CHAPTER 151 HOUSE BILL No. 3029 An Act amending the uniform commercial code; definitions; amending K.S.A. 84-1-201
and repealing the existing section; also repealing K.S.A. 84-1-201a. Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 84-1-201 is hereby amended to read as follows: 84-
1-201. Subject to additional definitions contained in the subsequent ar-
ticles of this act which are applicable to specific articles or parts thereof,
and unless the context otherwise requires, in this act:

(1) ``Action'' in the sense of a judicial proceeding includes 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 parties in fact as found in
their language or by implication from other circumstances including
course of dealing or usage of trade or course of performance as provided
in this act (K.S.A. 84-1-205 and 84-2-208, and amendments thereto).
Whether an agreement has legal consequences is determined by the pro-
visions of this act, if applicable; otherwise by the law of contracts (K.S.A.
84-1-103 and amendments thereto). (Compare ``Contract.'')

(4) ``Bank'' means any person engaged in the business of banking.

(5) ``Bearer'' means the person in possession of an instrument, doc-
ument of title or certificated security payable to bearer or indorsed in
blank.

(6) ``Bill of lading'' means a document evidencing the receipt of goods
for shipment issued by a person engaged in the business of transporting
or forwarding goods, and includes an airbill. ``Airbill'' means a document
serving for air transportation as a bill of lading does for marine or rail
transportation, and includes an air consignment note or air waybill.

(7) ``Branch'' includes a separately incorporated foreign branch of a
bank.

(8) ``Burden of establishing'' a fact means the burden of persuading
the triers of fact that the existence of the fact is more probable than its
nonexistence.

(9) ``Buyer in ordinary course of business'' means a person who in
good faith and without knowledge that the sale to the person 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. All persons who sell minerals
or the like (including oil and gas) at wellhead or minehead shall be
deemed to be persons in the business of selling goods of that kind. ``Buy-
ing'' 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: NONNEGOTIABLE
BILL OF LADING) is conspicuous. Language in the body of a form is
``conspicuous'' if it is in larger or other contrasting type or color. But in
a telegram any stated term is ``conspicuous.'' Whether a term or clause is
``conspicuous'' or not is for decision by the court.

(11) ``Contract'' means the total legal obligation which results from
the parties' agreement as affected by this act and any other applicable
rules of law. (Compare ``Agreement.'')

(12) ``Creditor'' includes a general creditor, a secured creditor, a lien
creditor and any representative of creditors, including an assignee for the
benefit of creditors, a trustee in bankruptcy, a receiver in equity and an
executor or administrator of an insolvent debtor's or assignor's estate.

(13) ``Defendant'' includes a person in the position of defendant in a
cross-action or counterclaim.

(14) ``Delivery'' with respect to instruments, documents of title, chat-
tel paper or certificated securities means voluntary transfer of possession.

(15) ``Document of title'' includes bill of lading, dock warrant, dock
receipt, warehouse receipt or order for the delivery of goods, and also
any other document which in the regular course of business or financing
is treated as adequately evidencing that the person in possession of it is
entitled to receive, hold and dispose of the document and the goods it
covers. To be a document of title a document must purport to be issued
by or addressed to a bailee and purport to cover goods in the bailee's
possession which are either identified or are fungible portions of an iden-
tified mass.

(16) ``Fault'' means wrongful act, omission or breach.

(17) ``Fungible'' with respect to goods or securities means goods or
securities of which any unit is, by nature or usage of trade, the equivalent
of any other like unit. Goods which are not fungible shall be deemed
fungible for the purposes of this act to the extent that under a particular
agreement or document unlike units are treated as equivalents.

(18) ``Genuine'' means free of forgery or counterfeiting.

(19) ``Good faith'' means honesty in fact in the conduct or transaction
concerned.

(20) ``Holder'' means a person who is in possession of a document of
title or an instrument or a certificated investment security drawn, issued
or indorsed to the person or the person's order or to bearer or in blank
with respect to a negotiable instrument, means the person in possession
if the instrument is payable to bearer or, in the case of an instrument
payable to an identified person, if the identified person is in possession.
``Holder'' with respect to a document of title means the person in posses-
sion if the goods are deliverable to bearer or to the order of the person in
possession.

(21) To ``honor'' is to pay or to accept and pay, or where a credit so
engages to purchase or discount a draft complying with the terms of the
credit.

(22) ``Insolvency proceedings'' includes any assignment for the ben-
efit 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 the person's
debts in the ordinary course of business or cannot pay the person's debts
as they become due or is insolvent within the meaning of the federal
bankruptcy law.

(24) ``Money'' means a medium of exchange authorized or adopted
by a domestic or foreign government as a part of its currency and includes
a monetary unit of account established by an intergovernmental organi-
zation or by agreement between two or more nations.

(25) A person has ``notice'' of a fact when:

(a) The person has actual knowledge of it; or

(b) the person has received a notice or notification of it; or

(c) from all the facts and circumstances known to the person at the
time in question the person has reason to know that it exists. A person
``knows'' or has ``knowledge'' of a fact when the person has actual knowl-
edge 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 circum-
stances under which a notice or notification may cease to be effective are
not determined by this act.

(26) A person ``notifies'' or ``gives'' a notice or notification to another
by taking such steps as may be reasonably required to inform the other
in ordinary course whether or not such other actually comes to know of
it. A person ``receives'' a notice or notification when:

(a) It comes to the person's 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 the person as the
place for receipt of such communications.

(27) Notice, knowledge or a notice or notification received by an or-
ganization 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 the
individual's attention if the organization had exercised due diligence. An
organization exercises due diligence if it maintains reasonable routines
for communicating significant information to the person conducting the
transaction and there is reasonable compliance with the routines. Due
diligence does not require an individual acting for the organization to
communicate information unless such communication is part of the in-
dividual's regular duties or unless the individual has reason to know of
the transaction and that the transaction would be materially affected by
the information.

(28) ``Organization'' includes a corporation, government or 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 entity.

(29) ``Party,'' as distinct from ``third party,'' means a person who has
engaged in a transaction or made an agreement within this act.

(30) ``Person'' includes an individual or an organization. (See K.S.A.
84-1-102 and amendments thereto.)

(31) ``Presumption'' or ``presumed'' means that the trier of fact must
find the existence of the fact presumed unless and until evidence is in-
troduced which would support a finding of its nonexistence. The intro-
duction of such evidence shall have the effect specified in K.S.A. 60-414
and amendments thereto on the burden of establishing the existence or
nonexistence of such fact.

(32) ``Purchase'' includes taking by sale, discount, negotiation, mort-
gage, pledge, lien, issue or reissue, gift or any other voluntary transaction
creating an interest in property.

(33) ``Purchaser'' means a person who takes by purchase.

(34) ``Remedy'' means any remedial right to which an aggrieved party
is entitled with or without resort to a tribunal.

(35) ``Representative'' includes an agent, an officer of a corporation
or association, and a trustee, executor or administrator of an estate or any
other person empowered to act for another.

(36) ``Rights'' includes remedies.

(37) ``Security interest'' means an interest in personal property or
fixtures which secures payment or performance of an obligation. The
retention or reservation of title by a seller of goods notwithstanding ship-
ment or delivery to the buyer (K.S.A. 84-2-401 and amendments thereto)
is limited in effect to a reservation of a ``security interest.'' The term also
includes any interest of a buyer of accounts or chattel paper which 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 K.S.A. 84-2-401
and amendments thereto is not a ``security interest,'' but a buyer may also
acquire a ``security interest'' by complying with article 9. Unless a con-
signment is intended as security, reservation of title thereunder is not a
``security interest,'' but a consignment in any event is subject to the pro-
visions on consignment sales (K.S.A. 84-2-326 and amendments thereto).

Whether a transaction creates a lease or security interest is determined
by the facts of each case; however, a transaction creates a security interest
if the consideration the lessee is to pay the lessor for the right to posses-
sion and use of the goods is an obligation for the term of the lease not
subject to termination by the lessee, and

(a) the original term of the lease is equal to or greater than the re-
maining economic life of the goods,

(b) the lessee is bound to renew the lease for the remaining economic
life of the goods or is bound to become the owner of the goods,

(c) the lessee has an option to renew the lease for the remaining
economic life of the goods for no additional consideration or nominal
additional consideration upon compliance with the lease agreement, or

(d) the lessee has an option to become the owner of the goods for no
additional consideration or nominal additional consideration upon com-
pliance with the lease agreement.

A transaction does not create a security interest merely because it pro-
vides that

(a) the present value of the consideration the lessee is obligated to
pay the lessor for the right to possession and use of the goods is substan-
tially equal to or is greater than the fair market value of the goods at the
time the lease is entered into,

(b) the lessee assumes risk of loss of the goods, or agrees to pay taxes,
insurance, filing, recording, or registration fees, or service or maintenance
costs with respect to the goods,

(c) the lessee has an option to renew the lease or to become the owner
of the goods,

(d) the lessee has an option to renew the lease for a fixed rent that is
equal to or greater than the reasonably predictable fair market rent for
the use of the goods for the term of the renewal at the time the option
is to be performed, or

(e) the lessee has an option to become the owner of the goods for a
fixed price that is equal to or greater than the reasonably predictable fair
market value of the goods at the time the option is to be performed.

For purposes of this subsection (37):

(a) Additional consideration is not nominal if (i) when the option to
renew the lease is grant to the lessee the rent is stated to be the fair
market rent for the use of the goods for the term of the renewal deter-
mined at the time the option is to be performed, or (ii) when the option
to become the owner of the goods is granted to the lessee the price is
stated to be the fair market value of the goods determined at the time
the option is to be performed. Additional consideration is nominal if it is
less than the lessee's reasonably predictable cost of performing under the
lease agreement if the option is not exercised;

(b) ``Reasonably predictable'' and ``remaining economic life of the
goods'' are to be determined with reference to the facts and circum-
stances at the time the transaction is entered into; and

(c) ``Present value'' means the amount as of a date certain of one or
more sums payable in the future, discounted to the date certain. The
discount is determined by the interest rate specified by the parties if the
rate is not manifestly unreasonable at the time the transaction is entered
into; otherwise, the discount is determined by a commercially reasonable
rate that takes into account the facts and circumstances of each case at
the time the transaction was entered into.

(38) ``Send'' in connection with any writing or notice means to deposit
in the mail or deliver for transmission by any other usual means of com-
munication 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) ``Unauthorized'' signature or indorsement means one made
without actual, implied or apparent authority and includes a forgery.

(44) ``Value.'' Except as otherwise provided with respect to negotiable
instruments and bank collections (K.S.A. 84-3-303, 84-4-208 and 84-4-
209, and amendments thereto) a person gives ``value'' for rights if the
person 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 preexisting
claim; or

(c) by accepting delivery pursuant to a preexisting contract for pur-
chase; or

(d) generally, in return for any consideration sufficient to support a
simple contract.

(45) ``Warehouse receipt'' means a receipt issued by a person engaged
in the business of storing goods for hire.

(46) ``Written'' or ``writing'' includes printing, typewriting or any
other intentional reduction to tangible form.

Sec. 2. K.S.A. 84-1-201 and 84-1-201a are hereby repealed.

Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.

Approved May 11, 1998

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