returned or repossessed goods or 
must file. 
(b) An unpaid transferee of the chattel paper has a security 
interest in the goods against the transferor. Such security inter-
est is prior to a security interest asserted under paragraph (a) to 
the extent that the transferee of the chattel paper was entitled to 
priority under section 28:9—308. 
(c) An unpaid transferee of the account has a security interest 
in the goods against the transferor. 
Such security interest is 
subordinate to a security interest asserted under paragraph (a). 
(d) A security interest of an unpaid transferee asserted under 
paragraph (b) or (c) must be perfected for protection against 
creditors of the transferor and purchasers of the returned or re-
possessed goods. 
§ 28:9—307. Protection of buyers of goods 
(1) A buyer in ordinary course of business (subsection (9) of 
section 28:1—201) other than a person buying farm products from 
a person engaged in farming operations takes free of a security inter-
est created by his seller even though the security interest is perfected 
and even though the buyer knows of its existence. 
(2) In the case of consumer goods and in the case of farm equip-
ment having an original purchase price not in excess of $2,500 (other 
than fixtures, see section 28:9—313), a buyer takes free of a security 
interest even though perfected if he buys without knowledge of the 
security interest, for value and for his own personal, family or house-
hold purposes or his own farming operations unless prior to the 
I)urchase the secured party has filed a financing statement covering 
such goods. 
758 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
§ 28:9—308. Purchase of chattel paper and non-negotiable instru-
ments 
A purcliaser of chattel i)aper or a non-negotiable instrument who 
gives new value and takes possession of it in the ordinary course of 
his business and without knowledge that the specific paper or instru-
ment is subject to a security interest has priority over a security in-
terest which is perfected under section 28:9—J504 (permissive filing 
and temporary perfection). A purchaser of chattel paper who gives 
new value and takes possession of it in the ordinary course of his busi-
ness has priority over a security interest in chattel paper which is 
claimed merely as proceeds of inventory subject to a security interest 
(section 28:9—8()(>), even though he knows that the specific paper is 
subject to the security interest. 
§28:9—309. Protection of purchasers of instruments and docu-
ments 
Nothing in this article limits the rights of a holder in due course of 
a negotiable instrument (section 28:8—802) or a holder to whom a 
negotiable document of title lias been duly negotiated (section 28:7— 
501) or a bona fide purchaser of a security (section 28 :S—801) and 
such holders or purchasers take priority over an earlier secur ty in-
terest even though perfected. 
Filing under this article does not con-
stitute notice of the security interest to such holdei's or purchasers. 
§28:9—310. Priority of certain liens arising by operation of law 
When a person in the ordinary course of his business furnishes serv-
ices or materials with respect to goods subject to a security interest, a 
lien upon goods in the possession of such person given by statute or 
rule of law for such materials or services takes [)ri()rity over a perfected 
security interest un'ess the lien is statutory and tiie statute expressly 
provides otherwise. 
§28:9—311. Alienability of debtor's rights: judicial process 
The debtor's rights in collateral may be voluntarily or involuntarily 
transferred (by way of sale, creation of a security interest, attachment, 
levy, garnishment or other judicial process) notwithstanding a pro-
vision in the security agreement prohibiting any transfer or making 
tlie transfer constitute a default. 
§ 28:9—312. Priorities among conflicting security interests in the 
same collateral 
(1) The rules of priority stated in the following sections shall gov-
ern where applicable: section 28:4—208 with respect to the security 
interest of collecting banks in items being collected, accompanying doc-
uments and proceeds; section 28:9—801 on certain priorities: section 
28:9—304 on goods covered by documents; section 28:9—8()H on pro-
ceeds and repossessions; section 28:9—307 on buyers of goods; sec-
tion 28:9—308 on possessory against non-possessory interests in chattel 
paper or non-negotiable instruments; section 28:9—809 on security 
interests in negotiable instruments, documents or securities; section 
28:9—310 on priorities between perfected security interests and liens 
by operation of law; section 28:9—313 on security interests in fixtures 
as against interests in real estate; section 28:9—814 on security inter-
ests in accessions as against interest in goods; section 28:9—315 on 
conflicting security interests where goods lose their identity or become 
part of a product; and section 28:9—316 on contractual subordination. 
(2) A perfected security interest in crops for new value given to 
enable the debtor to produce the crops during the production season 
and given not more than three months before the crops become grow-
ing crops by planting or otherwise takes priority over an earlier 
perfected security interest to the extent that such earlier interest 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
759 
secures obligations due more than six months before tlie crops become 
irroAving crops by planting or otherwise, even though the person giv-
ing new value had knowledge of the earlier security interest. 
(3) A purchase money security interest in inventory collateral has 
priority over a conflicting security interest in the same collateral if 
(a) the purchase money security interest is perfected at the 
time the debtor receives possession of the collateral; and 
(b) any secured party whose security interest is known to 
the holder of the purchase money security interest or who, prior 
to the date of the filing made by the liolder of tlie j)urchase 
money security interest, had filed a financing statement covering 
the same items or type of inventory, has received notification of 
the purchase money security interest before the debtor recei\es 
possession of the collateral covered by the purchase money security 
interest; and 
(c) such notification states that the ])erson giving the notice 
has or expects to acquire a purchase money security interest in 
inventory of the debtor, describing such inventory by item or tyi)e. 
(4) A purchase money security interest in collateral other than 
inventory has priority over a conflicting security interest in the same 
collateral if the purchase money security interest is perfected at the 
rime the debtor receives possession of the collateral or within ten 
days thereafter. 
(5) In all cases not governed by other rules stated in this section 
(including cases of purchase money security interests which do not 
(pialify for the special priorities set forth in subsections (3) and (4) 
of this section), priority between conflicting security interests in the 
same collateral shall be detennined as follows: 
(a) in the order of filing if both are perfected by filing, regard-
less of which security interest attached first under section 28:9— 
204(1) and whether it attached before or after filing; 
(b) in the order of perfection unless both are perfected by 
filing, regardless of which security interest attached first under 
section 28:9—204(1) and, in the case of a filed security interest, 
whether it attached before or after filing; and 
(c) in the order of attachment under section 28:9—204(1) so 
long as neither is perfected. 
(6) For the purpose of the priority rules of the immediately pre-
ceding subsection, a continuously j^erfected security interest shall be 
treated at all times as if perfected by filing if it was originally so 
perfected and it shall be treated at all times as if perfected otherwise 
than by filing if it was originally perfected otherwise than by filing. 
§ 28:9—313. Priority of security interests in fixtures 
(1) The rules of this section do not apply to goods incorporated into 
a structure in the manner of lumber, bricks, tile, cement, glass, metal 
work and the like and no security interest in them exists under this 
article unless the structure remains personal property under applica-
ble law. 
The law of the District other than this subtitle determines 
whether and when other goods become fixtures. This subtitle does not 
prevent creation of an encumbrance upon fixtures or real estate pur-
suant to the law applicable to real estate. 
(2) A security interest which attaches to goods before they become 
fixtures takes priority as to the goods over the claims of all persons 
who have an interest in the real estate except as stated in subsection 
(3) A security interest which attaches to goods after they become 
fixtures is valid against all persons subsequently acquiring interests 
in the real estate except as stated in subsection (4) but is invalid 
against any person with an interest in the real estate at the time the 
760 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
security interest attaches to the goods who has not in writing con-
sented to the security interest or dischiimed an interest in the goods 
as fixtures. 
(4) The security interests described in subsections (2) and (3) do 
not take priority over 
(a) a subsequent purchaser for vakie of any interest in the 
real estate; or 
(b) a creditor with a lien on the real estate subsequently 
obtained by judicial proceedings; or 
(c) a creditor with a prior encumbrance of record on the real 
estate to the extent that he makes subsequent advances 
if the subsequent purchase is made, the lien by judicial proceedings is 
obtained, or the subsequent advance under the prior encumbrance is 
made or contracted for without knowledge of the security interest and 
before it is perfected. A purchaser of the real estate at a foreclosure 
sale other than an encumbrancer purchasing at his own foreclosure 
sale is a subsequent purchaser within this section. 
(5) When under subsections (2) or (3) and (4:) a secured party 
has priority over the claims of all persons who have interests in the 
real estate, he may, on default, subject to the provisions of part 5, 
remove his collateral from the real estate but he must reimburse any 
encumbrancer or owner of the real estate who is not the debtor 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 ^oods removed or by any necessity for replacing 
them. 
A person entitled to reimbursement may refuse permission 
to remove until the secured party gives adequate security for the 
performance of this obligation. 
§28:9--314. Accessions 
(1) A security interest in goods which attaches before they are 
installed in or affixed to other goods takes priority as to the goods 
installed or affixed (called in this section "accessions") over the 
claims of all persons to the whole except as stated in subsection (3) and 
subject to section 28:9—315 (1). 
(2) A security interest which attaches to goods after they become 
part of a whole is valid against all persons subsequently acquiring 
interests in the whole except as stated in subsection (3) but is invalid 
against any person with an interest in the whole at the time the secu-
rity interest attaches to the goods who has not in writing consented to 
the security interest or disclaimed an interest in the goods as part of 
the whole. 
(3) The security interests described in subsections (1) and (2) do 
not take priority over 
(a) a subsequent purchaser for value of any interest in the 
whole; or 
(b) a creditor with a lien on the whole subsequently obtained 
by judicial proceedings; or 
(c) a creditor with a prior perfected security interest in the 
whole to the extent that he makes subsequent advances 
if the subsequent purchase is made, the lien by judicial proceedings 
obtained or the subsequent advance under the prior perfected security 
interest is made or contracted for without knowledge of the security 
interest and before it is perfected. 
A purchaser of the whole at a 
foreclosure sale other than the holder of a perfected security interest 
purchasing at his own foreclosure sale is a subsequent purchaser 
within this section. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
761 
(4) "When under subsections (1) or (2) and (H) a secured party 
luis an interest in accessions Which has priority over the chiinis of all 
persons who have interests in the whole, he may on default subject 
to the provisions of part 5 remove his collateral from the whole but 
lie must reimburse any encumbrancer or owner of the whole who is 
not the debtor 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 secured party gives adequate security 
for the performance of this obligation. 
§ 28:9—315. Priority when goods are commingled or processed 
(1) If a security interest in goods was perfected and subsequently 
the goods or a part thereof have become part of a product or mass, 
the security interest continues in the product or mass if 
(a) the goods are so manufactured, processed, assembled or 
commingled that their identity is lost in the product or mass; or 
(b) a financing statement covering the original goods also 
covers the product into which the goods have been manufactured, 
processed or assembled. 
In a case to which paragraph (b) applies, no separate security interest 
in that part of the original goods which has been manufactured, 
processed or assembled into the product may be claimed under section 
28:9—314. 
(2) When imder subsection (1) more than one security interest 
attaches to the product or mass, they rank equally according to the 
ratio that the cost of the goods to which each interest originally 
attached bears to the cost of the total product or mass. 
§ 28:9—316. Priority subject to subordination 
Nothing in this article prevents subordination by agreement by any 
person entitled to priority. 
§ 28:9—317. Secured party not obligated on contract of debtor 
The mere existence of a security interest or authority given to the 
debtor to dispose of or use collateral does not impose contract or tort 
liability upon the secured party for the debtors acts or omissions. 
§28:9—318. Defenses against assignee; modification of contract 
after notification of assignment; term prohibiting 
assignment ineffective; identification and proof of 
assignment 
(1) LTnless an account debtor has made an enforceable agreement 
not to assert defenses or claims arising out of a sale as provided in 
section 28:9—206 the rights of an assignee are subject to 
(a) all the terms of the contract between the account debtor 
and assignor and any defense or claim arising therefrom; and 
(b) any other defense or claim of the account debtor against 
the assignor which accrues before the account debtor receives 
notification of the assignment. 
(2) So far as the right to payment under an assigned contract right 
has not already become an account, and notwithstanding notification 
of the assignment, any modification of or substitution for the contract 
made in good faith and in accordance with reasonable commercial 
standards is effective against an assignee unless the account debtor 
has otherwise agreed but the assignee acquires corresponding rights 
under the modified or substituted contract. 
The assignment may pro-
vide that such modification or substitution is a breach by the assignor. 
(3) The account debtor is authorized to pay the assignor until the 
account debtor receives notification that the account has been assigned 
762 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
and that payment is to be made to the assignee. A notification which 
does not reasonably identify the rights assigned is ineffective. 
If 
requested by the account debtor, the assignee must seasonably furnish 
reasonable proof that the assignment has been made and unless he 
does so the account debtor may pay the assignor. 
(4) A term in any contract between an account debtor and an 
assignor which prohibits assignment of an account or contract right 
to which they are parties is ineffective. 
PART 4—FILING 
§ 28:9—401. Place of filing; erroneous filing; removal of collateral 
(1) The proper place to file in order to perfect a security interest 
is, in all cases, in the office of the Recorder of Deeds of the District. 
In this article, "filing officer" means said Recorder. 
(2) A filing which is made in good faith in an improper place is 
nevertheless effective with regard to any collateral as to which the 
filing complied with the requirements of this article and is also effec-
tive with regard to collateral covered by the financing statement 
against any person who has knowledge of the contents of such financing 
statement. 
(3) A filing which is made in the proper place continues effective 
even though the debtor's residence or place of business or the location 
of the collateral or its use, whichever controlled the original filing, is 
thereafter changed. 
(4) If collateral is brought into the District from another juris-
diction, the rules stated in section 28:9—103 determine whether filing 
is necessary in the District. 
§28:9—402. Formal requisites of financing statement; amend-
ments 
(1) A financing statement is sufficient if it is signed by the debtor 
and the secured party, gives an address of the secured party from 
which information concerning the security interest may be obtained, 
gives a mailing address of the debtor and contains a statement indi-
cating the types, or describing the items, of collateral. A financing 
statement may be filed before a security agreement is made or a 
security interest otherwise attaches. When the financing statement 
covers crops growing or to be grown or goods which are or are to 
become fixtures, the statement must also contain a description of the 
real estate concerned. 
A copy of the security agreement is sufficient 
as a financing statement if it contains the above information and is 
signed by both parties. 
(2) A financing statement which otherwise complies with subsec-
tion (1) is sufficient although it is signed only by the secured party 
when it is filed to perfect a security interest in 
(a) collateral already subject to a security interest in another 
jurisdiction when it is brought into the District. 
Such a financ-
ing statement must state that the collateral was brought into 
the District under such circumstances. 
(b) proceeds under section 28:9—306 if the security interest in 
! 
the original collateral was perfected. 
Such a financing statement 
must describe the original collateral. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
763 
(3) A form substantially as folloAvs is sufficient to comply with 
subsection (1) : 
Name of debtor (or assignor) 
Address 
Name of secured party (or assignee) 
Address 
1. This financing statement covers the following types 
(or items) of property: 
(Describe) 
2. (If collateral is crops) 
The above described crops 
are growing or are to be grown on: 
(Describe Real Estate) 
3. (If collateral is goods which are or are to become fix-
tures) 
The above described goods are affixed or to be affixed 
to: 
(Describe Real Estate) 
4. (If proceeds or products of collateral are claimed) 
Proceeds—Products of the collateral are also covered. 
Signature of Debtor (or Assignor) 
Signature of Secured Party (or Assignee) 
(4) The term "financing statement" as used in this article means 
tlie original financing statement and any amendments but if any 
amendment adds collateral, it is effective as to the added collateral 
only from the filing date of the amendment. 
(5) A financing statement substantially complying with the require-
ments of this section is eft'ective even though it contains minor errors 
which are not seriously misleading. 
§ 28:9—403. What constitutes filing; duration of filing; effect of 
lapsed filing; duties of filing officer 
(1) Presentation for filing of a financing statement and tender of 
the filing fee or acceptance of the statement by the filing officer consti-
tutes filing under this article. 
(2) A filed financing statement which states a maturity date of the 
obligation secured of five years or less is effective until such maturity 
date and thereafter for a period of sixty days. xVny other filed financ-
ing statement is effective for a period of five years from the date of 
filing. 
The effectiveness of a filed financing statement lapses on the 
expiration of such sixty day period after a stated maturity date or on 
the expiration of such five year period, as the case may be, unless a 
continuation statement is filed prior to the lapse. I^pon such lapse the 
security interest becomes unperfected. 
A filed financing statement 
which states that the obligation secured is payable on demand is effec-
tive for five years from the date of filing. 
(3) A continuation statement may be filed by the secured party (i) 
within six months before and sixty days after a stated maturity date 
of five years or less, and (ii) otherwise within six months prior to 
the expiration of the five year period specified in subsection (2). Any 
such continuation statement must be signed by the secured party, iden-
tify the original statement by file number and state that the original 
statement is still effective. 
Upon timely filing of the continuation 
statement, the effectiveness of the original statement is continued for 
five years after the last date to which the filing was effective whereupon 
it lapses in the same manner as provided in subsection (2) unless 
another continuation statement is filed prior to such lapse. Succeeding 
continuation statements may be filed in the same manner to continue 
the effectiveness of the original statement. Unless a statute on dispo-
sition of public records provides otherwise, the filing officer may re-
move a lapsed statement from the files and destroy it. 
764 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(4) A filing officer shall mark each statement Avith a consecntive file 
nmnber and with the date and hour of filing and shall hold the state-
ment for public inspection. In addition the filing officer shall index 
the statements according to the name of the debtor and shall note in 
the index the file number and the address of the debtor gi^-en in the 
statement. 
(5) The uniform fee for filing, indexing and furnishing filing data 
for an original or a continuation statement shall be $2.00. 
§ 28:9—404. Termination statement 
(1) Whenever there is no outstanding secured obligation and no 
commitment to make advances, incur obligations or otherwise give 
value, the secured party must on written demand by the debtor send 
the debtor a statement that he no longer claims a security interest 
under the financing statement, which shall be identified by file num-
ber. 
A termination statement signed by a person other than the 
secured party of record must include or be accompanied by the assign-
ment or a statement by the secured party of record that he has assigned 
the security interest to the signer of the termination statement. 
The 
uniform fee for filing and indexing such an assignment or statement 
thereof shall be $2.00. If the affected secured })arty fails to send such 
a termination statement within ten days after proper demand therefor 
he shall be liable to the debtor for one hundred dollars, and in addition 
for any loss caused to the debtor by such failure. 
(2) On presentation to the filing officer of such a termination state-
ment he must note it in the index. The tiling officer shall remove from 
the files, mark "terminated'" and send or deliver to the secured party 
the financing statement and any continuation statement, statement of 
assignment or statement of release pertaining thereto. 
(3) The uniform fee for filing and indexing a termination statement 
including sending or delivering the financing statement shall be $2.00. 
§28:9—405. Assignment of security interest; duties of filing 
officer; fees 
(1) A financing statement may disclose an assignment of a security 
interest in the collateral described in the statement by indication in the 
statement of the name and address of the assignee or by an assignment 
itself or a copy thereof on the face or back of the statement. 
Either 
the original secured party or the assignee may sign this statement as 
the secured party. 
On presentation to the filing officer of such a 
financing statement the filing officer shall mark the same as provided 
in section 28:9—103(4). The uniform fee for filing, indexing and 
furnishing filing data for a financing statement so indicating an 
assignment shall be $2.00. 
(2) A secui'ed party may assign of record all or a part of his 
rights under a financing statement by the filing of a. separate written 
statement of assignment signed by the secured party of record and 
setting forth the name of the secured party of record and the debtor, 
the file number and the date of filing of the financing statement and 
the name and address of the assignee and containing a description of 
the collateral assigned. 
A copy of the assignment is sufficient as a 
separate statement if it complies with the preceding sentence. On pres-
entation to the filing officer of such a separate statement, the filing 
officer shall mark such separate statement with the date and hour of 
the filing. He shall note the assignment on the index of the financing 
statement., The uniform fee for filing, indexing and furnishing 
filing data about such a separate statement of assignment shall be-
$2.00. 
(3) After the disclosure or filing of an assignment under this 
section, the assignee is the secured party of record. 
77 STAT. ] 
PUBLIC LAW 88-243-DEC.- 30,1963 
765 
§ 28:9—406. Release of collateral; duties of filing officer; fees 
A secured party of record may by his signed statement release 
all or a part of any collateral described in a filed financing statement. 
The statement of release is sufficient if it contains a description of the 
collateral being released, the name and address of the debtor, the 
name and address of the secured party, and the file number of the 
financing statement. 
L'pon presentation of such a statement to the 
filing officer he shall attach the statement of release to the instrument 
to which it relates and shall enter on the released instrument and on 
the index record thereof the word "released", the date of filing of the 
statement of release, and a facsimile of his signature. 
The uniform 
fee for filing and noting such a statement of release shall be $2.00. 
§ 28:9—407. Information from filing officer 
(1) If the person filing any financing statement, termination state-
ment, statement of assignment, or statement of release, furnishes the 
filing officer a copy thereof, the filing officer shall upon request note 
npon the copy the file number and date and hour of the filing of the 
original and deliver or send the copy to such person. 
(2) Upon request of any person, the filing officer shall issue his 
certificate showing whether there is on file on the date and hour 
stated therein, any presently effective financing statement naming 
a particular debtor and any statement of assignment thereof and if 
there is, giving the date and hour of filing of each such statement 
and the names and addresses of each secured party therein. 
The uni-
form fee for such a certificate shall be $1.00 plus $0.50 for each financ-
ing statement and for each statement of assignment reported therein. 
Upon request the filing officer shall furnish a copy of any filed financ-
ing, continuation or termination statement or statement of assignment 
or release for a uniform fee of $3.00 for the first two pages or less, 
and $1.00 for each additional page, plus $0.50 for certification. 
PART 5—DEFAULT 
§ 28:9—501. Default; procedure when security agreement covers 
both real and personal property 
(1) When a debtor is in default under a security agreement, a 
secured party has the rights and remedies provided in this part and 
except as limited by subsection (3) those provided in the security 
agreement. He may reduce his claim to judgment, foreclose or other-
wise enforce the security interest by any available judicial procedure. 
If the collateral is documents the secured party may proceed either 
as to the documents or as to the goods covered thereby. A secured 
party in possession has the rights, remedies and duties provided in 
section 28:9—207. The rights and remedies referred to in this subsec-
tion are cumulative. 
(2) After default, the debtor has the rights and remedies provided 
in this part, those provided in the security agreement and those pro-
vided in section 28:9—207. 
(3) To the extent that they give rights to the debtor and impose 
duties on the secured party, the rules stated in the subsections referred 
to below may not be waived or varied except as provided with respect 
to compulsory disposition of collateral (subsection (1) of section 
28:9—505) and with respect to redemption of collateral (section 
28:9—506) but the parties may by agreement determine the standards 
by which the fulfillment of tliese rights and duties is to be measured 
if such standards are not manifestly unreasonable: 
(a) subsection (2) of section 28:9—502 and subsection (2) of 
section 28:9—504 insofar as they require accounting for surplus 
proceeds of collateral; 
766 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
(b) subsection (3) of section 28:9—504 and subsection (1) of 
section 28:9—505 which deal with disposition of collateral; 
(c) subsection (2) of section 28:9—505 which deals with 
acceptance of collateral as discharge of obligation; 
(d) section 28:9—506 which deals with redemption of collat-
eral; and 
(e) subsection (1) of section 28:9—507 which deals witli the 
secured party's liaoility for failure to comply with this part. 
(4) If the security agreement covers both real and personal prop-
erty, the secured party may proceed under this part as to the personal 
property or he may proceed as to both the real and the personal prop-
erty in accordance with his rights and remedies in respect of the real 
property in which case the provisions of this part do not apply. 
(5) When a secured party has reduced his claim to judgment the 
lien of any levy whicli may be made upon his collateral by virtue of 
any execution based upon the judgment shall I'elate back to the date 
of the perfection of the security interest in such collateral. 
A judicial 
sale, pursuant to such execution, is a foreclosure of the security interest 
by judicial procedure within the meaning of this section, and the 
secured party may purchase at the sale and thereafter hold the col-
lateral free of any other requirements of this article. 
§ 28:9—502. Collection rights of secured party 
(1) When so agreed and in any event on default the secured party 
is ent'tled to notify an account debtor or the obligor on an instrument 
lo make payment to him whether or not the assignor was theretofore 
making collections on the collateral, and also to take control of any 
proceeds to which he is entitled under section 28 :9—306. 
(2) A secured party who by agreement is entitled to charge back 
uncollected collateral or otherwise to full or limited recourse against 
the debtor and who undertakes to collect from the account debtors 
or obligors must proceed in a conmiercially reasonable manner and 
may deduct h's reasonable expenses of realization from the collections. 
If the security agreement secures an indebtedness, the secured party 
must account to the debtor for any surplus, and unless otherwise 
agreed, the debtor is liable for any deficiency. 
Rut, if the underlying 
transaction was a sale of accounts, contract rights, or chattel paper, 
the debtor is entitled to any surplus or is liable for any deficiency only 
if the security agreement so provides. 
§ 28:9—503. Secured party's right to take possession after default 
Unless otherwise agreed a secured party has on default the right 
to take possession of the collateral. 
In taking possession a secured 
T)arty may proceed without judicial process if this can be done without 
breach of the peace or may proceed by action. 
If the security agree-
ment so prov'des the secured party may require the debtor to assemble 
the collateral and mnke it available to the secured party at a place 
to be designated by the secured party w^hich is reasonably convenient 
to both parties. Without removal a secured party may render equip-
ment unusable, and may dispose of collateral on the debtor's premises 
under section 28:9—50 i. 
§ 28:9—504. Secured party's right to dispose of collateral after de-
fault ; effect of disposition 
(1) A secured party after default may sell, lease or otherwise dis-
pose of any or all of the collateral in its then condition or following 
any commercially reasonable preparation or processing. 
Any sale 
of goods is subiect to the !^rt"cV, on sales (article 2). The proceeds of, 
disposition shall be applied in the order following to 
77 STAT J 
PUBLIC LAW 88-243-DEC. 30, 1963 
767 
(a) the reasonable exi>enses of retaking, holding, preparing for 
sale, selling and the like and, to the extent provided for in the 
agreement and not prohibited by law, the reasonable attorneys-
fees and legal expenses incurred by the secured party; 
(b) the satisfaction of indebtedness secured by the security 
interest under which the disposition is made; 
(c) the satisfaction of indebtedness secured by any subordinate 
security interest in the collateral if written notification of demand 
therefor is received before distribution of the proceeds is com-
pleted. 
If requested by the secured party, the holder of a sub-
ordinate security interest must seasonably funiish Treasonable 
proof of his interest, and unless he does so, the secured party need 
not comply with his demand. 
(2) If the security interest secures an indebtedness, the secured 
party must account to the debtor for any surplus, and, unless otherwise 
agreed, the debtor is liable for any deficiency. 
But if the underlying 
Transaction was a sale of accounts, contract rights, or chattel paper, 
the debtor is entitled to any surplus or is liable for any deficiency only 
if the security agreement so provides. 
(3) Disposition of the collateral may be by public or private pro-
ceedings and may be made by way of one or more contracts. 
Sale or 
other disposition may be as a unit or in parcels and at any time and 
place and on any terms but every aspect of the disposition including 
the method, manner, time, place and terms must be commercially rea-
sonable. Unless collateral is perishable or threatens to decline speed-
ily in value or is of a type customarily sold on a recognized market, 
reasonable notification of the time and place of any public sale or 
reasonable notification of the time after which any private sale or other 
intended disposition is to be made shall be sent by the secured party 
to the debtor, and except in the case of consumer goods to any other 
person who has a security interest in the collateral and who has duly 
filed a financing statement indexed in the name of the debtor in the 
District or who is known by the secured party to have a security 
interest in the collateral. 
The secured party may buy at aiiy public 
sale and if the collateral is of a type customarily sold in a recognized 
market or is of a type which is the subject of widely distributee! 
standard price quotations he may buy at private sale. 
(4) When collateral is disposed of by a secured party after default, 
the disposition transfers to a purchaser for value all of the debtors 
rights therein, discharges the security interest under which it is made 
and any security interest or lien subordinate thereto. The purchaser 
takes fi'ee of all such rights and interests even though the secured 
party fails to comply with the requirements of this Pail or of any 
judicial proceedings 
(a) in the case of a public sale, if the purchaser has no knowl-
edge of any defects in the sale and if he does not buy in collusion 
with the secured party, other bidders or the person conducting 
the sale; or 
(b) in any other case, if the purchaser acts in good faith. 
(5) A person who is liable to a secured party under a guaranty, 
indorsement, repurchase agreement or the like and who receives a 
transfer of collateral from the secured party or is subrogated to his 
rights has thereafter the rights and duties of the secured party. Such 
a transfer of collateral is not a sale or disposition of the collateral 
under this article. 
768 
PUBLIC L
A
W 88-243-DEC. 30, 1963 
[77 STAT. 
§28:9—505. Compulsory disposition of collateral; acceptance of 
the collateral as discharge of obligation 
(1) If the debtor lias paid sixty per cent of the cash price in the 
case of a purchase^ money security interest in consumer goods or,sixty 
per cent of the loan in the case of another security interest in consumer 
goods, and has not signed after default a statement renouncing or 
modifying his rights under this part a secured party who has taken 
possession of collateral must dispose of it under section 28:9—504 and 
if he fails to do so within ninety days after he takes possession the 
debtor at his option may recover in conversion or under section 28:9— 
507(1) on secured party's liability. 
(2) In any other case involving consumer goods or any other col-
lateral a secured party in possession may, after default, propose to 
retain the collateral in satisfaction of the obligation. Written notice 
of such proposal shall be sent to the debtor and except in the case of 
consumer goods to any other secured party who has a security interest 
in the collateral and who has duly filed a financing statement indexed 
in the name of the debtor in the District or is known by the secured 
party in possession to have a security interest in it. If the debtor or 
other person entitled to receive notification objects in writing within 
thirty days from the receipt of the notification or if any other secured 
party objects in writing within thirty days after the secured party 
obtains possession the secured party must dispose of the collateral 
under section 28:9—504. In the absence of such written objection the 
secured party may retain the collateral in satisfaction of the debtor's 
obligation. 
§28:9—506. Debtor's right to redeem collateral 
At any time before the secured party has disposed of collateral or 
entered into a contract for its disposition under section 28:9—504 or 
before the obligation has been discharged under section 28:9^—505(2) 
the debtor or any other secured party may unless otherwise agreed 
in writing after default redeem the collateral by tendering fulfillment 
of all obligations secured by the collateral as well as the expenses 
reasonably incurred by the secured party in retaking, holding and 
preparing the collateral for disposition, in arranging for the sale, and 
to the extent provided in the agreement and not prohibited by law, 
his reasonable attorneys' fees and legal expenses. 
§ 28:9—507. Secured party's liability for failure to comply with 
this part 
(1) If it is established that the secured party is not proceeding in 
accordance with the provisions of this Part disposition may be ordered 
or restrained on appropriate terms and conditions. If the disposition 
has occurred the debtor or any person entitled to notification or whose 
security interest has been made known to the secured party prior to 
the disposition has a right to recover from the secured party any loss 
caused by a failure to comply with the provisions of this Part. If the 
collateral is consumer goods, the debtor has a right to recover in any 
event an amount not less than the credit service charge plus ten j)er 
cent of the principal amount of the debt or the time price differential 
plus ten per cent of the cash price. 
(2) The fact that a better price could have been obtained by a sale 
at a different time or in a different method from that selected by the 
secured party is not of itself sufficient to establish that the sale was 
not made in a commercially reasonable manner. If the secured party 
either sells the collateral in the usual manner in any recognized mar-
ket therefor or if he sells at the price current in such market at the 
time of his sale or if he has otherwise sold in conformity with reason-
able commercial practices among dealers in the type of property sold 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
769 
lie lias sold in a commercially reasonable maimer. 
The i)riiiciples 
stated in the two preceding sentences with respect to sales also apply 
as may be appropriate to other types of disposition. A disposition 
which has been approved in any judicial proceeding" or by any bona 
tide creditors' committee or representative of creditors shall con-
clusively be deemed to be commercially reasonable, but this sentence 
does not indicate that any such approval must be obtained in any case 
nor does it indicate that any disposition not so approved is not com-
merciallj^ reasonable. 
ARTICLE 10—CONSTRUCTION WITH OTHER 
LAWS 
Sec. 
28:10—101. (Omitted.) 
28:10—102. (Omi tted.) 
28 :10—103. Inconsistent laws ; what law jjovevns. 
28:10—104. Laws not repealed. 
§28:10—lOL (Omitted.) 
§28:10—102. (Omitted.) 
§28:10—103. Inconsistent laws; what law governs 
Except as provided by section 28:10—104, if any provision of law 
is inconsistent with this subtitle, this subtitle shall govei-n, unless this 
subtitle or the inconsistent provision of the other law specifically 
provides otherwise. 
§28:10—104. Laws not repealed 
(1) The article on documents of title (article 7) does not repeal 
or modify any laws prescribing the form or contents of documents of 
title or the services or facilities to be afforded by bailees, or otherwise 
regulating bailees' businesses in i-espects not specifically dealt with 
herein; but the fact that such laws are violated does not affect the 
status of a document of title which otherwise complies with the 
definition of a document of title (section 28:1—201). 
(2) This subtitle does not supersede or modify the District of 
Columbia Uniform Act for Simplification of Fiduciary Security 
Transfers, approved July 5, 1960 (74 Stat. 322), being all of sub-
chapter I I of chapter 23 of Title 28 of the District of Columbia Code, 
1961 edition, and if in any respect there is any inconsistency between 
D.C. code 28-
that Act and article 8 of this subtitle relating to investment securities, ^^^^ *° 28-2330. 
the provisions of that Act, rather than article 8, control. 
SEC. 2. Section 1265 of the code of law for the District of Colum-
bia, approved March 3, 1901 (chapter 854, 31 Stat. 1389; D.C. Code, 
1961 ed., sec. 12-201), as amended by the Act approved June 30, 
1902 (chapter 1329, 32 Stat. 542), is amended by adding at the end 
' 
thereof the following paragraph: 
"This section does not apply to actions for breach of contracts for 
sale governed by section 28:2—725 of the District of Columbia Code.". 
SEC. 3. (a) Section 839 of the code of law for the District of Co-
lumbia, approved March 3, 1901 (chapter 854, 31 Stat. 1326; D.C. 
Code, 1961 ed., sec. 22-1209), is amended to read as follows: 
"(a) A person or any legal successor in interest of such person, 
security interest 
having executed a security agreement creating a security interest in in^pe"°"ai prop-
personal property securing a monetary obligation owed to a secured " ^' 
party and having under the security agreement: 
" (1) both the right of sale or other disposition of the property 
and the duty to account to the secured party for the proceeds of 
the disposition, sells or otherwise disposes of the property but 
willfully and wrongfully fails to account to the secui-ed party 
for proceeds of disposition; or 
93-025 0-64-51 
770 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 
STAT. 
Certificate rep-
resenting shares. 
Motor vehicles, 
lien for storage, 
repairs, etc. 
"(2) no right of sale or other disposition of the property, 
willfully and wrongfully secretes, withholds, sells, or disposes 
of the property, or converts it to his own use, or, without the 
consent of the secured party, removes it out of the District, or 
maliciously injures or destroys it, in A-iolation of the security 
agreement— 
if the lesser of the value of the proceeds not so accounted for or of the 
property so secreted, withheld, sold, disposed of, converted, removed, 
or injured or destroyed, or, in either case, of the unpaid balance of the 
monetary obligation so secured, is more than $100, shall be fined not 
more than $5,000 or imprisoned not more than five years, or both; or, 
if the lesser of any of the values as lierein described is $100 or less, 
shall be fined not more than $1,000 or imprisoned not more than one 
year, or both. 
"(b) In a case in which a debtor in possession of personal property 
subject to a security interest, who would be guilty of an offense under 
this section, is a corporation or a partnership, an officer, director, 
partner, or agent of the debtor who aids or abets in the commission of 
the offense shall be punished as provided by subsection (a) of this 
section. 
" (c) As used in this section, 'security agreement', 'security interest', 
and 'secured party' have the same meanings as those given to the 
terms by sections 28:9—105(h), 28:1—201(38), and 28:9—105(1), 
i*espectively, of the District of Columbia Code.". 
SEC. 4. Subsection (b) of section 20 of the Act approved June 8, 
1954 (ch. 269, 68 Stat. 189; D.C. Code, 1961 ed., sec. 29-908g(b)), 
as amended by section 3 of the Act approved July 23, 1959 (Pub. L. 
86-106, 73 Stat. 240), is amended to read as follows: 
"(b) Notwithstanding the provisions of section 28:8—204 of the 
District of Columbia Code, every certificate representing shares the 
transferability of which is restricted or limited shall state upon the 
face thereof that the transferability of such shares is restricted or 
limited and upon the face or back thereof shall either set forth a full 
or summary statement of any such restriction or limitation upon the 
transferability of such shares or shall state that the corporation will 
furnish to any shareholder upon request and without charge such full 
or summary statement.". 
SEC. 5. Section 2 of the Act approved June 3, 1952 (chapter 361, 
66 Stat. 97; D.C. Code, 1961 ed., sec. 38-205), is amended to read as 
follows: 
"SEC. 2. (a) All persons storing, repairing, or furnishing supplies 
of or concerning motor vehicles including trailers shall have a lien 
for their agreed or reasonable charges for such storage, repairs, and 
supplies when such charges are incurred by an owner or conditional 
\endee or chattel mortgagor (including a grantor of deed of trust in 
lieu of mortgage) of such motor vehicle, and may detain such motor 
vehicle at any time they may have lawful possession thereof. 
Such 
lien shall have priority over every security interest and other lien or 
right in or to tli© vehicle except as hereinafter limited with respect 
to claims for storage. Before enforcing such lien, notice in writing 
shall be given to the title holder, every secured party and other lien 
holder shown by the certificate of title or registry of the vehicle, and 
any other persons known to claimant who have any interest in or lien 
upon the vehicle. Such notice shall be delivered personally or sent 
by registered mail to the last-known address of the person to whom 
given, shall state that a lien is claimed for the charges therein set 
forth or thereto attached, and shall demand payment thereof. There 
shall be incorporated in or attached to said notice a statement of 
particulars of the charge or charges for which a lien is claimed, to 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
771 
which may be added a claim for storage of the vehicle from the date 
ol said notice to the date of payment or sale, which amount shall be 
set forth at a daily or weekly rate which shall not be in excess of 
charges prevailing at the time for similar storage, and shall not be 
in excess of $3 per day or $21 per week, which additional charge shall 
in no event cover a period in excess of ninety days. 
" (b) As used in this section, 'security interest' and 'secured party' 
have the same meanings as those given to the terms by sections 
28:1—201 and 28:9—105(i), respectively, of the District of Columbia 
Code." 
SEC. 6. (a) The definitions of "Lien", "Instrument", and "Lien 
Definitions. 
Information" in section 1 of the Act approved July 2, 1940 (chapter 
.527, 54 Stat. 736; D.C. Code, 1961 ed., sec. 40-701) are amended to 
read as follow^s: 
"Lien" shall mean any right or interest in or to, any security 
interest as defined in section 28:1—201 of the District of Colum-
bia Code in, or lien or encumbrance upon any motor vehicle or 
trailer, or the equipment or accessories affixed or sold to be affixed 
thereto, in favor of a person other than the owner, except (1) a 
sale of such motor vehicle or trailer accompanied by delivery of 
possession and on execution of the assignment on the back of the 
certificate covering it, or (2) any possessory lien now or hereafter 
provided by law or any lien acquired in any judicial proceeding, 
"Instrument" shall mean any security agreement, as defined in 
section 28:9—10.5(h) of the District of Columbia Code, creating 
such lien. 
"Lien information" shall mean the amount, kind, date of lien, 
name and address of holder or secured party as defined in section 
28:9—105(i) of the District of Columbia Code, and recorder's 
record number, if any. 
(b) The second sentence of section 2 of the Act approved July 
2, 1940 (chapter 527, 54 Stat. 736; D.C. Code, 1961 ed., sec. 40-702), 
is amended to read as follows: "The filing provisions of Article 9 
of Subtitle I of Title 28 of the District of Columbia Code do not 
apply to liens recorded as herein provided, and a lien has no greater 
validity or effect during the time a certificate is outstanding for the 
motor vehicle or trailer covered thereby by reason of the fact tliat 
the lien has been filed in accordance with that article.". 
SEO. 7. The first sentence of section 4 of the Act approved July 2, 
1940 (chapter 527, 54 Stat. 737; D.C. Code, 1961 ed., sec. 40-704), 
as amended by section 1 of the Act approved June 4, 1952 (chapter 
365, 66 Stat. 100), is amended by strikmg out at the end thereof the 
following words: "and acknowledged by the owner in the manner 
provided by law for deeds of real estate". 
SEC. 8. The first sentence of section 8 of the Act approved July 2, 
1940 (chapter 527, 54 Stat. 738; D.C. Code, 1961 ed., sec. 40-708), as 
amended by section 2 of the Act approved June 4, 1952 (chapter 365, 
66 Stat. 100), is amended by striking out at the end thereof the follow-
ing words: "and acknowledged by him in the manner provided by 
law for deeds of real estate". 
SEC. 9. (a) Paragraph (9) of section 1 of the Act approved April 
22, 1960 (Pub. L. 86-431, 74 Stat. 69; D.C. Code, 1961 ed., sec. 40-901 
(9)), is amended to read as follows: 
"Retail install-
"(9) 'Retail installment contract' means a contract entered into ment contract." 
in the District or entered into by a seller licensed or required to be 
licensed by the District evidencing a retail installment transaction 
pursuant to which the title to or a lien on, or security or a security 
interest in, the motor vehicle, which is the subject matter of the trans-
action, is retained or taken to secure, in whole or in part, the retail 
772 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
Recorder of 
Deeds. 
Financing state-
ments. 
Void instru-
ments. 
Disposal. 
buyer's obligations. 
The term includes a security a^eement, chattel 
mortgage, conditional sale contract and a contract m the form of a 
bailment or a lease if the bailee or lessee contracts to pay as compensa-
tion for use a sum substantially equivalent to or in excess of the value 
of the motor vehicle sold and it is agreed that the bailee or lessee is 
bound to become, or, for no further or a merely nominal consideration, 
has the option of becoming, the owner of the motor vehicle upon full 
compliance with the terms of the bailment or lease." 
(b) Section 1 of the Act approved April 22, 1960 (Pub. L. 86-431, 
74 Stat. 69; D.C. Code, 1961 ed., sec. 40-901), is further amended by 
adding at the end thereof the following paragraph: 
" (11) 'Security interest' and 'secured party' have the same meanings 
as those given to the terms in sections 28:1-201 and 28:9-105(1) of 
the District of Columbia Code.". 
SEC. 10. Section 546-C of the code of law for the District of 
Columbia, approved March 3, 1901 (chapter 854, 31 Stat. 1275; D.C. 
Code, 1961 ed., sec. 42-102), as so renumbered and amended by section 
2 of the Act approved June 5, 1952 (chapter 370, 66 Stat. 126), is 
amended to read as follows: 
"SEC. 5 4 6 - C . It is not necessary for the Recorder of Deeds to spread 
upon the records of his office the financing statements or other papers 
filed pursuant to Part 4 of Article 9 of Subtitle I of Title 28 of the 
District of Columbia Code, but they shall be indexed and, except as 
hereinafter provided, shall be kept on file and shall be open to inspec-
tion by the public, and shall have the same force and legal effect as 
if they were actually recorded in the books of his office.". 
SEC. 11. Section 546-D of the code of law for the District of Colum-
bia, approved March 3, 1901 (chapter 854, 31 Stat. 1189), as added by 
section 3 of the Act approved June 5,1952 (chapter 370, 66 Stat. 126; 
D.C. Code, 1961 ed., sec. 42-104), and amended by section 1 of the 
Act approved June 18, 1953 (chapter 126, 67 Stat. 64), is amended to 
read as follows: 
"SEC. 5 4 6 - D . (a) Unless the Recorder of Deeds has notice of an 
action pending relative thereto, he may remove from the files and 
destroy: 
" (1) an instrument filed in his office pursuant to sections 546-A 
and 546-B, as amended, of the code of law for the District of 
Columbia approved March 3, 1901 (chapter 854, 31 Stat. 1275), 
as so renumoered by the Act approved June 5, 1952, chapter 370, 
sec. 1, 66 Stat. 126 (D.C. Code, 1961 ed., sees. 42-101 and 42-103) 
or pursuant to the Act approved July 2, 1940 (chapter 527, 54 
Stat. 736; D.C. Code, 1961 ed., sees. 40-701 to 40-712, 40-713 to 
40-715), as amended, which has become void or lapsed, and which 
has been void or lapsed for one year or more, together with any 
affidavit, release, assignment, or continuation or termination state-
ment relating thereto; 
"(2) a lapsed financing statement, a lapsed continuation state-
ment, a statement of assignment or release relating to either, filed 
pursuant to Part 4 of Article 9 of Subtitle I of Title 28 of the 
District of Columbia Code, and any index of any of them, one 
year or more after lapse of the financing statement and every 
continuation statement relating thereto; and 
"(3) a termination statement filed pursuant to section 28:9— 
404 of the District of Columbia Code, and the index on which it 
is noted, one year or more after the filing of the termination 
statement. 
"(b) Subsection (a) of this section does not apply to a bill of sale, 
mortgage, deed of trust, conditional sale of, financing statement or 
security agreement covering, railroad rolling stock.". 
77 STAT. ] 
PUBLIC LAW 88-243-DEC. 30, 1963 
773 
SEC. 12. Section 546-F of tlie code of law for the District of Co-
lumbia, approved March 3, 1901 (chapter 854, 31 Stat. 1189), as 
added by section 3 of the Act approved June 5, 1902 (chapter 370, 
66 Stat. 126; D.C. Code, 1961 ed., sec. 42-106), is amended to read as 
follows: 
"SEC. 5 4 6 - F . When a financing statement filed pursuant to Part 4 
Destruction o
f 
of Articles 9 of Subtitle I of Title 28 of the District of Columbia Code "^^^^^^"^ ^"^"•"-
has not lapsed, but all the collateral described in the financing state-
ment has been released in the manner provided by Part 4 thereof, the 
Recorder of Deeds may, after the expiration of three years from the 
date of the filing of the statement releasing all the collateral, destroy 
the financing statement and each continuation statement, statement of 
assignment, and statement of release relating thereto." 
SEC. 13. Section 546-G of the code of law for the District of Co-
lumbia, approved March 3, 1901 (chapter 854, 31 Stat. 1189), as 
added by section 3 of the Act approved June 5, 1952 (cha])ter 370, 
66 Stat. 126; D.C. Code, 1961 ed., sec. 42-107), is amended to read 
as follows: 
"SEC. 546-G. (a) Whoever intentionally makes a false statement 
False state-
with respect to a financing statement or other paper filed with the "^^nts. 
Recorder of Deeds pursuant to Part 4 of Aritcle 9 of Subtitle I of 
Title 28 of the District of (Columbia Code, or, after receipt of payment 
in full of the debt secured thereby, neglects or refuses, after written 
demand by the debtor, to send to the debtor a termination statement 
as provided by section 28:9—104 of the Code, shall be fined not more 
than $500 or imprisoned not more than one year, or both. 
"(b) Prosecutions for violations of this subchapter shall be by the 
Corporation Counsel of the District of Columbia or any of his assist-
ants, in the name of the District of Columbia.''. 
"(c) As used in subsection (b) of this section 'Corporation Counsel* 
means the attorney for the District of Columbia, by whatever title the 
attorney may be designated by the Board of Commissioners of the 
District of Columbia.". 
SEC. 14. Section 548 of the code of law for the District of Columbia, 
approved March 3, 1901 (chapter 854, 31 Stat. 1275; D.C. Code, 1961 
ed., sec. 45-701), as amended, is amended to read as follows: 
"SEC. 548. (a) There shall be a Recorder of Deeds of the District, 
Recorder o
f 
appointed by the Commissioners of the District of Columbia, who ^^^"^s. 
•l->nll • 
Appointment. 
"(1) except as provided by clause (2) of this subsection, record 
all deeds, contracts, and other instruments in writing affecting 
the title or ownership of real estate or personal property which 
have been duly acknowledged and certified; 
" (2) accept for filing, without acknowledgment or certification, 
all instruments, financing statements and other papers filed in 
his office pursuant to Part 4 of Article 9 of Subtitle I of Title 28 
of the District of Columbia Code, and the Act of July 2, 1940 
(chapter 527, 54 Stat. 736; D.C. Code, 1961 ed., sees. 40-701 
to 40-712,40-713 to 40-715). 
"(3) perform all requisite services connected with the duties 
prescribed in clauses (1) and (2) of this subsection; and 
"(4) have charge and custody of all the records, papers, and 
property appertaining to his office. 
"(b) A person may not be appointed Recorder of Deeds unless 
he has been a resident of the District of Columbia for at least five 
years next preceding his appointment. 
"(c) The performance, by the Recorder of Deeds and officers and 
employees in his office, of their duties and functions shall be subject 
to tlie supervision and control of the Commissioners of the District." 
774 
PUBLIC LAW 88-243-DEC. 30, 1963 
[77 STAT. 
Repeals. 
SEC. 15. (ji) The followiiig Act and parts of Acts, as amended, are 
hereby repealed: 
(1) Section 833a of the code of law for the District of Colum-
bia, approved March 3, 1901 (chapter 854, 31 Stat. 1189), as 
added by the Act approved April 28,1904 (chapter 1808, 33 Stat. 
554), and amended by the Act approved May 27, 1921 (chapter 
13, 42 Stat. 9; D.C. Code, 1961 ed., sec. 22-1406). 
(2) Sections 1304 to 1493, inclusive, of the code of law for the 
District of Columbia, approved March 3, 1901 (chapter 854, 31 
Stat. 1395-1414), such sections being known as the Negotiable 
Instruments Law (D.C. Code, 1961 ed.. Title 28, chapters 1 to 10, 
inclusive, except sees. 28-410, 28-714a, 28-920, 28-1004, 28-1008 
to 28-1011, inclusive), except that, with respect to section 1389 
of such code of laws for the District of Columbia (31 Stat. 1404; 
D.C. Code, 1961 ed., sec. 28-616), as amended, this repeal applies 
only to the first three sentences thereof. 
(3) Sections 1, 3, 6 and 7 of the Act approved April 5, 1939 
(chapter 37, 53 Stat. 566, 567; D.C. Code, 1961 ed., sees. 28-1004. 
28-1008 to 28-1010, inclusive). 
(4) Sections 1 to 5, inclusive, of the Act approved July 26, 
1949 (chapter 365, 63 Stat. 481, 482; D.C. Code, 1961 ed., sec. 
28-1011). 
(5) Sections 1 to 3, inclusive, of the Act approved August 7, 
1950 (chapter 602, 64 Stat. 416, 417; D.C. Code, 1961 ed., sec. 
28-7l4a). 
(6) Sections 1 to 76a, inclusive, and 79 of the Act approved 
March 17, 1937 (chapter 43, 50 Stat. 29-1:8; D.C. Code, 1961 ed., 
Title 28, chapters 11 to 16, inclusive), known as the TTniform Sales 
Act. 
(7) Sections 1 to 5, inclusive, of the Act approved April 28, 
1904 (chapter 1809, 33 Stat. 555, 556; D.C. Code, 1961 ed., sees. 
28-1701 to 28-1705, inclusive), relating to bulk sales. 
(8) Sections 1 to 49, inclusive, 56 to 59, inclusive, and 62 of 
the Act approved April 15, 1910 (chapter 167, 36 Stat. 301-311; 
D.C. Code, 1961 ed.. Title 28, chapters 18, 19 (except sec. 28-1918 
thereof), 20 and 22), constituting part of the Warehouse Receipts 
Act. 
(9) Section 1621 of the code of law for the District of Colum-
bia, approved March 3, 1901 (chapter 854, 31 Stat. 1432; D.C. 
Code, 1961 ed., sec. 28-1918). 
(10) Sections 1 to 26, inclusive, of the Act approved December 
23, 1944 (chapter 729, 58 Stat. 927-932; D.C. Code, 1961 ed., sees. 
28-2901, 28-2901 notes, 28-2902 to 28-2923, inclusive) constitut-
ing the Uniform Stock Transfer Act. 
(11) Sections 546-A and 546-B, as amended, of the code of 
law for the District of Columbia, approved March 3,1901 (chapter 
854, 31 Stat. 1275), as so renumbered by the Act approved June 5, 
1952, chapter 370, sec. 1, 66 Stat. 126 (D.C. Code, 1961 ed., sees. 
42-101 and 42-103). 
(12) Section 546-E of the code of law for the District of 
Columbia, approved March 3, 1901 (chapter 854, 31 Stat. 1189), 
as added by the Act approved June 5, 1952, chapter 370, sec. 3, 
66 Stat. 126 (D.C. Code, 1961 ed., see. 42-105). 
(13) Section 1119 of the code of law for the District of Colum-
bia, approved March 3, 1901 (chapter 854, 31 Stat. 1368; D.C. 
Code, 1961 ed., sec. 12-304). 
77 STAT. J 
PUBLIC LAW 88-244-DEC. 30, 1963 
775 
(b) Except as provided by subsection (c) of tliis section, transac-
tions validly entered into before the effective date specified in section 
16 of this Act, and the rights, duties and interests flowing from them 
remain valid thereafter and may be terminated, completed, consum-
mated 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. 
(c) The perfection of a security interest, as defined in section 28:1— 
201 of the District of Columbia Code, and however denominated 
in any law repealed by this Act, which was perfected when this Act 
takes effect by a filing, refiling or recording under a law repealed by 
this Act and re(][uiring a further filing, renling or recording to con-
tinue its perfection, continue until and will lapse on the date provided 
by the law so repealed for such further filing, refiling or recording, 
unless in such case, a continuation statement is filed, in the office of 
the Recorder of Deeds of the District, by the secured party within 
twelve months before the perfection of the security interest would 
otherwise lapse. Any such continuation statement must be signed by 
the secured party, identifying the original security agreement, how-
ever denominated, state the date of the last filing, refiling or recording 
and the filing number, and further state that the original security 
agreement is still effective. 
Except as herein specified, the provi-
sions of section 28:9—i03(3) of the Code apply to such a continua-
tion statement. 
(d) The following British statutes shall no longer have any force 
or effect in the District of Columbia: 
(1) 9 and 10 William I I I (1698), chapter 17, sec. 3 (D.C. 
Code, 1961 ed., sec. 28-410). 
(2) 3 and 4 Anne (1704), chapter 9, sees. 7 and 8 (D.C. Code, 
1961 ed., sec. 28-920). 
SEC. 16. This Act shall become effective on January 1,1965. Laws 
Effective date. 
enacted after the approval of this Act, that are inconsistent with this 
Act, supersede it to the extent of the inconsistency. 
Approved December 30, 1963. 
Public Law 88-244 
JOINT RESOLUTION 
December 30, 1963 
To provide for participation by the Government of the United States in the Hague [H. J. Res. 778] 
Conference on Private International Law and the International (Rome) 
Institute for the Unification of Private Law, and authorizing appropriations 
therefor. 
Resol/ved hy the Semite (ind Hou^'^e of Representatives 
of the United 
States of America in Congress assembled^ That the President is hereby 
Hague confer-
authorized to accept membership for the Government of the United intern°aurnarLaw, 
States in (1) the Hague Conference on Private International Law u. s. participa-
and (2) the International (Rome) Institute for the Unification of "°"-
Private Law, and to appoint the United States delegates and their 
alternates to meetings of the two organizations, and the committees 
and organs thereof. 
SEC. 2. There is authorized to be appropriated such sums as may Appropriations. 
be necessary, not to exceed $25,000 annually, for the payment by the 
United States of (1) its proportionate share of the expenses of the 
Hague Conference on Private International Law and of the Inter-
national (Rome) Institute for the Unification of Private Law, and 
(2) all other necessary expenses incident to participation by the 
United States in the activities of the two organizations referred to in 
clause (1) of this section. 
Approved December 30, 1963.