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title-28•Title 28 — Commercial Transactions
Idaho Code, published by the Idaho Legislative Services Office. Idaho Statutes are updated to the website July 1 following the legislative session.
(a) This title shall be known and may be cited as the Uniform Commercial Code.
(b) This chapter may be cited as "Uniform Commercial Code — General Provisions."
[28-1-101, added 1967, ch. 161, sec. 1-101, p. 351; am. 2004, ch. 43, sec. 2, p. 137.]
This chapter applies to a transaction to the extent that it is governed by another chapter of the uniform commercial code.
[28-1-102, added 2004, ch. 43, sec. 3, p. 138.]
(a) The uniform commercial code shall be liberally construed and applied to promote its underlying purposes and policies, which are:
(1) To simplify, clarify, and modernize the law governing commercial transactions;
(2) To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
(3) To make uniform the law among the various jurisdictions.
(b) Unless displaced by the particular provisions of the uniform commercial code, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.
[(28-1-103) 28-1-102, added 1967, ch. 161, sec. 1-102, p. 351; am. and redesig. 2004, ch. 43, sec. 5, p. 138.]
The uniform commercial code being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.
[28-1-104, added 1967, ch. 161, sec. 1-104, p. 351; am. 2004, ch. 43, sec. 6, p. 139.]
If any provision or clause of the uniform commercial code or its application to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of the uniform commercial code which can be given effect without the invalid provision or application, and to this end the provisions of the uniform commercial code are severable.
[(28-1-105) 28-1-108, added 1967, ch. 161, sec. 1-108, p. 351; am. and redesig. 2004, ch. 43, sec. 7, p. 139.]
In the uniform commercial code, unless the statutory context otherwise requires:
(1) Words in the singular number include the plural, and those in the plural include the singular; and
(2) Words of any gender also refer to any other gender.
[28-1-106, added 2004, ch. 43, sec. 8, p. 139.]
Section captions are part of the uniform commercial code.
[28-1-107, added 2004, ch. 43, sec. 9, p. 139.]
This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. section 7001 et seq., except that nothing in this chapter modifies, limits, or supersedes section 7001(c) of that act or authorizes electronic delivery of any of the notices described in section 7003(b) of that act.
[28-1-108, added 2004, ch. 43, sec. 10, p. 139.]
(a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other chapters of the uniform commercial code that apply to particular chapters or parts thereof, have the meanings stated.
(b) Subject to definitions contained in other articles of the uniform commercial code that apply to particular articles or parts thereof:
(1) "Action," in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and any other proceeding in which rights are determined.
(2) "Aggrieved party" means a party entitled to pursue a remedy.
(3) "Agreement," as distinguished from "contract," means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing or usage of trade as provided in section 28-1-303, Idaho Code.
(4) "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.
(5) "Bearer" means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, negotiable tangible document of title, or certificated security that is payable to bearer or indorsed in blank.
(6) "Bill of lading" means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or forwarding goods. The term does not include a warehouse receipt.
(7) "Branch" includes a separately incorporated foreign branch of a bank.
(8) "Burden of establishing" a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.
(9) "Buyer in ordinary course of business" means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A person that sells oil, gas or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under chapter 2, title 28, Idaho Code, may be a buyer in ordinary course of business. "Buyer in ordinary course of business" does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(10) "Conspicuous," with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following:
(A) A heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and
(B) Language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks that call attention to the language.
(11) "Consumer" means an individual who enters into a transaction primarily for personal, family, or household purposes.
(12) "Contract," as distinguished from "agreement," means the total legal obligation that results from the parties’ agreement as determined by the uniform commercial code as supplemented by any other applicable laws.
(13) "Creditor" includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor’s or assignor’s estate.
(14) "Defendant" includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.
(15) "Delivery," with respect to an electronic document of title means voluntary transfer of control and with respect to an instrument, a tangible document of title, or chattel paper, means voluntary transfer of possession.
(16) "Document of title" means a record (i) that in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers and (ii) that purports to be issued by or addressed to a bailee and to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass. The term includes a bill of lading, transport document, dock warrant, dock receipt, warehouse receipt, and order for delivery of goods. An electronic document of title means a document of title evidenced by a record consisting of information stored in an electronic medium. A tangible document of title means a document of title evidenced by a record consisting of information that is inscribed on a tangible medium.
(17) "Fault" means a default, breach, or wrongful act or omission.
(18) "Fungible goods" means:
(A) Goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or
(B) Goods that by agreement are treated as equivalent.
(19) "Genuine" means free of forgery or counterfeiting.
(20) "Good faith" means honesty in fact in the conduct or transaction concerned.
(21) "Holder" means:
(A) The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession;
(B) The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or
(C) The person in control of a negotiable electronic document of title.
(22) "Insolvency proceeding" includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.
(23) "Insolvent" means:
(A) Having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute;
(B) Being unable to pay debts as they become due; or
(C) Being insolvent within the meaning of federal bankruptcy law.
(24) "Money" means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two (2) or more countries.
(25) "Organization" means a person other than an individual.
(26) "Party," as distinguished from "third party," means a person that has engaged in a transaction or made an agreement subject to the uniform commercial code.
(27) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity.
(28) "Present value" means the amount as of a date certain of one (1) or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.
(29) "Purchase" means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in property.
(30) "Purchaser" means a person that takes by purchase.
(31) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(32) "Remedy" means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.
(33) "Representative" means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.
(34) "Rights" includes remedy.
(35) "Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation. "Security interest" includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to chapter 9, title 28, Idaho Code. "Security interest" does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under section 28-2-401, Idaho Code, but a buyer may also acquire a "security interest" by complying with chapter 9, title 28, Idaho Code. Except as otherwise provided in section 28-2-505, Idaho Code, the right of a seller or lessor of goods under chapter 2 or chapter 12, title 28, Idaho Code, to retain or acquire possession of the goods is not a "security interest," but a seller or lessor may also acquire a "security interest" by complying with chapter 9, title 28, Idaho Code. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under section 28-2-401, Idaho Code, is limited in effect to a reservation of a "security interest." Whether a transaction in the form of a lease creates a "security interest" is determined pursuant to section 28-1-203, Idaho Code.
(36) "Send" in connection with a writing, record, or notice means:
(A) To deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or
(B) In any other way to cause to be received any record or notice within the time it would have arrived if properly sent.
(37) "Signed" includes using any symbol executed or adopted with present intention to adopt or accept a writing.
(38) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(39) "Surety" includes a guarantor or other secondary obligor.
(40) "Term" means a portion of an agreement that relates to a particular matter.
(41) "Unauthorized signature" means a signature made without actual, implied, or apparent authority. The term includes a forgery.
(42) "Warehouse receipt" means a document of title issued by a person engaged in the business of storing goods for hire.
(43) "Written" or "writing" includes printing, typewriting, or any other intentional reduction to tangible form.
[28-1-201, added 2004, ch. 309, sec. 2, p. 867.]
(a) Subject to subsection (f) of this section, a person has "notice" of a fact if the person:
(1) Has actual knowledge of it;
(2) Has received a notice or notification of it; or
(3) From all the facts and circumstances known to the person at the time in question, has reason to know that it exists.
(b) "Knowledge" means actual knowledge. "Knows" has a corresponding meaning.
(c) "Discover," "learn," or words of similar import refer to knowledge rather than to reason to know.
(d) A person "notifies" or "gives" a notice or notification to another person by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person actually comes to know of it.
(e) Subject to subsection (f) of this section, a person "receives" a notice or notification when:
(1) It comes to that person’s attention; or
(2) It is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications.
(f) Notice, knowledge, or a notice or notification received by an organization is effective for a particular transaction from the time it is brought to the attention of the individual conducting that transaction and, in any event, from the time it would have been brought to the individual’s attention if the organization had exercised due diligence. An organization exercises due diligence if it maintains reasonable routines for communicating significant information to the person conducting the transaction and there is reasonable compliance with the routines. Due diligence does not require an individual acting for the organization to communicate information unless the communication is part of the individual’s regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.
[28-1-202, added 2004, ch. 43, sec. 12, p. 146.]
(a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.
(b) A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:
(1) The original term of the lease is equal to or greater than the remaining economic life of the goods;
(2) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
(3) The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or
(4) The lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.
(c) A transaction in the form of a lease does not create a security interest merely because:
(1) The present value of the consideration the lessee is obligated to pay the lessor for the right to possession and use of the goods is substantially equal to or is greater than the fair market value of the goods at the time the lease is entered into;
(2) The lessee assumes risk of loss of the goods;
(3) The lessee agrees to pay, with respect to the goods, taxes, insurance, filing, recording, or registration fees, or service or maintenance costs;
(4) The lessee has an option to renew the lease or to become the owner of the goods;
(5) The lessee has an option to renew the lease for a fixed rent that is equal to or greater than the reasonably predictable fair market rent for the use of the goods for the term of the renewal at the time the option is to be performed; or
(6) The lessee has an option to become the owner of the goods for a fixed price that is equal to or greater than the reasonably predictable fair market value of the goods at the time the option is to be performed.
(d) Additional consideration is nominal if it is less than the lessee’s reasonably predictable cost of performing under the lease agreement if the option is not exercised. Additional consideration is not nominal if:
(1) When the option to renew the lease is granted to the lessee, the rent is stated to be the fair market rent for the use of the goods for the term of the renewal determined at the time the option is to be performed; or
(2) When the option to become the owner of the goods is granted to the lessee, the price is stated to be the fair market value of the goods determined at the time the option is to be performed.
(e) The "remaining economic life of the goods" and "reasonably predictable" fair market rent, fair market value, or cost of performing under the lease agreement must be determined with reference to the facts and circumstances at the time the transaction is entered into.
[28-1-203, added 2004, ch. 43, sec. 13, p. 147.]
Except as otherwise provided in chapters 3, 4, 5 and 6, title 28, Idaho Code, a person gives value for rights if the person acquires them:
(1) In return for a binding commitment to extend credit or for the extension of immediately available credit, whether or not drawn upon and whether or not a charge-back is provided for in the event of difficulties in collection;
(2) As security for, or in total or partial satisfaction of, a preexisting claim;
(3) By accepting delivery under a preexisting contract for purchase; or
(4) In return for any consideration sufficient to support a simple contract.
[28-1-204, added 2004, ch. 43, sec. 14, p. 148.]
(a) Whether a time for taking an action required by the uniform commercial code is reasonable depends on the nature, purpose, and circumstances of the action.
(b) An action is taken seasonably if it is taken at or within the time agreed or, if no time is agreed, at or within a reasonable time.
[(28-1-205) 28-1-204, added 1967, ch. 161, sec. 1-204, p. 351; am. and redesig. 2004, ch. 43, sec. 15, p. 148.]
Whenever the uniform commercial code creates a "presumption" with respect to a fact, or provides that a fact is "presumed," the trier of fact must find the existence of the fact unless and until evidence is introduced that supports a finding of its nonexistence.
[28-1-206, added 2004, ch. 43, sec. 17, p. 148.]
(a) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement the uniform commercial code applies to transactions bearing an appropriate relation to this state.
(b) Where one (1) of the following provisions of the uniform commercial code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law, including the conflict of laws rules, so specified:
Rights of creditors against sold goods. Section 28-2-402, Idaho Code.
Applicability of the chapter on leases. Sections 28-12-105 and 28-12-106, Idaho Code.
Applicability of the chapter on bank deposits and collections. Section 28-4-102, Idaho Code.
Governing law in the part on funds transfers. Section 28-4-638, Idaho Code.
Letters of credit. Section 28-5-116, Idaho Code.
Applicability of the chapter on investment securities. Section 28-8-110, Idaho Code.
Law governing perfection, the effect of perfection or nonperfection, the priority of security interests and agricultural liens. Sections 28-9-301 through 28-9-307, Idaho Code.
[(28-1-301) 28-1-105, added 1967, ch. 161, sec. 1-105, p. 351; am. 1991, ch. 135, sec. 2, p. 318; am. 1993, ch. 287, sec. 2, p. 1013; am. 1993, ch. 288, sec. 47, p. 1074; am. 1995, ch. 272, sec. 16, p. 916; am. 1996, ch. 7, sec. 3, p. 19; am. 2001, ch. 208, sec. 3, p. 800; am. and redesig. 2004, ch. 43, sec. 19, p. 149.]
(a) Except as otherwise provided in subsection (b) of this section or elsewhere in the uniform commercial code, the effect of provisions of the uniform commercial code may be varied by agreement.
(b) The obligations of good faith, diligence, reasonableness, and care prescribed by the uniform commercial code may not be disclaimed by agreement. The parties, by agreement, may determine the standards by which the performance of those obligations is to be measured if those standards are not manifestly unreasonable. Whenever the uniform commercial code requires an action to be taken within a reasonable time, a time that is not manifestly unreasonable may be fixed by agreement.
(c) The presence in certain provisions of the uniform commercial code of the phrase "unless otherwise agreed," or words of similar import, does not imply that the effect of other provisions may not be varied by agreement under this section.
[28-1-302, added 2004, ch. 43, sec. 20, p. 149.]
(a) A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if:
(1) The agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
(2) The other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.
(b) A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
(c) A "usage of trade" is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.
(d) A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
(e) Except as otherwise provided in subsection (f) of this section, the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade shall be construed wherever reasonable as consistent with each other. If such a construction is unreasonable:
(1) Express terms prevail over course of performance, course of dealing, and usage of trade;
(2) Course of performance prevails over course of dealing and usage of trade; and
(3) Course of dealing prevails over usage of trade.
(f) Subject to section 28-2-209, Idaho Code, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
(g) Evidence of a relevant usage of trade offered by one (1) party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.
[(28-1-303) 28-1-205, added 1967, ch. 161, sec. 1-205, p. 351; am. and redesig. 2004, ch. 43, sec. 21, p. 150.]
Every contract or duty within the uniform commercial code imposes an obligation of good faith in its performance and enforcement.
[(28-1-304) 28-1-203, added 1967, ch. 161, sec. 1-203, p. 351; am. and redesig. 2004, ch. 43, sec. 22, p. 151.]
(a) The remedies provided by the uniform commercial code shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in the uniform commercial code or by other rule of law.
(b) Any right or obligation declared by the uniform commercial code is enforceable by action unless the provision declaring it specifies a different and limited effect.
[(28-1-305) 28-1-106, added 1967, ch. 161, sec. 1-106, p. 351; am. and redesig. 2004, ch. 43, sec. 23, p. 151.]
A claim or right arising out of an alleged breach may be discharged in whole or in part without consideration by agreement of the aggrieved party in an authenticated record.
[(28-1-306) 28-1-107, added 1967, ch. 161, sec. 1-107, p. 351; am. and redesig. 2004, ch. 43, sec. 24, p. 151.]
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 is prima facie evidence of its own authenticity and genuineness and of the facts stated in the document by the third party.
[(28-1-307) 28-1-202, added 1967, ch. 161, sec. 1-202, p. 351; am. and redesig. 2004, ch. 43, sec. 25, p. 151.]
(a) A party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest," or the like are sufficient.
(b) Subsection (a) of this section does not apply to an accord and satisfaction.
[(28-1-308) 28-1-207, added 1967, ch. 161, sec. 1-207, p. 351; am. 1993, ch. 288, sec. 49, p. 1079; am. and redesig. 2004, ch. 43, sec. 26, p. 151.]
A term providing that one (1) party or that party’s successor in interest may accelerate payment or performance or require collateral or additional collateral "at will" or when the party "deems itself insecure," or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.
[(28-1-309) 28-1-208, added 1967, ch. 161, sec. 1-208, p. 351; am. and redesig. 2004, ch. 43, sec. 27, p. 152.]
An obligation may be issued as subordinated to performance of another obligation of the person obligated, or a creditor may subordinate its right to performance of an obligation by agreement with either the person obligated or another creditor of the person obligated. Subordination does not create a security interest as against either the common debtor or a subordinated creditor.
[28-1-310, added 2004, ch. 43, sec. 28, p. 152.]
This chapter shall be known and may be cited as Uniform Commercial Code–Sales.
[28-2-101, added 1967, ch. 161, sec. 2-101, p. 351.]
Unless the context otherwise requires, this chapter applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this chapter impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.
[28-2-102, added 1967, ch. 161, sec. 2-102, p. 351.]
(1) In this chapter 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 possession of them.
(d) "Seller" means a person who sells or contracts to sell goods.
(2) Other definitions applying to this chapter 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.
"Commercial unit." Section 28-2-105.
"Confirmed credit." Section 28-2-325.
"Conforming to contract." Section 28-2-106.
"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 28-2-323.
"Person in position of seller." Section 28-2-707.
"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) "Control" as provided in section 28-7-106 and the following definitions in other chapters apply to this chapter:
"Check." Section 28-3-104.
"Consignee." Section 28-7-102.
"Consignor." Section 28-7-102.
"Consumer goods." Section 28-9-102.
"Dishonor." Section 28-3-502.
"Draft." Section 28-3-104.
(4) In addition, chapter 1, title 28, Idaho Code, contains general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-2-103, added 1967, ch. 161, sec. 2-103, p. 351; am. 2001, ch. 208, sec. 5, p. 806; am. 2004, ch. 42, sec. 4, p. 103.]
(1) "Merchant" means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
(2) "Financing agency" means a bank, finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due or claimed under the contract for sale, as by purchasing or paying the seller’s draft or making advances against it or by merely taking it for collection whether or not documents of title accompany or are associated with the draft. "Financing agency" includes also a bank or other person who similarly intervenes between persons who are in the position of seller and buyer in respect to the goods (section 28-2-707).
(3) "Between merchants" means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.
[28-2-104, added 1967, ch. 161, sec. 2-104, p. 351; am. 2004, ch. 42, sec. 5, p. 104.]
(1) "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (chapter 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).
(2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are "future" goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.
(3) There may be a sale of a part interest in existing identified goods.
(4) An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller’s interest in the bulk be sold to the buyer who then becomes an owner in common.
(5) "Lot" means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.
(6) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.
[28-2-105, added 1967, ch. 161, sec. 2-105, p. 351.]
(1) In this chapter 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 "conforming" or conform to the contract when they are in accordance with the obligations under the contract.
(3) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On "termination" all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.
(4) "Cancellation" occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of "termination" except that the cancelling party also retains any remedy for breach of the whole contract or any unperformed balance.
[28-2-106, added 1967, ch. 161, sec. 2-106, p. 351.]
(1) A contract for the sale of minerals or the like (including oil and gas) or a structure or its materials to be removed from realty is a contract for the sale of goods within this chapter if they are to be severed by the seller but until severance a purported present sale thereof which is not effective as a transfer of an interest in land is effective only as a contract to sell.
(2) A contract for the sale apart from the land of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) or of timber to be cut is a contract for the sale of goods within this chapter whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance.
(3) The provisions of this section are subject to any third party rights provided by the law relating to realty records, and the contract for sale may be executed and recorded 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.
[28-2-107, added 1967, ch. 161, sec. 2-107, p. 351; am. 1979, ch. 299, sec. 2, p. 787.]
(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 unless 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 enforceable 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 (10) 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 received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or
(c) with respect to goods for which payment has been made and accepted or which have been received and accepted (section 28-2-606).
[28-2-201, added 1967, ch. 161, sec. 2-201, p. 351.]
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 performance, course of dealing, or usage of trade (section 28-1-303); and
(b) 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.
[28-2-202, added 1967, ch. 161, sec. 2-202, p. 351; am. 2004, ch. 43, sec. 29, p. 152.]
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.
[28-2-203, added 1967, ch. 161, sec. 2-203, p. 351.]
(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.
[28-2-204, added 1967, ch. 161, sec. 2-204, p. 351.]
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 supplies by the offeree must be separately signed by the offeror.
[28-2-205, added 1967, ch. 161, sec. 2-205, p. 351.]
(1) Unless otherwise unambiguously indicated by the language or circumstances
(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
[28-2-206, added 1967, ch. 161, sec. 2-206, p. 351.]
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act.
[28-2-207, added 1967, ch. 161, sec. 2-207, p. 351.]
(1) An agreement modifying a contract within this chapter 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 chapter (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 (3) it can operate as a waiver.
(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.
[28-2-209, added 1967, ch. 161, sec. 2-209, p. 351.]
(1) A party may perform 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 perform or any liability for breach.
(2) Except as otherwise provided in section 28-9-406, unless otherwise agreed, all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him 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 performance of his entire obligation can be assigned despite agreement otherwise.
(3) The creation, attachment, perfection or enforcement of a security interest in the seller’s interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer’s chance of obtaining return performance within the purview of subsection (2) of this section unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection and enforcement of the security interest remain effective, but: (i) the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer; and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.
(4) Unless the circumstances indicate the contrary, a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor’s performance.
(5) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances, as in an assignment for security, indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.
(6) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (section 28-2-609).
[28-2-210, added 1967, ch. 161, sec. 2-210, p. 351; am. 2001, ch. 208, sec. 6, p. 807.]
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.
[28-2-301, added 1967, ch. 161, sec. 2-301, p. 351.]
(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 contract 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 commercial setting, purpose and effect to aid the court in making the determination.
[28-2-302, added 1967, ch. 161, sec. 2-302, p. 351.]
Where this chapter allocates a risk or a burden as between the parties "unless otherwise agreed," the agreement may not only shift the allocation but may also divide the risk or burden.
[28-2-303, added 1967, ch. 161, sec. 2-303, p. 351.]
(1) The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which he is to transfer.
(2) Even though all or part of the price is payable in an interest in realty the transfer of the goods and the seller’s obligations with reference to them are subject to this chapter, but not the transfer of the interest in realty or the transferor’s obligations in connection therewith.
[28-2-304, added 1967, ch. 161, sec. 2-304, p. 351.]
(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if
(a) nothing is said as to price; or
(b) the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as 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 contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.
[28-2-305, added 1967, ch. 161, sec. 2-305, p. 351.]
(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
[28-2-306, added 1967, ch. 161, sec. 2-306, p. 351.]
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.
[28-2-307, added 1967, ch. 161, sec. 2-307, p. 351.]
Unless otherwise agreed
(a) the place for delivery of goods is the seller’s place of business or if he has none his residence; but
(b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
(c) documents of title may be delivered through customary banking channels.
[28-2-308, added 1967, ch. 161, sec. 2-308, p. 351.]
(1) The time for shipment or delivery or any other action under a contract if not provided in this chapter or agreed upon shall be a reasonable time.
(2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
(3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.
[28-2-309, added 1967, ch. 161, sec. 2-309, p. 351.]
Unless otherwise agreed
(a) Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
(b) If the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (section 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 regardless of where the goods are to be received (i) at the time and place at which the buyer is to receive delivery of the tangible documents or (ii) at the time the buyer is to receive delivery of the electronic documents and at the seller’s place of business or if none, the seller’s residence; and
(d) Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.
[28-2-310, added 1967, ch. 161, sec. 2-310, p. 351; am. 2004, ch. 42, sec. 6, p. 104.]
(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 specified by one of the parties. Any such specification must be made in good faith and within limits set by commercial reasonableness.
(2) Unless otherwise agreed specifications relating to assortment of the goods are at the buyer’s option and except as otherwise provided in 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 performance treat the failure to specify or to cooperate as a breach by failure to deliver or accept the goods.
[28-2-311, added 1967, ch. 161, sec. 2-311, p. 351.]
(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that
(a) the title conveyed shall be good, and its transfer rightful; and
(b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.
(2) A warranty under 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.
[28-2-312, added 1967, ch. 161, sec. 2-312, p. 351.]
(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.
(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 affirmation 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.
[28-2-313, added 1967, ch. 161, sec. 2-313, p. 351.]
(1) Unless excluded or modified (section 28-2-316), a warranty that the goods shall be merchantable is implied in a contract for their 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 consumed 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; and
(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.
[28-2-314, added 1967, ch. 161, sec. 2-314, p. 351.]
Where the seller at the time of contracting has 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 shall be fit for such purpose.
[28-2-315, added 1967, ch. 161, sec. 2-315, p. 351.]
(1) Words or conduct relevant to the creation of an express warranty 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 chapter 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 be 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 warranties 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) unless 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
(b) when the 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 circumstances 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 chapter on liquidation or limitation of damages and on contractual modification of remedy (sections 28-2-718 and 28-2-719).
[28-2-316, added 1967, ch. 161, sec. 2-316, p. 351.]
Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:
(a) Exact or technical specifications displace an inconsistent 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 warranties other than an implied warranty of fitness for a particular purpose.
[28-2-317, added 1967, ch. 161, sec. 2-317, p. 351.]
A seller’s warranty whether express or implied extends to any natural 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 operation of this section.
[28-2-318, added 1967, ch. 161, sec. 2-318, p. 351.]
(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 chapter (section 28-2-504) and bear the expense and risk of putting 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 in this chapter (section 28-2-503);
(c) when under either (a) or (b) the term is also F.O.B. vessel, 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 chapter on the form of bill of lading (section 28-2-323).
(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
(b) obtain and tender a receipt for the goods in exchange for which the carrier is under a duty to issue a bill of lading.
(3) Unless otherwise agreed in any case falling within subsection (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 the vessel and in an appropriate case its name and sailing date. The seller may treat the failure of needed instructions as a failure of cooperation under this chapter (section 28-2-311). He may also at his option move the goods in any reasonable manner preparatory to delivery or shipment.
(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 documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.
[28-2-319, added 1967, ch. 161, sec. 2-319, p. 351.]
(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 destination. The term C. & 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 connection with the stated price and destination, the term C.I.F. destination 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 covering the entire transportation 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 freight has 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 contract, 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 procure 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 form 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.
[28-2-320, added 1967, ch. 161, sec. 2-320, p. 351.]
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.
(2) An agreement described in subsection (1) or any warranty of quality or condition of the goods on arrival places upon the seller the risk of ordinary deterioration, shrinkage and the like in transportation 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 where the contract provides for payment 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.
[28-2-321, added 1967, ch. 161, sec. 2-321, p. 351.]
(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 carriage 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.
[28-2-322, added 1967, ch. 161, sec. 2-322, p. 351.]
(1) Where the contract contemplates overseas shipment and contains a term C.I.F. or C. & F. or F.O.B. vessel, the seller unless otherwise agreed must obtain a negotiable bill of lading stating that the goods have been loaded on board or, in the case of a term C.I.F. or C. & F., received for shipment.
(2) Where in a case within subsection (1) of this section a tangible 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 (1) 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 provisions of this chapter 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 characteristic of international deep water commerce.
[28-2-323, added 1967, ch. 161, sec. 2-323, p. 351; am. 2004, ch. 42, sec. 7, p. 105.]
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 nonarrival; 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).
[28-2-324, added 1967, ch. 161, sec. 2-324, p. 351.]
(1) Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale.
(2) The delivery to seller of a proper letter of credit suspends the buyer’s obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from 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.
[28-2-325, added 1967, ch. 161, sec. 2-325, p. 351.]
(1) Unless otherwise agreed, if delivered goods may be returned by the buyer even though they conform 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) 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) 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 chapter (section 28-2-201) and as contradicting the sale aspect of the contract within the provisions of this chapter on parol or extrinsic evidence (section 28-2-202).
[28-2-326, added 1967, ch. 161, sec. 2-326, p. 351; am. 2001, ch. 208, sec. 7, p. 808.]
(1) Under a sale on approval unless 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 with 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
(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 unit 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.
[28-2-327, added 1967, ch. 161, sec. 2-327, p. 351.]
(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 acceptance 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 completion 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.
[28-2-328, added 1967, ch. 161, sec. 2-328, p. 351.]
No person, firm, partnership, association or corporation, or agent or employee thereof, shall, in any manner, or by any means, offer for sale goods, wares, or merchandise, where the offer includes the voluntary and unsolicited sending of goods, wares, or merchandise not actually ordered or requested by the recipient, either orally or in writing. The receipt of any such unsolicited goods, wares, or merchandise shall for all purposes be deemed an unconditional gift to the recipient who may use or dispose of the same in any manner he sees fit without any obligation on his part to the sender.
[28-2-329, added 1969, ch. 46, sec. 1, p. 124.]
Each provision of this chapter 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 chapter and matters concerning title become material the following rules apply:
(1) Title to goods 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 act. Any retention or reservation 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 chapter on secured transactions (chapter 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 physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place; and in particular 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 destination, title passes to the buyer at the time and place of shipment; but
(b) if the contract requires delivery at destination, title passes on tender there.
(3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods,
(a) if the seller is to deliver a tangible document of title, title passes at the time when and the place where he delivers such documents and if the seller is to deliver an electronic document of title, title passes when the seller delivers the document; or
(b) if the goods are at the time of contracting already identified and no documents of title are to be 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."
[28-2-401, added 1967, ch. 161, sec. 2-401, p. 351; am. 2004, ch. 42, sec. 8, p. 105.]
(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 chapter (sections 28-2-502 and 28-2-716).
(2) A creditor of the seller may 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 course of trade by a merchant-seller for a commercially reasonable time after a sale or identification is not fraudulent.
(3) Nothing in this chapter shall be deemed to impair the rights of creditors of the seller
(a) under the provisions of the chapter on Secured Transactions (chapter 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 chapter constitute the transaction a fraudulent transfer or voidable preference.
[28-2-402, added 1967, ch. 161, sec. 2-402, p. 351.]
(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 was to be a "cash sale"; or
(d) The delivery was procured through fraud punishable as larcenous under the criminal law.
(2) Any entrusting of possession of goods to a merchant 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 has 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 chapters on secured transactions (chapter 9) and documents of title (chapter 7).
[28-2-403, added 1967, ch. 161, sec. 2-403, p. 351; am. 1993, ch. 288, sec. 50, p. 1079; am. 2001, ch. 21, sec. 1, p. 27.]
(1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods as goods to which the contract refers even though the goods so identified are nonconforming 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 contract 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 (12) months after contracting or for the sale of crops to be harvested within twelve (12) months or the next normal harvest season after contracting whichever 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 recognized under any other statute or rule of law.
[28-2-501, added 1967, ch. 161, sec. 2-501, p. 351.]
(1) Subject to subsections (2) and (3) 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 section 28-2-501, may on making and keeping good a tender of any unpaid portion of their price recover them from the seller if:
(a) In the case of goods bought for personal, family or household purposes, the seller repudiates or fails to deliver as required by the contract; or
(b) In all cases, the seller becomes insolvent within ten (10) days after receipt of the first installment on their price.
(2) The buyer’s right to recover the goods under subsection (1)(a) vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
(3) If the identification creating 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.
[28-2-502, added 1967, ch. 161, sec. 2-502, p. 351; am. 2001, ch. 208, sec. 8, p. 808.]
(1) Tender of delivery requires that the seller put and hold conforming 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 the agreement and this chapter, and in particular
(a) tender must be at a reasonable hour, and if it is of goods they must be kept available for the period reasonably necessary to enable the buyer to take possession; but
(b) unless otherwise agreed the buyer must 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 destination tender requires that he comply with subsection (1) and also in any appropriate case tender documents 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 acknowledgment by the bailee of the buyer’s right to possession of the goods; but
(b) tender to the buyer of a nonnegotiable document of title or of a record directing to the bailee to deliver is sufficient tender unless the buyer seasonably objects, and except as otherwise provided in chapter 9, title 28, Idaho Code, receipt by the bailee of notification of the buyer’s 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 nonnegotiable 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 correct form, except as provided in this chapter 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 or associated with the documents constitutes nonacceptance or rejection.
[28-2-503, added 1967, ch. 161, sec. 2-503, p. 351; am. 2004, ch. 42, sec. 9, p. 106.]
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 particular 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 reasonable having regard to the nature of the goods and other circumstances 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 material delay or loss ensues.
[28-2-504, added 1967, ch. 161, sec. 2-504, p. 351.]
(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 in 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.
(b) a nonnegotiable 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 nonnegotiable bill of lading naming the buyer as consignee reserves no security interest even though the seller retains possession or control of the bill of lading.
(2) When shipment by the seller with reservation of a security interest is in violation of the contract for sale it constitutes an improper contract for transportation within the preceding section but impairs neither the rights given to the buyer by shipment and identification of the goods to the contract nor the seller’s powers as a holder of a negotiable document of title.
[28-2-505, added 1967, ch. 161, sec. 2-505, p. 351; am. 2004, ch. 42, sec. 10, p. 107.]
(1) A financing agency by paying or purchasing for value a draft which relates to a shipment of goods 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 the 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 buyer is not impaired by subsequent discovery of defects with reference to any relevant document which was apparently regular.
[28-2-506, added 1967, ch. 161, sec. 2-506, p. 351; am. 2004, ch. 42, sec. 11, p. 107.]
(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 them is conditional upon his making the payment due.
[28-2-507, added 1967, ch. 161, sec. 2-507, p. 351.]
(1) Where any tender or delivery by the seller is rejected because nonconforming and the time for performance 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 nonconforming tender which the seller had reasonable grounds to believe 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.
[28-2-508, added 1967, ch. 161, sec. 2-508, p. 351.]
(1) Where the contract requires 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 particular destination and the goods are there duly tendered while in the possession of the 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.
(2) Where the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the buyer
(a) on his receipt of possession or control of a negotiable document of title covering 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 possession or control of a nonnegotiable document of title or other direction to deliver in a record, 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 merchant; 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 chapter on sale on approval (section 28-2-327) and on effect of breach on risk of loss (section 28-2-510).
[28-2-509, added 1967, ch. 161, sec. 2-509, p. 351; am. 2004, ch. 42, sec. 12, p. 107.]
(1) Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.
(2) Where the buyer rightfully revokes 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 beginning.
(3) Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before 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.
[28-2-510, added 1967, ch. 161, sec. 2-510, p. 351.]
(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 when 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 act on the effect of an instrument on an obligation (section 28-3-310), payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment.
[28-2-511, added 1967, ch. 161, sec. 2-511, p. 351; am. 1993, ch. 288, sec. 51, p. 1079.]
(1) Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless
(a) the nonconformity appears without inspection; or
(b) despite tender of the required documents the circumstances would justify injunction against honor under the provisions of this act (section 28-5-109(2)).
(2) Payment pursuant to subsection (1) does not constitute an acceptance of goods or impair the buyer’s right to inspect or any of his remedies.
[28-2-512, added 1967, ch. 161, sec. 2-512, p. 351; am. 1996, ch. 7, sec. 4, p. 19.]
(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.
(2) Expenses of inspection must be borne by the buyer but may be recovered from the seller if the goods do not conform and are rejected.
(3) Unless otherwise agreed and subject to the provisions of this chapter 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.
(4) A place or method of inspection fixed by the parties is presumed to be exclusive but unless otherwise expressly 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.
[28-2-513, added 1967, ch. 161, sec. 2-513, p. 351.]
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 (3) days after presentment; otherwise, only on payment.
[28-2-514, added 1967, ch. 161, sec. 2-514, p. 351.]
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 party inspection or survey to determine the conformity or condition of the goods and may agree that the findings shall be binding upon them in any subsequent litigation or adjustment.
[28-2-515, added 1967, ch. 161, sec. 2-515, p. 351.]
Subject to the provisions of this chapter on breach in installment contracts (section 28-2-612) and unless otherwise agreed under the sections 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 conform to the contract, the buyer may
(a) reject the whole; or
(b) accept the whole; or
(c) accept any commercial unit or units and reject the rest.
[28-2-601, added 1967, ch. 161, sec. 2-601, p. 351.]
(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies 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 chapter (subsection (3) of section 28-2-711), he 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 regard to goods rightfully rejected.
(3) The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of this chapter on seller’s remedies in general (section 28-2-703).
[28-2-602, added 1967, ch. 161, sec. 2-602, p. 351.]
(1) Subject to any security interest in the buyer (subsection (3) of section 28-2-711), when the seller has no agent or place 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 goods 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 commission then to such commission as is usual in the trade or if there is none to a reasonable sum not exceeding ten per cent (10%) 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.
[28-2-603, added 1967, ch. 161, sec. 2-603, p. 351.]
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.
[28-2-604, added 1967, ch. 161, sec. 2-604, p. 351.]
(1) The buyer’s failure to state in connection with rejection a particular defect which is ascertainable by reasonable inspection precludes 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 precludes recovery of the payment for defects apparent in the documents.
[28-2-605, added 1967, ch. 161, sec. 2-605, p. 351; am. 2004, ch. 42, sec. 13, p. 108.]
(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 section 28-2-602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
(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.
[28-2-606, added 1967, ch. 161, sec. 2-606, p. 351.]
(1) The buyer must pay at the contract rate for any goods accepted.
(2) Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this chapter for nonconformity.
(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 to the goods accepted.
(5) Where the buyer is sued for breach of a warranty or other obligation 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 (2) 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 writing that his buyer turn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgment, 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).
[28-2-607, added 1967, ch. 161, sec. 2-607, p. 351.]
(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it
(a) on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
(b) without discovery of such nonconformity 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 which 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 rejected them.
[28-2-608, added 1967, ch. 161, sec. 2-608, p. 351.]
(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 until 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 insecurity 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 (30) days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.
[28-2-609, added 1967, ch. 161, sec. 2-609, p. 351.]
When either party repudiates the contract with respect to a performance 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 section 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 chapter on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods (section 28-2-704).
[28-2-610, added 1967, ch. 161, sec. 2-610, p. 351.]
(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 chapter (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.
[28-2-611, added 1967, ch. 161, sec. 2-611, p. 351.]
(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 contract" or its equivalent.
(2) The buyer may reject any installment which is nonconforming if the nonconformity substantially impairs the value of that installment and cannot be cured or if the nonconformity is a defect in the required documents; but if the nonconformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.
(3) Whenever nonconformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a nonconforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
[28-2-612, added 1967, ch. 161, sec. 2-612, p. 351.]
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 without further right against the seller.
[28-2-613, added 1967, ch. 161, sec. 2-613, p. 351.]
(1) Where without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially 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 payment 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 regulation is discriminatory, oppressive or predatory.
[28-2-614, added 1967, ch. 161, sec. 2-614, p. 351.]
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 nondelivery 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 nonoccurrence 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 production 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 nondelivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.
[28-2-615, added 1967, ch. 161, sec. 2-615, p. 351.]
(1) Where 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, and where the prospective deficiency substantially impairs the value of the whole contract under the provisions of this chapter relating to breach of installment contracts (section 28-2-612), 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 (30) days the contract lapses with respect to any deliveries affected.
(3) The provisions of this section may not be negated by agreement except insofar as the seller has assumed a greater obligation under the preceding section.
[28-2-616, added 1967, ch. 161, sec. 2-616, p. 351.]
Remedies for breach of any obligation or promise collateral or ancillary to a contract for sale are not impaired by the provisions of this chapter.
[28-2-701, added 1967, ch. 161, sec. 2-701, p. 351.]
(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 chapter (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 (10) days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within three (3) months before delivery the ten (10) 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 misrepresentation 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 course or other good faith purchaser or lien creditor under this chapter (section 28-2-403). Successful reclamation of goods excludes all other remedies with respect to them.
[28-2-702, added 1967, ch. 161, sec. 2-702, p. 351.]
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 the 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 damages as hereafter provided (section 28-2-706);
(e) recover damages for nonacceptance (section 28-2-708) or in a proper case the price (section 28-2-709);
(f) cancel.
[28-2-703, added 1967, ch. 161, sec. 2-703, p. 351.]
(1) An aggrieved seller under the preceding section may
(a) identify to the contract conforming goods 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 demonstrably been intended for the particular contract even though those goods are unfinished.
(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contract or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.
[28-2-704, added 1967, ch. 161, sec. 2-704, p. 351.]
(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, plane load or larger shipments of express or freight when the buyer repudiates or fails to make a payment 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 reshipment or as a warehouse; or
(d) negotiation to the buyer of any negotiable document of title covering the goods.
(3) (a) To stop delivery the seller must so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(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 negotiable document of title has been issued for goods the bailee is not obliged to obey a notification to stop until surrender of possession or control of the document.
(d) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
[28-2-705, added 1967, ch. 161, sec. 2-705, p. 351; am. 2004, ch. 42, sec. 14, p. 108.]
(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 in a commercially 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 chapter (section 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 necessary that the 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 acceptance must account for any excess over the amount of his security interest, as hereinafter defined (subsection (3) of section 28-2-711).
[28-2-706, added 1967, ch. 161, sec. 2-706, p. 351.]
(1) A "person in the position of a seller" includes as against a principal 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 chapter withhold or stop delivery (section 28-2-705) and resell (section 28-2-706) and recover incidental damages (section 28-2-710).
[28-2-707, added 1967, ch. 161, sec. 2-707, p. 351.]
(1) Subject to subsection (2) and to the provisions of this chapter with respect to proof of market price (section 28-2-723), the measure of damages for nonacceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this chapter (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 inadequate 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 performance by the buyer, together with any incidental damages provided in this chapter (section 28-2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.
[28-2-708, added 1967, ch. 161, sec. 2-708, p. 351.]
(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under 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
(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 nonacceptance under the preceding section.
[28-2-709, added 1967, ch. 161, sec. 2-709, p. 351.]
Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer’s breach, in connection with return or resale of the goods or otherwise resulting from the breach.
[28-2-710, added 1967, ch. 161, sec. 2-710, p. 351.]
(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 if the breach goes to 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 nondelivery as provided in this chapter (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 chapter (section 28-2-502); or
(b) in a proper case obtain specific performance or replevy the goods as provided in this chapter (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).
[28-2-711, added 1967, ch. 161, sec. 2-711, p. 351.]
(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 difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (section 28-2-715), but less expenses saved 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.
[28-2-712, added 1967, ch. 161, sec. 2-712, p. 351.]
(1) Subject to the provisions of this chapter with respect to proof of market price (section 28-2-723), the measure of damages for nondelivery 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 damages provided in this chapter (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.
[28-2-713, added 1967, ch. 161, sec. 2-713, p. 351.]
(1) Where the buyer has accepted goods and given notification (subsection (3) of section 28-2-607) he may recover as damages for any nonconformity of tender the loss resulting in the ordinary course 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 difference 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 warranted, 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.
[28-2-714, added 1967, ch. 161, sec. 2-714, p. 351.]
(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 commercially reasonable charges, expenses or commissions in connection with effecting 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.
[28-2-715, added 1967, ch. 161, sec. 2-715, p. 351.]
(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 to maintain a claim and delivery action for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances 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. In the case of goods bought for personal, family or household purposes, the buyer’s right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
[28-2-716, added 1967, ch. 161, sec. 2-716, p. 351; am. 2001, ch. 208, sec. 9, p. 809.]
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.
[28-2-717, added 1967, ch. 161, sec. 2-717, p. 351.]
(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 nonfeasibility 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 subsection (1), or
(b) in the absence of such terms, twenty per cent (20%) 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 chapter 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 breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this chapter on resale by an aggrieved seller (section 28-2-706).
[28-2-718, added 1967, ch. 161, sec. 2-718, p. 351.]
(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 chapter and may limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of 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 act.
(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.
[28-2-719, added 1967, ch. 161, sec. 2-719, p. 351.]
Unless the contrary intention clearly appears, expressions of "cancellation" or "rescission" of the contract or the like shall not be construed as a renunciation or discharge of any claim in damages for an antecedent breach.
[28-2-720, added 1967, ch. 161, sec. 2-720, p. 351.]
Remedies for material misrepresentation or fraud include all remedies available under this chapter for nonfraudulent breach. Neither rescission or a claim for rescission of the contract for sale nor rejection or return of the goods shall bar or be deemed inconsistent with a claim for damages or other remedy.
[28-2-721, added 1967, ch. 161, sec. 2-721, p. 351.]
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 party 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.
[28-2-722, added 1967, ch. 161, sec. 2-722, p. 351.]
(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 chapter 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 reasonable 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 chapter 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.
[28-2-723, added 1967, ch. 161, sec. 2-723, p. 351.]
Whenever 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.
[28-2-724, added 1967, ch. 161, sec. 2-724, p. 351.]
(1) An action for breach of any contract for sale must be commenced within four (4) years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one (1) 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 of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
(3) Where an action commenced within the time limited by subsection (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 (6) months after the termination of the first action unless 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 act becomes effective.
[28-2-725, added 1967, ch. 161, sec. 2-725, p. 351.]
This chapter may be cited as "Uniform Commercial Code — Negotiable Instruments."
[28-3-101, added 1993, ch. 288, sec. 2, p. 1021.]
(1) This chapter applies to negotiable instruments. It does not apply to money, to payment orders governed by part 6 of chapter 4, or to securities governed by chapter 8.
(2) If there is conflict between this chapter and chapter 4 or 9, chapters 4 and 9 govern.
(3) Regulations of the board of governors of the federal reserve system and operating circulars of the federal reserve banks supersede any inconsistent provision of this chapter to the extent of the inconsistency.
[28-3-102, added 1993, ch. 288, sec. 2, p. 1021.]
(1) In this chapter:
(a) "Acceptor" means a drawee who has accepted a draft.
(b) "Drawee" means a person ordered in a draft to make payment.
(c) "Drawer" means a person who signs or is identified in a draft as a person ordering payment.
(d) "Good faith" means honesty in fact in the conduct or transaction concerned.
(e) "Maker" means a person who signs or is identified in a note as a person undertaking to pay.
(f) "Order" means a written instruction to pay money signed by the person giving the instruction. The instruction may be addressed to any person, including the person giving the instruction, or to one (1) or more persons jointly or in the alternative but not in succession. An authorization to pay is not an order unless the person authorized to pay is also instructed to pay.
(g) "Ordinary care" in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged. In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank’s prescribed procedures and the bank’s procedures do not vary unreasonably from general banking usage not disapproved by this chapter or chapter 4.
(h) "Party" means a party to an instrument.
(i) "Promise" means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation.
(j) "Prove" with respect to a fact means to meet the burden of establishing the fact (section 28-1-201(b)(8)).
(k) "Remitter" means a person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.
(2) Other definitions applying to this chapter and the sections in which they appear are:
"Acceptance"
"Accommodated party"
"Accommodation party"
"Alteration"
"Anomalous indorsement"
"Blank indorsement"
"Cashier’s check"
"Certificate of deposit"
"Certified check"
"Check"
"Consideration"
"Demand draft"
"Draft"
"Holder in due course"
"Incomplete instrument"
"Indorsement"
"Indorser"
"Instrument"
"Issue"
"Issuer"
"Negotiable instrument"
"Negotiation"
"Note"
"Payable at a definite time"
"Payable on demand"
"Payable to bearer"
"Payable to order"
"Payment"
"Person entitled to enforce"
"Presentment"
"Reacquisition"
"Special indorsement"
"Teller’s check"
"Transfer of instrument"
"Traveler’s check"
"Value"
(3) The following definitions in other chapters apply to this chapter:
"Bank"
"Banking day"
"Clearing house"
"Collecting bank"
"Depositary bank"
"Documentary draft"
"Intermediary bank"
"Item"
"Payor bank"
"Suspends payments"
(4) In addition, chapter 1 contains general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-3-103, added 1993, ch. 288, sec. 2, p. 1021; am. 2002, ch. 121, sec. 1, p. 339; am. 2004, ch. 43, sec. 31, p. 153.]
(1) Except as provided in subsections (3) and (4) of this section, "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:
(a) Is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
(b) Is payable on demand or at a definite time; and
(c) Does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
(2) "Instrument" means a negotiable instrument.
(3) An order that meets all of the requirements of subsection (1) of this section, except paragraph (a), and otherwise falls within the definition of "check" in subsection (6) of this section is a negotiable instrument and a check.
(4) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this chapter.
(5) An instrument is a "note" if it is a promise and is a "draft" if it is an order. If an instrument falls within the definition of both "note" and "draft," a person entitled to enforce the instrument may treat it as either.
(6) "Check" means (i) a draft, other than a documentary draft, payable on demand and drawn on a bank, (ii) a cashier’s check or teller’s check, or (iii) a demand draft. An instrument may be a check even though it is described on its face by another term, such as "money order."
(7) "Cashier’s check" means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.
(8) "Teller’s check" means a draft drawn by a bank (i) on another bank, or (ii) payable at or through a bank.
(9) "Traveler’s check" means an instrument that (i) is payable on demand, (ii) is drawn on or payable at or through a bank, (iii) is designated by the term "traveler’s check" or by a substantially similar term, and (iv) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.
(10) "Certificate of deposit" means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.
(11) "Demand draft" means a writing not signed by the customer that is created by a third party under the purported authority of the customer for the purpose of charging the customer’s account with a bank. A demand draft shall contain the customer’s account number and may contain any or all of the following:
(a) The customer’s printed or typewritten name;
(b) A notation that the customer authorized the draft; or
(c) The statement "no signature required" or words to that effect.
"Demand draft" does not include a check purportedly drawn by and bearing the signature of a fiduciary, as defined in section 68-301, Idaho Code.
[28-3-104, added 1993, ch. 288, sec. 2, p. 1023; am. 2002, ch. 121, sec. 2, p. 340.]
(1) "Issue" means the first delivery of an instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on the instrument to any person.
(2) An unissued instrument, or an unissued incomplete instrument that is completed, is binding on the maker or drawer, but nonissuance is a defense. An instrument that is conditionally issued or is issued for a special purpose is binding on the maker or drawer, but failure of the condition or special purpose to be fulfilled is a defense.
(3) "Issuer" applies to issued and unissued instruments and means a maker or drawer of an instrument.
[28-3-105, added 1993, ch. 288, sec. 2, p. 1024.]
(1) Except as provided in this section, for the purposes of section 28-3-104(1), a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another writing, or (iii) that rights or obligations with respect to the promise or order are stated in another writing. A reference to another writing does not of itself make the promise or order conditional.
(2) A promise or order is not made conditional (i) by a reference to another writing for a statement of rights with respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source.
(3) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of section 28-3-104(1). If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.
(4) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of section 28-3-104(1); but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.
[28-3-106, added 1993, ch. 288, sec. 2, p. 1024.]
Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.
[28-3-107, added 1993, ch. 288, sec. 2, p. 1024.]
(1) A promise or order is "payable on demand" if it (i) states that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder, or (ii) does not state any time of payment.
(2) A promise or order is "payable at a definite time" if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of (i) prepayment, (ii) acceleration, (iii) extension at the option of the holder, or (iv) extension to a further definite time at the option of the maker or acceptor or automatically upon or after a specified act or event.
(3) If an instrument, payable at a fixed date, is also payable upon demand made before the fixed date, the instrument is payable on demand until the fixed date and, if demand for payment is not made before that date, becomes payable at a definite time on the fixed date.
[28-3-108, added 1993, ch. 288, sec. 2, p. 1024.]
(1) A promise or order is payable to bearer if it:
(a) States that it is payable to bearer or to the order of bearer or otherwise indicates that the person in possession of the promise or order is entitled to payment;
(b) Does not state a payee; or
(c) States that it is payable to or to the order of cash or otherwise indicates that it is not payable to an identified person.
(2) A promise or order that is not payable to bearer is payable to order if it is payable (i) to the order of an identified person, or (ii) to an identified person or order. A promise or order that is payable to order is payable to the identified person.
(3) An instrument payable to bearer may become payable to an identified person if it is specially indorsed pursuant to section 28-3-205(1). An instrument payable to an identified person may become payable to bearer if it is indorsed in blank pursuant to section 28-3-205(2).
[28-3-109, added 1993, ch. 288, sec. 2, p. 1025.]
(1) The person to whom an instrument is initially payable is determined by the intent of the person, whether or not authorized, signing as, or in the name or behalf of, the issuer of the instrument. The instrument is payable to the person intended by the signer even if that person is identified in the instrument by a name or other identification that is not that of the intended person. If more than one (1) person signs in the name or behalf of the issuer of an instrument and all the signers do not intend the same person as payee, the instrument is payable to any person intended by one (1) or more of the signers.
(2) If the signature of the issuer of an instrument is made by automated means, such as a check-writing machine, the payee of the instrument is determined by the intent of the person who supplied the name or identification of the payee, whether or not authorized to do so.
(3) A person to whom an instrument is payable may be identified in any way, including by name, identifying number, office or account number. For the purpose of determining the holder of an instrument, the following rules apply:
(a) If an instrument is payable to an account and the account is identified only by number, the instrument is payable to the person to whom the account is payable. If an instrument is payable to an account identified by number and by the name of a person, the instrument is payable to the named person, whether or not that person is the owner of the account identified by number.
(b) If an instrument is payable to:
(i) A trust, an estate or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative or a successor of either, whether or not the beneficiary or estate is also named;
(ii) A person described as agent or similar representative of a named or identified person, the instrument is payable to the represented person, the representative, or a successor of the representative;
(iii) A fund or organization that is not a legal entity, the instrument is payable to a representative of the members of the fund or organization; or
(iv) An office or to a person described as holding an office, the instrument is payable to the named person, the incumbent of the office, or a successor to the incumbent.
(4) If an instrument is payable to two (2) or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to two (2) or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to two (2) or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.
[28-3-110, added 1993, ch. 288, sec. 2, p. 1025.]
Except as otherwise provided for items in chapter 4, an instrument is payable at the place of payment stated in the instrument. If no place of payment is stated, an instrument is payable at the address of the drawee or maker stated in the instrument. If no address is stated, the place of payment is the place of business of the drawee or maker. If a drawee or maker has more than one (1) place of business, the place of payment is any place of business of the drawee or maker chosen by the person entitled to enforce the instrument. If the drawee or maker has no place of business, the place of payment is the residence of the drawee or maker.
[28-3-111, added 1993, ch. 288, sec. 2, p. 1026.]
(1) Unless otherwise provided in the instrument, (i) an instrument is not payable with interest, and (ii) interest on an interest-bearing instrument is payable from the date of the instrument.
(2) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates. The amount or rate of interest may be stated or described in the instrument in any manner and may require reference to information not contained in the instrument. If an instrument provides for interest, but the amount of interest payable cannot be ascertained from the description, interest is payable at the judgment rate in effect at the place of payment of the instrument and at the time interest first accrues.
[28-3-112, added 1993, ch. 288, sec. 2, p. 1026.]
(1) An instrument may be antedated or postdated. The date stated determines the time of payment if the instrument is payable at a fixed period after date. Except as provided in section 28-4-401(3), an instrument payable on demand is not payable before the date of the instrument.
(2) If an instrument is undated, its date is the date of its issue or, in the case of an unissued instrument, the date it first comes into possession of a holder.
[28-3-113, added 1993, ch. 288, sec. 2, p. 1027.]
If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.
[28-3-114, added 1993, ch. 288, sec. 2, p. 1027.]
(1) "Incomplete instrument" means a signed writing, whether or not issued by the signer, the contents of which show at the time of signing that it is incomplete but that the signer intended it to be completed by the addition of words or numbers.
(2) Subject to subsection (3) of this section, if an incomplete instrument is an instrument under section 28-3-104 it may be enforced according to its terms if it is not completed, or according to its terms as augmented by completion. If an incomplete instrument is not an instrument under section 28-3-104 but, after completion, the requirements of section 28-3-104 are met, the instrument may be enforced according to its terms as augmented by completion.
(3) If words or numbers are added to an incomplete instrument without authority of the signer, there is an alteration of the incomplete instrument under section 28-3-407.
(4) The burden of establishing that words or numbers were added to an incomplete instrument without authority of the signer is on the person asserting the lack of authority.
[28-3-115, added 1993, ch. 288, sec. 2, p. 1027.]
(1) Except as otherwise provided in the instrument, two (2) or more persons who have the same liability on an instrument as makers, drawers, acceptors, indorsers who indorse as joint payees, or anomalous indorsers are jointly and severally liable in the capacity in which they sign.
(2) Except as provided in section 28-3-419(5) or by agreement of the affected parties, a party having joint and several liability who pays the instrument is entitled to receive from any party having the same joint and several liability contribution in accordance with applicable law.
(3) Discharge of one (1) party having joint and several liability by a person entitled to enforce the instrument does not affect the right under subsection (2) of this section of a party having the same joint and several liability to receive contribution from the party discharged.
[28-3-116, added 1993, ch. 288, sec. 2, p. 1027.]
Subject to applicable law regarding exclusion of proof of contemporaneous or previous agreements, the obligation of a party to an instrument to pay the instrument may be modified, supplemented or nullified by a separate agreement of the obligor and a person entitled to enforce the instrument, if the instrument is issued or the obligation is incurred in reliance on the agreement or as part of the same transaction giving rise to the agreement. To the extent an obligation is modified, supplemented or nullified by an agreement under this section, the agreement is a defense to the obligation.
[28-3-117, added 1993, ch. 288, sec. 2, p. 1028.]
(1) Except as provided in subsection (5) of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.
(2) Except as provided in subsection (4) or (5) of this section, if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six (6) years after the demand. If no demand for payment is made to the maker, an action to enforce the note is barred if neither principal nor interest on the note has been paid for a continuous period of ten (10) years.
(3) Except as provided in subsection (4) of this section, an action to enforce the obligation of a party to an unaccepted draft to pay the draft must be commenced within three (3) years after dishonor of the draft or ten (10) years after the date of the draft, whichever period expires first.
(4) An action to enforce the obligation of the acceptor of a certified check or the issuer of a teller’s check, cashier’s check, or traveler’s check must be commenced within three (3) years after demand for payment is made to the acceptor or issuer, as the case may be.
(5) An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within six (6) years after demand for payment is made to the maker, but if the instrument states a due date and the maker is not required to pay before that date, the six (6) year period begins when a demand for payment is in effect and the due date has passed.
(6) An action to enforce the obligation of a party to pay an accepted draft, other than a certified check, must be commenced (i) within six (6) years after the due date or dates stated in the draft or acceptance if the obligation of the acceptor is payable at a definite time, or (ii) within six (6) years after the date of the acceptance if the obligation of the acceptor is payable on demand.
(7) Unless governed by other law regarding claims for indemnity or contribution, an action (i) for conversion of an instrument, for money had and received, or like action based on conversion, (ii) for breach of warranty, or (iii) to enforce an obligation, duty or right arising under this chapter and not governed by this section must be commenced within three (3) years after the cause of action accrues.
[28-3-118, added 1993, ch. 288, sec. 2, p. 1028.]
In an action for breach of an obligation for which a third person is answerable over pursuant to this chapter or chapter 4, the defendant 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. If the notice states (i) that the person notified may come in and defend and (ii) that failure to do so will bind the person notified in an action later brought by the person giving the notice as to any determination of fact common to the two (2) litigations, the person notified is so bound unless after seasonable receipt of the notice the person notified does come in and defend.
[28-3-119, added 1993, ch. 288, sec. 2, p. 1029.]
(1) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.
(2) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
[28-3-201, added 1993, ch. 288, sec. 2, p. 1029.]
(1) Negotiation is effective even if obtained (i) from an infant, a corporation exceeding its powers, or a person without capacity, (ii) by fraud, duress or mistake, or (iii) in breach of duty or as part of an illegal transaction.
(2) To the extent permitted by other law, negotiation may be rescinded or may be subject to other remedies, but those remedies may not be asserted against a subsequent holder in due course or a person paying the instrument in good faith and without knowledge of facts that are a basis for rescission or other remedy.
[28-3-202, added 1993, ch. 288, sec. 2, p. 1029.]
(1) An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.
(2) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.
(3) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.
(4) If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this chapter and has only the rights of a partial assignee.
[28-3-203, added 1993, ch. 288, sec. 2, p. 1029.]
(1) "Indorsement" means a signature, other than that of a signer as maker, drawer or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser’s liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.
(2) "Indorser" means a person who makes an indorsement.
(3) For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.
(4) If an instrument is payable to a holder under a name that is not the name of the holder, indorsement may be made by the holder in the name stated in the instrument or in the holder’s name or both, but signature in both names may be required by a person paying or taking the instrument for value or collection.
[28-3-204, added 1993, ch. 288, sec. 2, p. 1030.]
(1) If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a "special indorsement." When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in section 28-3-110 apply to special indorsements.
(2) If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a "blank indorsement." When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.
(3) The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.
(4) "Anomalous indorsement" means an indorsement made by a person who is not the holder of the instrument. An anomalous indorsement does not affect the manner in which the instrument may be negotiated.
[28-3-205, added 1993, ch. 288, sec. 2, p. 1030.]
(1) An indorsement limiting payment to a particular person or otherwise prohibiting further transfer or negotiation of the instrument is not effective to prevent further transfer or negotiation of the instrument.
(2) An indorsement stating a condition to the right of the indorsee to receive payment does not affect the right of the indorsee to enforce the instrument. A person paying the instrument or taking it for value or collection may disregard the condition, and the rights and liabilities of that person are not affected by whether the condition has been fulfilled.
(3) If an instrument bears an indorsement (i) described in section 28-4-201(2), or (ii) in blank or to a particular bank using the words "for deposit," "for collection," or other words indicating a purpose of having the instrument collected by a bank for the indorser or for a particular account, the following rules apply:
(a) A person, other than a bank, who purchases the instrument when so indorsed converts the instrument unless the amount paid for the instrument is received by the indorser or applied consistently with the indorsement.
(b) A depositary bank that purchases the instrument or takes it for collection when so indorsed converts the instrument unless the amount paid by the bank with respect to the instrument is received by the indorser or applied consistently with the indorsement.
(c) A payor bank that is also the depositary bank or that takes the instrument for immediate payment over the counter from a person other than a collecting bank converts the instrument unless the proceeds of the instrument are received by the indorser or applied consistently with the indorsement.
(d) Except as otherwise provided in paragraph (c) of this subsection, a payor bank or intermediary bank may disregard the indorsement and is not liable if the proceeds of the instrument are not received by the indorser or applied consistently with the indorsement.
(4) Except for an indorsement covered in subsection (3) of this section, if an instrument bears an indorsement using words to the effect that payment is to be made to the indorsee as agent, trustee or other fiduciary for the benefit of the indorser or another person, the following rules apply:
(a) Unless there is notice of breach of fiduciary duty as provided in section 28-3-307, a person who purchases the instrument from the indorsee or takes the instrument from the indorsee for collection or payment may pay the proceeds of payment or the value given for the instrument to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser.
(b) A subsequent transferee of the instrument or person who pays the instrument is neither given notice nor otherwise affected by the restriction in the indorsement unless the transferee or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of fiduciary duty.
(5) The presence on an instrument of an indorsement to which this section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrument unless the purchaser is a converter under subsection (3) of this section or has notice or knowledge of breach of fiduciary duty as stated in subsection (4) of this section.
(6) In an action to enforce the obligation of a party to pay the instrument, the obligor has a defense if payment would violate an indorsement to which this section applies and the payment is not permitted by this section.
[28-3-206, added 1993, ch. 288, sec. 2, p. 1030.]
Reacquisition of an instrument occurs if it is transferred to a former holder, by negotiation or otherwise. A former holder who reacquires the instrument may cancel indorsements made after the reacquirer first became a holder of the instrument. If the cancellation causes the instrument to be payable to the reacquirer or to bearer, the reacquirer may negotiate the instrument. An indorser whose indorsement is canceled is discharged, and the discharge is effective against any subsequent holder.
[28-3-207, added 1993, ch. 288, sec. 2, p. 1032.]
"Person entitled to enforce" an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 28-3-309 or 28-3-418(4). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
[28-3-301, added 1993, ch. 288, sec. 2, p. 1032.]
(1) Subject to subsection (3) of this section and section 28-3-106(4), "holder in due course" means the holder of an instrument if:
(a) The instrument when issued or negotiated to the holder does not bear such apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity; and
(b) The holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in section 28-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in section 28-3-305(1).
(2) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (1) of this section, but discharge is effective against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of a defense, claim in recoupment, or claim to the instrument.
(3) Except to the extent a transferor or predecessor in interest has rights as a holder in due course, a person does not acquire rights of a holder in due course of an instrument taken (i) by legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar proceeding, (ii) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organization.
(4) If, under section 28-3-303(1)(a), the promise of performance that is the consideration for an instrument has been partially performed, the holder may assert rights as a holder in due course of the instrument only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance.
(5) If (i) the person entitled to enforce an instrument has only a security interest in the instrument, and (ii) the person obliged to pay the instrument has a defense, claim in recoupment, or claim to the instrument that may be asserted against the person who granted the security interest, the person entitled to enforce the instrument may assert rights as a holder in due course only to an amount payable under the instrument which, at the time of enforcement of the instrument, does not exceed the amount of the unpaid obligation secured.
(6) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
(7) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.
[28-3-302, added 1993, ch. 288, sec. 2, p. 1032.]
(1) An instrument is issued or transferred for value if:
(a) The instrument is issued or transferred for a promise of performance, to the extent the promise has been performed;
(b) The transferee acquires a security interest or other lien in the instrument other than a lien obtained by judicial proceeding;
(c) The instrument is issued or transferred as payment of, or as security for, an antecedent claim against any person, whether or not the claim is due;
(d) The instrument is issued or transferred in exchange for a negotiable instrument; or
(e) The instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a third party by the person taking the instrument.
(2) "Consideration" means any consideration sufficient to support a simple contract. The drawer or maker of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued for a promise of performance, the issuer has a defense to the extent performance of the promise is due and the promise has not been performed. If an instrument is issued for value as stated in subsection (1) of this section, the instrument is also issued for consideration.
[28-3-303, added 1993, ch. 288, sec. 2, p. 1033.]
(1) An instrument payable on demand becomes overdue at the earliest of the following times:
(a) On the day after the day demand for payment is duly made;
(b) If the instrument is a check, ninety (90) days after its date; or
(c) If the instrument is not a check, when the instrument has been outstanding for a period of time after its date which is unreasonably long under the circumstances of the particular case in light of the nature of the instrument and usage of the trade.
(2) With respect to an instrument payable at a definite time the following rules apply:
(a) If the principal is payable in installments and a due date has not been accelerated, the instrument becomes overdue upon default under the instrument for nonpayment of an installment, and the instrument remains overdue until the default is cured.
(b) If the principal is not payable in installments and the due date has not been accelerated, the instrument becomes overdue on the day after the due date.
(c) If a due date with respect to principal has been accelerated, the instrument becomes overdue on the day after the accelerated due date.
(3) Unless the due date of principal has been accelerated, an instrument does not become overdue if there is default in payment of interest but no default in payment of principal.
[28-3-304, added 1993, ch. 288, sec. 2, p. 1033.]
(1) Except as stated in subsection (2) of this section, the right to enforce the obligation of a party to pay an instrument is subject to the following:
(a) A defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;
(b) A defense of the obligor stated in another section of this chapter or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and
(c) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
(2) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in subsection (1)(a) of this section, but is not subject to defenses of the obligor stated in subsection (1)(b) of this section or claims in recoupment stated in subsection (1)(c) of this section against a person other than the holder.
(3) Except as stated in subsection (4) of this section, in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (section 28-3-306) of another person, but the other person’s claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.
(4) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection (1) of this section that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy and lack of legal capacity.
[28-3-305, added 1993, ch. 288, sec. 2, p. 1034.]
A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.
[28-3-306, added 1993, ch. 288, sec. 2, p. 1035.]
(1) In an action with respect to an instrument, the authenticity of, and authority to make, each signature on the instrument is admitted unless specifically denied in the pleadings. If the validity of a signature is denied in the pleadings, the burden of establishing validity is on the person claiming validity, but the signature is presumed to be authentic and authorized unless the action is to enforce the liability of the purported signer and the signer is dead or incompetent at the time of trial of the issue of validity of the signature. If an action to enforce the instrument is brought against a person as the undisclosed principal of a person who signed the instrument as a party to the instrument, the plaintiff has the burden of establishing that the defendant is liable on the instrument as a represented person under section 28-3-402(1).
(2) If the validity of signatures is admitted or proved and there is compliance with subsection (1) of this section, a plaintiff producing the instrument is entitled to payment if the plaintiff proves entitlement to enforce the instrument under section 28-3-301, unless the defendant proves a defense or claim in recoupment. If a defense or claim in recoupment is proved, the right to payment of the plaintiff is subject to the defense or claim, except to the extent the plaintiff proves that the plaintiff has rights of a holder in due course which are not subject to the defense or claim.
[28-3-307, added 1993, ch. 288, sec. 2, p. 1035.]
(1) A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(2) A person seeking enforcement of an instrument under subsection (1) of this section must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, the provisions of this section apply to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
[28-3-308, added 1993, ch. 288, sec. 2, p. 1035.]
(1) Unless otherwise agreed, if a certified check, cashier’s check or teller’s check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation. Discharge of the obligation does not affect any liability that the obligor may have as an indorser of the instrument.
(2) Unless otherwise agreed and except as provided in subsection (1) of this section, if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply:
(a) In the case of an uncertified check, suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check.
(b) In the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in discharge of the obligation to the extent of the payment.
(c) Except as provided in subsection (2)(d) of this section, if the check or note is dishonored and the obligee of the obligation for which the instrument was taken is the person entitled to enforce the instrument, the obligee may enforce either the instrument or the obligation. In the case of an instrument of a third person which is negotiated to the obligee by the obligor, discharge of the obligor on the instrument also discharges the obligation.
(d) If the person entitled to enforce the instrument taken for an obligation is a person other than the obligee, the obligee may not enforce the obligation to the extent the obligation is suspended. If the obligee is the person entitled to enforce the instrument but no longer has possession of it because it was lost, stolen, or destroyed, the obligation may not be enforced to the extent of the amount payable on the instrument, and to that extent the obligee’s rights against the obligor are limited to enforcement of the instrument.
(3) If an instrument other than one described in subsection (1) or (2) of this section is taken for an obligation, the effect is (i) that stated in subsection (1) of this section if the instrument is one on which a bank is liable as maker or acceptor, or (ii) that stated in subsection (2) of this section in any other case.
[28-3-309, added 1993, ch. 288, sec. 2, p. 1036.]
(1) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.
(2) Unless subsection (3) of this section applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
(3) Subject to subsection (4) of this section, a claim is not discharged under subsection (2) of this section if either of the following applies:
(a) The claimant, if an organization, proves that (i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place.
(b) The claimant, whether or not an organization, proves that within ninety (90) days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (a)(i) of this subsection.
(4) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.
[28-3-310, added 1993, ch. 288, sec. 2, p. 1036.]
(1) In this section:
(a) "Check" means a cashier’s check, teller’s check or certified check.
(b) "Claimant" means a person who claims the right to receive the amount of a cashier’s check, teller’s check, or certified check that was lost, destroyed or stolen.
(c) "Declaration of loss" means a written statement, made under penalty of perjury, to the effect that (i) the declarer lost possession of a check, (ii) the declarer is the drawer or payee of the check, in the case of a certified check, or the remitter or payee of the check, in the case of a cashier’s check or teller’s check, (iii) the loss of possession was not the result of a transfer by the declarer or a lawful seizure, and (iv) the declarer cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(d) "Obligated bank" means the issuer of a cashier’s check or teller’s check or the acceptor of a certified check.
(2) A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if (i) the claimant is the drawer or payee of a certified check or the remitter or payee of a cashier’s check or teller’s check, (ii) the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check, (iii) the communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid, and (iv) the claimant provides reasonable identification if requested by the obligated bank. Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration. If a claim is asserted in compliance with this subsection, the following rules apply:
(a) The claim becomes enforceable at the later of (i) the time the claim is asserted, or (ii) the 90th day following the date of the check, in the case of a cashier’s check or teller’s check, or the 90th day following the date of the acceptance, in the case of a certified check.
(b) Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller’s check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check.
(c) If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check.
(d) When the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to section 28-4-302(1)(a), payment to the claimant discharges all liability of the obligated bank with respect to the check.
(3) If the obligated bank pays the amount of a check to a claimant under subsection (2)(d) of this section and the check is presented for payment by a person having rights of a holder in due course, the claimant is obliged to (i) refund the payment to the obligated bank if the check is paid, or (ii) pay the amount of the check to the person having rights of a holder in due course if the check is dishonored.
(4) If a claimant has the right to assert a claim under subsection (2) of this section and is also a person entitled to enforce a cashier’s check, teller’s check or certified check which is lost, destroyed or stolen, the claimant may assert rights with respect to the check either under this section or section 28-3-309.
[28-3-311, added 1993, ch. 288, sec. 2, p. 1037.]
(1) A person is not liable on an instrument unless (i) the person signed the instrument, or (ii) the person is represented by an agent or representative who signed the instrument and the signature is binding on the represented person under section 28-3-402.
(2) A signature may be made (i) manually or by means of a device or machine, and (ii) by the use of any name, including a trade or assumed name, or by a word, mark or symbol executed or adopted by a person with present intention to authenticate a writing.
[28-3-401, added 1993, ch. 288, sec. 2, p. 1038.]
(1) If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the "authorized signature of the represented person" and the represented person is liable on the instrument, whether or not identified in the instrument.
(2) If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:
(a) If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument.
(b) Subject to subsection (3) of this section, if (i) the form of the signature does not show unambiguously that the signature is made in a representative capacity, or (ii) the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.
(3) If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.
[28-3-402, added 1993, ch. 288, sec. 2, p. 1038.]
(1) Unless otherwise provided in this chapter or chapter 4, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this chapter.
(2) If the signature of more than one (1) person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one (1) of the required signatures is lacking.
(3) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this chapter which makes the unauthorized signature effective for the purposes of this chapter.
[28-3-403, added 1993, ch. 288, sec. 2, p. 1039.]
(1) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an indorsement of the instrument by any person in the name of the payee is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(2) If (i) a person whose intent determines to whom an instrument is payable (section 28-3-110(1) or (2)) does not intend the person identified as payee to have any interest in the instrument, or (ii) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special indorsement:
(a) Any person in possession of the instrument is its holder.
(b) An indorsement by any person in the name of the payee stated in the instrument is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value or for collection.
(3) Under subsection (1) or (2) of this section, an indorsement is made in the name of a payee if (i) it is made in a name substantially similar to that of the payee, or (ii) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.
(4) With respect to an instrument to which subsection (1) or (2) of this section applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
[28-3-404, added 1993, ch. 288, sec. 2, p. 1039.]
(1) In this section:
(a) "Employee" includes an independent contractor and employee of an independent contractor retained by the employer.
(b) "Fraudulent indorsement" means (i) in the case of an instrument payable to the employer, a forged indorsement purporting to be that of the employer, or (ii) in the case of an instrument with respect to which the employer is the issuer, a forged indorsement purporting to be that of the person identified as payee.
(c) "Responsibility" with respect to instruments means authority (i) to sign or indorse instruments on behalf of the employer, (ii) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (iii) to prepare or process instruments for issue in the name of the employer, (iv) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (v) to control the disposition of instruments to be issued in the name of the employer, or (vi) to act otherwise with respect to instruments in a responsible capacity. "Responsibility" does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.
(2) For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent indorsement of the instrument, the indorsement is effective as the indorsement of the person to whom the instrument is payable if it is made in the name of that person. If the person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from the fraud, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
(3) Under subsection (2) of this section, an indorsement is made in the name of the person to whom an instrument is payable if (i) it is made in a name substantially similar to the name of that person, or (ii) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.
[28-3-405, added 1993, ch. 288, sec. 2, p. 1040.]
(1) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.
(2) Under subsection (1) of this section, if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.
(3) Under subsection (1) of this section, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (2) of this section, the burden of proving failure to exercise ordinary care is on the person precluded.
[28-3-406, added 1993, ch. 288, sec. 2, p. 1041.]
(1) "Alteration" means (i) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or (ii) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
(2) Except as provided in subsection (3) of this section, an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
(3) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument (i) according to its original terms, or (ii) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.
[28-3-407, added 1993, ch. 288, sec. 2, p. 1041.]
A check or other draft does not of itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it.
[28-3-408, added 1993, ch. 288, sec. 2, p. 1041.]
(1) "Acceptance" means the drawee’s signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee’s signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.
(2) A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.
(3) If a draft is payable at a fixed period after sight and the acceptor fails to date the acceptance, the holder may complete the acceptance by supplying a date in good faith.
(4) "Certified check" means a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection (1) of this section or by a writing on the check which indicates that the check is certified. The drawee of a check has no obligation to certify the check, and refusal to certify is not dishonor of the check.
[28-3-409, added 1993, ch. 288, sec. 2, p. 1042.]
(1) If the terms of a drawee’s acceptance vary from the terms of the draft as presented, the holder may refuse the acceptance and treat the draft as dishonored. In that case, the drawee may cancel the acceptance.
(2) The terms of a draft are not varied by an acceptance to pay at a particular bank or place in the United States, unless the acceptance states that the draft is to be paid only at that bank or place.
(3) If the holder assents to an acceptance varying the terms of a draft, the obligation of each drawer and indorser that does not expressly assent to the acceptance is discharged.
[28-3-410, added 1993, ch. 288, sec. 2, p. 1042.]
(1) In this section, "obligated bank" means the acceptor of a certified check or the issuer of a cashier’s check or teller’s check bought from the issuer.
(2) If the obligated bank wrongfully (i) refuses to pay a cashier’s check or certified check, (ii) stops payment of a teller’s check, or (iii) refuses to pay a dishonored teller’s check, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.
(3) Expenses or consequential damages under subsection (2) of this section are not recoverable if the refusal of the obligated bank to pay occurs because (i) the bank suspends payments, (ii) the obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument, (iii) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or (iv) payment is prohibited by law.
[28-3-411, added 1993, ch. 288, sec. 2, p. 1042.]
The issuer of a note or cashier’s check or other draft drawn on the drawer is obliged to pay the instrument (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in sections 28-3-115 and 28-3-407. The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under section 28-3-415.
[28-3-412, added 1993, ch. 288, sec. 2, p. 1043.]
(1) The acceptor of a draft is obliged to pay the draft (i) according to its terms at the time it was accepted, even though the acceptance states that the draft is payable "as originally drawn" or equivalent terms, (ii) if the acceptance varies the terms of the draft, according to the terms of the draft as varied, or (iii) if the acceptance is of a draft that is an incomplete instrument, according to its terms when completed, to the extent stated in sections 28-3-115 and 28-3-407. The obligation is owed to a person entitled to enforce the draft or to the drawer or an indorser who paid the draft under section 28-3-414 or 28-3-415.
(2) If the certification of a check or other acceptance of a draft states the amount certified or accepted, the obligation of the acceptor is that amount. If (i) the certification or acceptance does not state an amount, (ii) the amount of the instrument is subsequently raised, and (iii) the instrument is then negotiated to a holder in due course, the obligation of the acceptor is the amount of the instrument at the time it was taken by the holder in due course.
[28-3-413, added 1993, ch. 288, sec. 2, p. 1043.]
(1) This section does not apply to cashier’s checks or other drafts drawn on the drawer.
(2) If an unaccepted draft is dishonored, the drawer is obliged to pay the draft (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the drawer signed an incomplete instrument, according to its terms when completed, to the extent stated in sections 28-3-115 and 28-3-407. The obligation is owed to a person entitled to enforce the draft or to an indorser who paid the draft under section 28-3-415.
(3) If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.
(4) If a draft is accepted and the acceptor is not a bank, the obligation of the drawer to pay the draft if the draft is dishonored by the acceptor is the same as the obligation of an indorser under section 28-3-415(1) and (3).
(5) If a draft states that it is drawn "without recourse" or otherwise disclaims liability of the drawer to pay the draft, the drawer is not liable under subsection (2) of this section to pay the draft if the draft is not a check. A disclaimer of the liability stated in subsection (2) of this section is not effective if the draft is a check.
(6) If (i) a check is not presented for payment or given to a depositary bank for collection within thirty (30) days after its date, (ii) the drawee suspends payments after expiration of the thirty (30) day period without paying the check, and (iii) because of the suspension of payments, the drawer is deprived of funds maintained with the drawee to cover payment of the check, the drawer to the extent deprived of funds may discharge its obligation to pay the check by assigning to the person entitled to enforce the check the rights of the drawer against the drawee with respect to the funds.
[28-3-414, added 1993, ch. 288, sec. 2, p. 1043.]
(1) Subject to subsections (2), (3) and (4) of this section and to section 28-3-419(4), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in sections 28-3-115 and 28-3-407. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section.
(2) If an indorsement states that it is made "without recourse" or otherwise disclaims liability of the indorser, the indorser is not liable under subsection (1) of this section to pay the instrument.
(3) If notice of dishonor of an instrument is required by section 28-3-503 and notice of dishonor complying with that section is not given to an indorser, the liability of the indorser under subsection (1) of this section is discharged.
(4) If a draft is accepted by a bank after an indorsement is made, the liability of the indorser under subsection (1) of this section is discharged.
(5) If an indorser of a check is liable under subsection (1) of this section and the check is not presented for payment, or given to a depositary bank for collection, within thirty (30) days after the day the indorsement was made, the liability of the indorser under subsection (1) of this section is discharged.
[28-3-415, added 1993, ch. 288, sec. 2, p. 1044.]
(1) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by indorsement, to any subsequent transferee that:
(a) The warrantor is a person entitled to enforce the instrument;
(b) All signatures on the instrument are authentic and authorized;
(c) The instrument has not been altered;
(d) The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor;
(e) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
(f) If the instrument is a demand draft, creation of the instrument according to the terms on its face was authorized by the person identified as drawer.
(2) A person to whom the warranties under subsection (1) of this section are made and who took the instrument in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach.
(3) The warranties stated in subsection (1) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (2) of this section is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(4) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(5) If the warranty in subsection (1)(f) of this section is not given by a transferor under applicable conflict of law rules, then the warranty is not given to that transferor when that transferor is a transferee.
[28-3-416, added 1993, ch. 288, sec. 2, p. 1044; am. 2002, ch. 121, sec. 3, p. 341.]
(1) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that:
(a) The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
(b) The draft has not been altered;
(c) The warrantor has no knowledge that the signature of the drawer of the draft is unauthorized; and
(d) If the draft is a demand draft, creation of the demand draft according to the terms on its face was authorized by the person identified as drawer.
(2) A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.
(3) If a drawee asserts a claim for breach of warranty under subsection (1) of this section, based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under section 28-3-404 or 28-3-405 or the drawer is precluded under section 28-3-406 or 28-4-406 from asserting against the drawee the unauthorized indorsement or alteration.
(4) If (i) a dishonored draft is presented for payment to the drawer or an indorser or (ii) any other instrument is presented for payment to a party obliged to pay the instrument, and (iii) payment is received, the following rules apply:
(a) The person obtaining payment and a prior transferor of the instrument warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the instrument, a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument.
(b) The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
(5) The warranties stated in subsections (1) and (4) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the liability of the warrantor under subsection (2) or (4) of this section is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(6) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(7) A demand draft is a check, as provided in section 28-3-104.
(8) If the warranty in subsection (1)(d) of this section is not given by a transferor under applicable conflict of law rules, the warranty is not given to that transferor when the transferor is a transferee.
[28-3-417, added 1993, ch. 288, sec. 2, p. 1045; am. 2002, ch. 121, sec. 4, p. 342.]
(1) Except as provided in subsection (3) of this section, if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that (i) payment of the draft had not been stopped pursuant to section 28-4-403, or (ii) the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.
(2) Except as provided in subsection (3) of this section, if an instrument has been paid or accepted by mistake and the case is not covered by subsection (1) of this section, the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (i) recover the payment from the person to whom or for whose benefit payment was made or (ii) in the case of acceptance, may revoke the acceptance.
(3) The remedies provided in subsection (1) or (2) of this section may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided in section 28-3-417 or 28-4-407.
(4) Notwithstanding section 28-4-215 if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection (1) or (2) of this section, the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.
[28-3-418, added 1993, ch. 288, sec. 2, p. 1046.]
(1) If an instrument is issued for value given for the benefit of a party to the instrument ("accommodated party") and another party to the instrument ("accommodation party") signs the instrument for the purpose of incurring liability on the instrument without being a direct beneficiary of the value given for the instrument, the instrument is signed by the accommodation party "for accommodation."
(2) An accommodation party may sign the instrument as maker, drawer, acceptor, or indorser and, subject to subsection (4) of this section, is obliged to pay the instrument in the capacity in which the accommodation party signs. The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives consideration for the accommodation.
(3) A person signing an instrument is presumed to be an accommodation party and there is notice that the instrument is signed for accommodation if the signature is an anomalous indorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. Except as provided in section 28-3-605, the obligation of an accommodation party to pay the instrument is not affected by the fact that the person enforcing the obligation had notice when the instrument was taken by that person that the accommodation party signed the instrument for accommodation.
(4) If the signature of a party to an instrument is accompanied by words indicating unambiguously that the party is guaranteeing collection rather than payment of the obligation of another party to the instrument, the signer is obliged to pay the amount due on the instrument to a person entitled to enforce the instrument only if (i) execution of judgment against the other party has been returned unsatisfied, (ii) the other party is insolvent or in an insolvency proceeding, (iii) the other party cannot be served with process, or (iv) it is otherwise apparent that payment cannot be obtained from the other party.
(5) An accommodation party who pays the instrument is entitled to reimbursement from the accommodated party and is entitled to enforce the instrument against the accommodated party. An accommodated party who pays the instrument has no right of recourse against, and is not entitled to contribution from, an accommodation party.
[28-3-419, added 1993, ch. 288, sec. 2, p. 1046.]
(1) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee.
(2) In an action under subsection (1) of this section, the measure of liability is presumed to be the amount payable on the instrument, but recovery may not exceed the amount of the plaintiff’s interest in the instrument.
(3) A representative, other than a depositary bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.
[28-3-420, added 1993, ch. 288, sec. 2, p. 1047.]
(1) "Presentment" means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.
(2) The following rules are subject to chapter 4, agreement of the parties, and clearing-house rules and the like:
(a) Presentment may be made at the place of payment of the instrument and must be made at the place of payment if the instrument is payable at a bank in the United States; may be made by any commercially reasonable means, including an oral, written or electronic communication; is effective when the demand for payment or acceptance is received by the person to whom presentment is made; and is effective if made to any one (1) of two (2) or more makers, acceptors, drawees or other payors.
(b) Upon demand of the person to whom presentment is made, the person making presentment must (i) exhibit the instrument, (ii) give reasonable identification and, if presentment is made on behalf of another person, reasonable evidence of authority to do so, and (iii) sign a receipt on the instrument for any payment made or surrender the instrument if full payment is made.
(c) Without dishonoring the instrument, the party to whom presentment is made may (i) return the instrument for lack of a necessary indorsement, or (ii) refuse payment or acceptance for failure of the presentment to comply with the terms of the instrument, an agreement of the parties, or other applicable law or rule.
(d) The party to whom presentment is made may treat presentment as occurring on the next business day after the day of presentment if the party to whom presentment is made has established a cut-off hour not earlier than 2 p.m. for the receipt and processing of instruments presented for payment or acceptance and presentment is made after the cut-off hour.
[28-3-501, added 1993, ch. 288, sec. 2, p. 1047.]
(1) Dishonor of a note is governed by the following rules:
(a) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment.
(b) If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later.
(c) If the note is not payable on demand and paragraph (b) of this subsection does not apply, the note is dishonored if it is not paid on the day it becomes payable.
(2) Dishonor of an unaccepted draft other than a documentary draft is governed by the following rules:
(a) If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under section 28-4-301 or 28-4-302 or becomes accountable for the amount of the check under section 28-4-302.
(b) If a draft is payable on demand and paragraph (a) of this subsection does not apply, the draft is dishonored if presentment for payment is duly made to the drawee and the draft is not paid on the day of presentment.
(c) If a draft is payable on a date stated in the draft, the draft is dishonored if (i) presentment for payment is duly made to the drawee and payment is not made on the day the draft becomes payable or the day of presentment, whichever is later, or (ii) presentment for acceptance is duly made before the day the draft becomes payable and the draft is not accepted on the day of presentment.
(d) If a draft is payable on elapse of a period of time after sight or acceptance, the draft is dishonored if presentment for acceptance is duly made and the draft is not accepted on the day of presentment.
(3) Dishonor of an unaccepted documentary draft occurs according to the rules stated in subsection (2)(b), (c) and (d) of this section, except that payment or acceptance may be delayed without dishonor until no later than the close of the third business day of the drawee following the day on which payment or acceptance is required by those paragraphs.
(4) Dishonor of an accepted draft is governed by the following rules:
(a) If the draft is payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and the draft is not paid on the day of presentment.
(b) If the draft is not payable on demand, the draft is dishonored if presentment for payment is duly made to the acceptor and payment is not made on the day it becomes payable or the day of presentment, whichever is later.
(5) In any case in which presentment is otherwise required for dishonor under this section and presentment is excused under section 28-3-504 dishonor occurs without presentment if the instrument is not duly accepted or paid.
(6) If a draft is dishonored because timely acceptance of the draft was not made and the person entitled to demand acceptance consents to a late acceptance, from the time of acceptance the draft is treated as never having been dishonored.
[28-3-502, added 1993, ch. 288, sec. 2, p. 1048.]
(1) The obligation of an indorser stated in section 28-3-415(1) and the obligation of a drawer stated in section 28-3-414(4) may not be enforced unless, (i) the indorser or drawer is given notice of dishonor of the instrument complying with this section, or (ii) notice of dishonor is excused under section 28-3-504(2).
(2) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.
(3) Subject to section 28-3-504(3) with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (i) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or (ii) by any other person within thirty (30) days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within thirty (30) days following the day on which dishonor occurs.
[28-3-503, added 1993, ch. 288, sec. 2, p. 1049.]
(1) Presentment for payment or acceptance of an instrument is excused if (i) the person entitled to present the instrument cannot with reasonable diligence make presentment, (ii) the maker or acceptor has repudiated an obligation to pay the instrument or is dead or in insolvency proceedings, (iii) by the terms of the instrument presentment is not necessary to enforce the obligation of indorsers or the drawer, (iv) the drawer or indorser whose obligation is being enforced has waived presentment or otherwise has no reason to expect or right to require that the instrument be paid or accepted, or (v) the drawer instructed the drawee not to pay or accept the draft or the drawee was not obligated to the drawer to pay the draft.
(2) Notice of dishonor is excused if (i) by the terms of the instrument notice of dishonor is not necessary to enforce the obligation of a party to pay the instrument, or (ii) the party whose obligation is being enforced waived notice of dishonor. A waiver of presentment is also a waiver of notice of dishonor.
(3) Delay in giving notice of dishonor is excused if the delay was caused by circumstances beyond the control of the person giving the notice and the person giving the notice exercised reasonable diligence after the cause of the delay ceased to operate.
[28-3-504, added 1993, ch. 288, sec. 2, p. 1050.]
(1) The following are admissible as evidence and create a presumption of dishonor and of any notice of dishonor stated:
(a) A document regular in form as provided in subsection (2) of this section which purports to be a protest;
(b) A purported stamp or writing of the drawee, payor bank or presenting bank on or accompanying the instrument stating that acceptance or payment has been refused unless reasons for the refusal are stated and the reasons are not consistent with dishonor;
(c) A book or record of the drawee, payor bank or collecting bank, kept in the usual course of business which shows dishonor, even if there is no evidence of who made the entry.
(2) A protest is a certificate of dishonor made by a United States consul or vice consul, or a notary public or other person authorized to administer oaths by the law of the place where dishonor occurs. It may be made upon information satisfactory to that person. The protest must identify the instrument and certify either that presentment has been made or, if not made, the reason why it was not made, and that the instrument has been dishonored by nonacceptance or nonpayment. The protest may also certify that notice of dishonor has been given to some or all parties.
[28-3-505, added 1993, ch. 288, sec. 2, p. 1050.]
(1) The obligation of a party to pay the instrument is discharged as stated in this chapter or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.
(2) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.
[28-3-601, added 1993, ch. 288, sec. 2, p. 1050.]
(1) Subject to subsection (2) of this section, an instrument is paid to the extent payment is made (i) by or on behalf of a party obliged to pay the instrument, and (ii) to a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged even though payment is made with knowledge of a claim to the instrument under section 28-3-306 by another person.
(2) The obligation of a party to pay the instrument is not discharged under subsection (1) of this section if:
(a) A claim to the instrument under section 28-3-306 is enforceable against the party receiving payment and (i) payment is made with knowledge by the payor that payment is prohibited by injunction or similar process of a court of competent jurisdiction, or (ii) in the case of an instrument other than a cashier’s check, teller’s check or certified check, the party making payment accepted, from the person having a claim to the instrument, indemnity against loss resulting from refusal to pay the person entitled to enforce the instrument; or
(b) The person making payment knows that the instrument is a stolen instrument and pays a person it knows is in wrongful possession of the instrument.
[28-3-602, added 1993, ch. 288, sec. 2, p. 1051.]
(1) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.
(2) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.
(3) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.
[28-3-603, added 1993, ch. 288, sec. 2, p. 1051.]
(1) A person entitled to enforce an instrument, with or without consideration, may discharge the obligation of a party to pay the instrument (i) by an intentional voluntary act, such as surrender of the instrument to the party, destruction, mutilation or cancellation of the instrument, cancellation or striking out of the party’s signature, or the addition of words to the instrument indicating discharge, or (ii) by agreeing not to sue or otherwise renouncing rights against the party by a signed writing.
(2) Cancellation or striking out of an indorsement pursuant to subsection (1) of this section does not affect the status and rights of a party derived from the indorsement.
[28-3-604, added 1993, ch. 288, sec. 2, p. 1051.]
(1) In this section, the term "indorser" includes a drawer having the obligation described in section 28-3-414(4).
(2) Discharge, under section 28-3-604 of the obligation of a party to pay an instrument does not discharge the obligation of an indorser or accommodation party having a right of recourse against the discharged party.
(3) If a person entitled to enforce an instrument agrees, with or without consideration, to an extension of the due date of the obligation of a party to pay the instrument, the extension discharges an indorser or accommodation party having a right of recourse against the party whose obligation is extended to the extent the indorser or accommodation party proves that the extension caused loss to the indorser or accommodation party with respect to the right of recourse.
(4) If a person entitled to enforce an instrument agrees, with or without consideration, to a material modification of the obligation of a party other than an extension of the due date, the modification discharges the obligation of an indorser or accommodation party having a right of recourse against the person whose obligation is modified to the extent the modification causes loss to the indorser or accommodation party with respect to the right of recourse. The loss suffered by the indorser or accommodation party as a result of the modification is equal to the amount of the right of recourse unless the person enforcing the instrument proves that no loss was caused by the modification or that the loss caused by the modification was an amount less than the amount of the right of recourse.
(5) If the obligation of a party to pay an instrument is secured by an interest in collateral and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of an indorser or accommodation party having a right of recourse against the obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent (i) the value of the interest is reduced to an amount less than the amount of the right of recourse of the party asserting discharge, or (ii) the reduction in value of the interest causes an increase in the amount by which the amount of the right of recourse exceeds the value of the interest. The burden of proving impairment is on the party asserting discharge.
(6) If the obligation of a party is secured by an interest in collateral not provided by an accommodation party and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of any party who is jointly and severally liable with respect to the secured obligation is discharged to the extent the impairment causes the party asserting discharge to pay more than that party would have been obliged to pay, taking into account rights of contribution, if impairment had not occurred. If the party asserting discharge is an accommodation party not entitled to discharge under subsection (5) of this section, the party is deemed to have a right to contribution based on joint and several liability rather than a right to reimbursement. The burden of proving impairment is on the party asserting discharge.
(7) Under subsection (5) or (6) of this section, impairing value of an interest in collateral includes (i) failure to obtain or maintain perfection or recordation of the interest in collateral, (ii) release of collateral without substitution of collateral of equal value, (iii) failure to perform a duty to preserve the value of collateral owed, under chapter 9 or other law, to a debtor or surety or other person secondarily liable, or (iv) failure to comply with applicable law in disposing of collateral.
(8) An accommodation party is not discharged under subsection (3), (4) or (5) of this section unless the person entitled to enforce the instrument knows of the accommodation or has notice under section 28-3-419(3) that the instrument was signed for accommodation.
(9) A party is not discharged under this section if (i) the party asserting discharge consents to the event or conduct that is the basis of the discharge, or (ii) the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.
[28-3-605, added 1993, ch. 288, sec. 2, p. 1052.]
This chapter may be cited as Uniform Commercial Code — Bank Deposits and Collections.
[28-4-101, added 1967, ch. 161, sec. 4-101, p. 351; am. 1993, ch. 288, sec. 3, p. 1053.]
(1) To the extent that items within this chapter are also within chapters 3 and 8, they are subject to the provisions of those chapters. If there is conflict, the provisions of this chapter govern those of chapter 3, but the provisions of chapter 8 govern those of this chapter.
(2) The liability of a bank for action or nonaction with respect to an item handled by it for purposes of presentment, payment or collection is governed by the law of the place where the bank is located. In the case of action or nonaction 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.
[28-4-102, added 1967, ch. 161, sec. 4-102, p. 351; am. 1993, ch. 288, sec. 4, p. 1053.]
(1) The effect of the provisions of this chapter may be varied by agreement, but the parties to the agreement cannot disclaim a bank’s responsibility for its lack of good faith or failure to exercise ordinary care, or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank’s responsibility is to be measured if those standards are not manifestly unreasonable.
(2) Federal reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection (1) of this section, whether or not specifically assented to by all parties interested in items handled.
(3) Action or nonaction approved by this chapter or pursuant to federal reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearing-house rules and the like or with a general banking usage not disapproved by this chapter, is prima facie the exercise of ordinary care.
(4) The specification or approval of certain procedures by this chapter is not disapproval of other procedures that 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 that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.
[28-4-103, added 1967, ch. 161, sec. 4-103, p. 351; am. 1993, ch. 288, sec. 5, p. 1053.]
(1) In this chapter, unless the context otherwise requires:
(a) "Account" means any deposit or credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;
(b) "Afternoon" means the period of a day between noon and midnight;
(c) "Banking day" means the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions;
(d) "Clearing house" means an 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, including a bank that maintains an account at another bank;
(f) "Documentary draft" means a draft to be presented for acceptance or payment if specified documents, certificated securities (section 28-8-102) or instructions for uncertificated securities (section 28-8-102), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;
(g) "Draft" means a draft as defined in section 28-3-104 or an item, other than an instrument, that is an order;
(h) "Drawee" means a person ordered in a draft to make payment;
(i) "Item" means an instrument or a promise or order to pay money handled by a bank for collection or payment. The term does not include a payment order governed by part 6 of chapter 4 or a credit or debit card slip;
(j) "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;
(k) "Settle" means to pay in cash, by clearing-house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final;
(l) "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 chapter and the sections in which they appear are:
"Agreement for electronic presentment"
"Bank"
"Collecting bank"
"Depositary bank"
"Intermediary bank"
"Payor bank"
"Presenting bank"
"Presentment notice"
(3) "Control" as provided in section 28-7-106 and the following definitions in other chapters apply to this chapter:
"Acceptance"
"Alteration"
"Cashier’s check"
"Certificate of deposit"
"Certified check"
"Check"
"Draft"
"Good faith"
"Holder in due course"
"Instrument"
"Notice of dishonor"
"Order"
"Ordinary care"
"Person entitled to enforce"
"Presentment"
"Promise"
"Prove"
"Teller’s check"
"Unauthorized signature"
(4) In addition chapter 1 of this title contains general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-4-104, added 1967, ch. 161, sec. 4-104, p. 351; am. 1993, ch. 288, sec. 6, p. 1054; am. 1995, ch. 272, sec. 18, p. 917; am. 2004, ch. 42, sec. 18, p. 113.]
In this chapter:
(1) "Bank" means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company;
(2) "Depositary bank" means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;
(3) "Payor bank" means a bank that is the drawee of a draft;
(4) "Intermediary bank" means a bank to which an item is transferred in course of collection except the depositary or payor bank;
(5) "Collecting bank" means a bank handling the item for collection except the payor bank;
(6) "Presenting bank" means a bank presenting an item except a payor bank.
[28-4-105, added 1967, ch. 161, sec. 4-105, p. 351; am. 1993, ch. 288, sec. 7, p. 1056.]
(1) If an item states that it is "payable through" a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.
(2) If an item states that it is "payable at" a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.
(3) If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a codrawee or a collecting bank, the bank is a collecting bank.
[28-4-106, added 1993, ch. 288, sec. 8, p. 1056.]
A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notices or orders must be given under this chapter and under chapter 3.
[(28-4-107) 1967, ch. 161, sec. 4-106, p. 351; am. and redesig. 1993, ch. 288, sec. 9, p. 1056.]
(1) For the purpose of allowing time to process items, prove balances and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of 2 P.M. or later as a cutoff hour for the handling of money and items and the making of entries on its books.
(2) An item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.
[(28-4-108) 1967, ch. 161, sec. 4-107, p. 351; am. and redesig. 1993, ch. 288, sec. 10, p. 1057.]
(1) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank and with or without the approval of any person involved, may waive, modify or extend time limits imposed or permitted by this chapter for a period not exceeding two (2) additional banking days without discharge of drawers or indorsers or liability to its transferor or a prior party.
(2) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this chapter or by instructions is excused if (i) the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of the bank, and (ii) the bank exercises such diligence as the circumstances require.
[(28-4-109) 1967, ch. 161, sec. 4-108, p. 351; am. and redesig. 1993, ch. 288, sec. 11, p. 1057.]
(1) "Agreement for electronic presentment" means an agreement, clearing-house rule, or federal reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item ("presentment notice") rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor and other matters concerning items subject to the agreement.
(2) Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received.
(3) If presentment is made by presentment notice, a reference to "item" or "check" in this chapter means the presentment notice unless the context otherwise indicates.
[28-4-110, added 1993, ch. 288, sec. 13, p. 1057.]
An action to enforce an obligation, duty or right arising under this chapter must be commenced within three (3) years after the cause of action accrues.
[28-4-111, added 1993, ch. 288, sec. 14, p. 1058.]
(1) Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or subagent 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 rights of recoupment or setoff. If an item is handled by banks for purposes of presentment, payment, collection, or return, the relevant provisions of this chapter apply even though action of the 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 words "pay any bank" or the like, only a bank may acquire the rights of a holder until the item has been:
(a) returned to the customer initiating collection; or
(b) specially indorsed by a bank to a person who is not a bank.
[28-4-201, added 1967, ch. 161, sec. 4-201, p. 351; am. 1993, ch. 288, sec. 15, p. 1058.]
(1) A collecting bank must exercise ordinary care in:
(a) presenting an item or sending it for presentment;
(b) sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank’s transferor after learning that the item has not been paid or accepted, as the case may be;
(c) settling for an item when the bank receives final settlement; and
(d) notifying its transferor of any loss or delay in transit within a reasonable time after discovery thereof.
(2) A collecting bank exercises ordinary care under subsection (1) of this section by taking proper action before its midnight deadline following receipt of an item, notice or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.
(3) Subject to subsection (1)(a) of this section, 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 the possession of others or in transit.
[28-4-202, added 1967, ch. 161, sec. 4-202, p. 351; am. 1993, ch. 288, sec. 16, p. 1058.]
Subject to the provisions of chapter 3 concerning conversion of instruments (section 28-3-420) and restrictive indorsements (section 28-3-206), only a collecting bank’s transferor can give instructions that affect the bank or constitute notice to it and a collecting bank is not liable to prior parties for any action taken pursuant to the instructions or in accordance with any agreement with its transferor.
[28-4-203, added 1967, ch. 161, sec. 4-203, p. 351; am. 1993, ch. 288, sec. 17, p. 1059.]
(1) A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of those items on hand, the cost of collection involved and the method generally used by it or others to present those items.
(2) A collecting bank may send:
(a) an item directly to the payor bank;
(b) an item to a nonbank payor if authorized by its transferor; and
(c) an item other than documentary drafts to a nonbank payor, if authorized by federal reserve regulation or operating circular, clearing-house rule or the like.
(3) Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.
[28-4-204, added 1967, ch. 161, sec. 4-204, p. 351; am. 1993, ch. 288, sec. 18, p. 1059.]
If a customer delivers an item to a depositary bank for collection:
(1) The depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer indorses the item, and, if the bank satisfies the other requirements of section 28-3-302, it is a holder in due course; and
(2) The depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer’s account.
[28-4-205, added 1967, ch. 161, sec. 4-205, p. 351; am. 1993, ch. 288, sec. 19, p. 1060.]
Any agreed method that identifies the transferor bank is sufficient for the item’s further transfer to another bank.
[28-4-206, added 1967, ch. 161, sec. 4-206, p. 351; am. 1993, ch. 288, sec. 20, p. 1060.]
(1) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:
(a) The warrantor is a person entitled to enforce the item;
(b) All signatures on the item are authentic and authorized;
(c) The item has not been altered;
(d) The item is not subject to a defense or claim in recoupment (section 28-3-305(1)) of any party that can be asserted against the warrantor;
(e) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
(f) If the item is a demand draft, creation of the item according to the terms on its face was authorized by the person identified as drawer.
(2) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item (i) according to the terms of the item at the time it was transferred, or (ii) if the transfer was of an incomplete item, according to its terms when completed as stated in sections 28-3-115 and 28-3-407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an indorsement stating that it is made "without recourse" or otherwise disclaiming liability.
(3) A person to whom the warranties under subsection (1) of this section are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.
(4) The warranties stated in subsection (1) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(5) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(6) If the warranty in subsection (1)(f) of this section is not given by a transferor under applicable conflict of law rules, the warranty is not given to that transferor when the transferor is a transferee, nor to any prior collecting bank.
[28-4-207, added 1993, ch. 288, sec. 22, p. 1060; am. 2002, ch. 121, sec. 5, p. 343.]
(1) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:
(a) The warrantor is, or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
(b) The draft has not been altered;
(c) The warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized; and
(d) If the draft is a demand draft, creation of the demand draft according to the terms on its face was authorized by the person identified as drawer.
(2) A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft (i) breach of warranty is a defense to the obligation of the acceptor, and (ii) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.
(3) If a drawee asserts a claim for breach of warranty under subsection (1) of this section based on an unauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under section 28-3-404 or 28-3-405 or the drawer is precluded under section 28-3-406 or 28-4-406 from asserting against the drawee the unauthorized indorsement or alteration.
(4) If (i) a dishonored draft is presented for payment to the drawer or an indorser or (ii) any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was, at the time the warrantor transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.
(5) The warranties stated in subsections (1) and (2) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (30) days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(6) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(7) A demand draft is a check, as provided in section 28-3-104.
(8) If the warranty in subsection (1)(d) of this section is not given by a transferor under applicable conflict of law rules, the warranty is not given to that transferor when the transferor is a transferee.
[28-4-208, added 1993, ch. 288, sec. 23, p. 1061; am. 2002, ch. 121, sec. 6, p. 344.]
(1) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.
(2) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payor bank or other payor that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.
(3) A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.
[28-4-209, added 1993, ch. 288, sec. 24, p. 1062.]
(1) A collecting bank has a security interest in an item and any accompanying 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;
(b) In case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or
(c) If it makes an advance on or against the item.
(2) If credit given for several items received at one (1) time or pursuant to a single agreement is withdrawn or applied in part, the security interest remains upon all the items, any accompanying 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 documents and proceeds. So long as the bank does not receive final settlement for the item or give up possession of the item or possession or control of the accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to the provisions of chapter 9, title 28, Idaho Code, but:
(a) No security agreement is necessary to make the security interest enforceable (section 28-9-203(b)(3)(A));
(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, accompanying documents or proceeds.
[(28-4-210) 1967, ch. 161, sec. 4-208, p. 351; am. and redesig. 1993, ch. 288, sec. 25, p. 1062; am. 2001, ch. 208, sec. 10, p. 809; am. 2004, ch. 42, sec. 19, p. 114.]
For purposes of determining its status as a holder in due course, a bank has given value to the extent it has a security interest in an item, if the bank otherwise complies with the requirements of section 28-3-302 on what constitutes a holder in due course.
[(28-4-211) 1967, ch. 161, sec. 4-209, p. 351; am. and redesig. 1993, ch. 288, sec. 26, p. 1063.]
(1) Unless otherwise instructed, 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 acceptance 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 28-3-501 by the close of the bank’s next banking day after it knows of the requirement.
(2) If presentment is made by notice and payment, acceptance or request for compliance with a requirement under section 28-3-501 is not 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 drawer or indorser by sending it notice of the facts.
[(28-4-212) 1967, ch. 161, sec. 4-210, p. 351; am. and redesig. 1993, ch. 288, sec. 27, p. 1063.]
(1) With respect to settlement by a bank, the medium and time of settlement may be prescribed by federal reserve regulations or circulars, clearing-house rules, and the like, or agreement. In the absence of such prescription:
(a) The medium of settlement is cash or credit to an account in a federal reserve bank of or specified by the person to receive settlement; and
(b) The time of settlement is:
(i) With respect to tender of settlement by cash, a cashier’s check, or teller’s check, when the cash or check is sent or delivered;
(ii) With respect to tender of settlement by credit in an account in a federal reserve bank, when the credit is made;
(iii) With respect to tender of settlement by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or
(iv) With respect to tender of settlement by a funds transfer, when payment is made pursuant to section 28-4-631(1) to the person receiving settlement.
(2) If the tender of settlement is not by a medium authorized by subsection (1) of this section or the time of settlement is not fixed by subsection (1) of this section, no settlement occurs until the tender of settlement is accepted by the person receiving settlement.
(3) If settlement for an item is made by cashier’s check or teller’s check and the person receiving settlement, before its midnight deadline:
(a) Presents or forwards the check for collection, settlement is final when the check is finally paid; or
(b) Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.
(4) If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is made by the bank receiving settlement if there are funds available in the account for the amount of the item.
[28-4-213, added 1993, ch. 288, sec. 29, p. 1064.]
(1) If a collecting bank has made provisional settlement with its customer for an item and 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 given by 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 item, 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. If the return or notice is delayed beyond the bank’s midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit, or obtain refund from its customer, but it is liable for any loss resulting from the delay. 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.
(2) A collecting bank returns an item when it is sent or delivered to the bank’s customer or transferor or pursuant to its instructions.
(3) A depositary bank that 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 right to charge back is not affected by:
(a) previous use of a credit given for the item; or
(b) failure by any bank to exercise ordinary care with respect to the item, but a 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 credit is given in dollars as the equivalent of the value of an item payable in foreign money, the dollar amount of any charge-back or refund must be calculated on the basis of the bank-offered spot rate for the foreign money prevailing on the day when the person entitled to the charge-back or refund learns that it will not receive payment in ordinary course.
[(28-4-214) 1967, ch. 161, sec. 4-212, p. 351; am. and redesig. 1993, ch. 288, sec. 30, p. 1065.]
(1) An item is finally paid by a payor bank when the bank has first done any of the following:
(a) paid the item in cash;
(b) settled for the item without having a right to revoke the settlement under statute, clearing-house rule or agreement; or
(c) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule or agreement.
(2) If provisional settlement for an item does not become final, the item is not finally paid.
(3) If provisional settlement for an item between the presenting and payor banks is made through a clearing house or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor banks or between the presenting and successive prior collecting banks seriatim, they become final upon final payment of the item by the payor bank.
(4) If a collecting bank receives a settlement for an item which is or becomes final, 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.
(5) Subject to (i) applicable law stating a time for availability of funds and (ii) any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in a customer’s account becomes available for withdrawal as of right:
(a) if the bank has received a provisional settlement for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;
(b) if the bank is both the depositary bank and the payor bank and the item is finally paid, at the opening of the bank’s second banking day following receipt of the item.
(6) Subject to applicable law stating a time for availability of funds and any right of a bank to apply a deposit to an obligation of the depositor, a deposit of money becomes available for withdrawal as of right at the opening of the bank’s next banking day after receipt of the deposit.
[(28-4-215) 1967, ch. 161, sec. 4-213, p. 351; am. and redesig. 1993, ch. 288, sec. 31, p. 1065.]
(1) If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item must be returned by the receiver, trustee or agent in charge of the closed bank to the presenting bank or the closed bank’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.
(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’s becoming final if the finality occurs automatically upon the lapse of certain time or the happening of certain events.
(4) If a collecting bank receives from subsequent parties settlement for an item, which settlement is or becomes final and the bank suspends payments without making a settlement for the item with its customer which settlement is or becomes final, the owner of the item has a preferred claim against the collecting bank.
[(28-4-216) 1967, ch. 161, sec. 4-214, p. 351; am. and redesig. 1993, ch. 288, sec. 32, p. 1066.]
(1) If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it:
(a) returns the item; or
(b) sends written notice of dishonor or nonpayment if the item is unavailable for return.
(2) If a demand item is received by a payor bank for credit on its books, it may return the 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 subsection (1) of this section.
(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 presented 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 clearing-house rules; or
(b) in all other cases, when it is sent or delivered to the bank’s customer or transferor or pursuant to instructions.
[28-4-301, added 1967, ch. 161, sec. 4-301, p. 351; am. 1993, ch. 288, sec. 33, p. 1067.]
(1) If an item is presented to and received 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 in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; 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.
(2) The liability of a payor bank to pay an item pursuant to subsection (1) of this section is subject to defenses based on breach of a presentment warranty (section 28-4-208) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.
[28-4-302, added 1967, ch. 161, sec. 4-302, p. 351; am. 1993, ch. 288, sec. 34, p. 1068.]
(1) Any knowledge, notice or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank comes too late 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 if the knowledge, notice, stop-payment order, or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the earliest of the following:
(a) the bank accepts or certifies the item;
(b) the bank pays the item in cash;
(c) the bank settles for the item without having a right to revoke the settlement under statute, clearing-house rule or agreement;
(d) the bank becomes accountable for the amount of the item under section 28-4-302 dealing with the payor bank’s responsibility for late return of items; or
(e) with respect to checks, a cutoff hour no earlier than one (1) hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if no cutoff hour is fixed, the close of the next banking day after the banking day on which the bank received the check.
(2) Subject to the provisions of subsection (1) of this section items may be accepted, paid, certified or charged to the indicated account of its customer in any order.
[28-4-303, added 1967, ch. 161, sec. 4-303, p. 351; am. 1993, ch. 288, sec. 35, p. 1068.]
(1) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and the bank.
(2) A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.
(3) A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in section 28-4-403(2) for stop-payment orders, and must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to the check described in section 28-4-303. If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act. The loss may include damages for dishonor of subsequent items under section 28-4-402.
(4) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:
(a) the original terms of the altered item; or
(b) the terms of the completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.
[28-4-401, added 1967, ch. 161, sec. 4-401, p. 351; am. 1993, ch. 288, sec. 36, p. 1069.]
(1) Except as otherwise provided in this chapter, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.
(2) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and 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.
(3) A payor bank’s determination of the customer’s account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one (1) determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank’s decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful.
[28-4-402, added 1967, ch. 161, sec. 4-402, p. 351; am. 1993, ch. 288, sec. 37, p. 1069.]
(1) A customer or any person authorized to draw on the account if there is more than one (1) person may stop payment of any item drawn on the customer’s account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in section 28-4-303. If the signature of more than one (1) person is required to draw on an account, any of these persons may stop payment or close the account.
(2) A stop-payment order is effective for six (6) months, but it lapses after fourteen (14) calendar days if the original order was oral and was not confirmed in writing within that period. A stop-payment order may be renewed for additional six (6) month periods by a writing given to the bank within a period during which the stop-payment order is effective.
(3) The burden of establishing the fact and amount of loss resulting from the payment of an item contrary to a stop-payment order or order to close an account is on the customer. The loss from payment of an item contrary to a stop-payment order may include damages for dishonor of subsequent items under section 28-4-402.
[28-4-403, added 1967, ch. 161, sec. 4-403, p. 351; am. 1993, ch. 288, sec. 38, p. 1070.]
A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six (6) months after its date, but it may charge its customer’s account for a payment made thereafter in good faith.
[28-4-404, added 1967, ch. 161, sec. 4-404, p. 351.]
In the event the original copy of a check is lost or mutilated during processing by a bank, and if a photocopy of a check is presented for payment, and the bank honors the photocopy for payment, the bank shall prepare a notice to its customer, which shall be forwarded to the customer with the monthly statement of accounts.
[28-4-404A, added 1984, ch. 145, sec. 1, p. 340.]
The notice of a photocopied check required by section 28-4-404A, Idaho Code, shall be imprinted on the jacket containing the photocopied check or the facsimile itself and the notice shall be substantially in the following form:
NOTICE OF PROCESSING OF PHOTOCOPIED CHECK.
A check drawn by you has been photocopied and the photocopy has been honored. The original of the check has been lost or mutilated, and the photocopy has been used for your convenience. We have attempted to insure that payment has been made only one time. This is your notice of this process so that you may check your statement of account to determine that payment has not been duplicated.
[28-4-404B, added 1984, ch. 145, sec. 2, p. 340.]
The notice required by section 28-4-404B, Idaho Code, shall not be required in the event that the customer has elected to have the bank hold checks.
[28-4-404C, added 1984, ch. 145, sec. 3, p. 341.]
(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 effective, 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 incompetence. Neither death nor incompetence of a customer revokes the authority to accept, pay, collect or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.
(2) Even with knowledge, a bank may for ten (10) days after the date of death pay or certify checks drawn on or before that date unless ordered to stop payment by a person claiming an interest in the account.
[28-4-405, added 1967, ch. 161, sec. 4-405, p. 351; am. 1993, ch. 288, sec. 39, p. 1070.]
(1) A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonably to identify the items paid. The statement of account provides sufficient information if the item is described by item number, amount, and date of payment.
(2) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish legible copies of the items until the expiration of seven (7) years after receipt of the items. A customer may request an item from the bank that paid the item, and that bank must provide in a reasonable time either the item or, if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.
(3) If a bank sends or makes available a statement of account or items pursuant to subsection (1) of this section, the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.
(4) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (3) of this section the customer is precluded from asserting against the bank:
(a) the customer’s unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and
(b) the customer’s unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding thirty (30) days, in which to examine the item or statement of account and notify the bank.
(5) If subsection (4) of this section applies and the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure substantially contributed to loss, the loss is allocated between the customer precluded and the bank asserting the preclusion according to the extent to which the failure of the customer to comply with subsection (3) of this section and the failure of the bank to exercise ordinary care contributed to the loss. If the customer proves that the bank did not pay the item in good faith, the preclusion under subsection (4) of this section does not apply.
(6) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one (1) year after the statement or items are made available to the customer (subsection (1)) discover and report the customer’s unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration. If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under section 28-4-208 with respect to the unauthorized signature or alteration to which the preclusion applies.
[28-4-406, added 1967, ch. 161, sec. 4-406, p. 351; am. 1993, ch. 288, sec. 40, p. 1071.]
If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, 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 is subrogated to the rights
(a) of any holder in due course on the item against the drawer or maker;
(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.
[28-4-407, added 1967, ch. 161, sec. 4-407, p. 351; am. 1993, ch. 288, sec. 41, p. 1072.]
A bank that takes a documentary draft for collection shall 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, shall seasonably notify its customer of the fact even though it may have discounted or brought the draft or extended credit available for withdrawal as of right.
[28-4-501, added 1967, ch. 161, sec. 4-501, p. 351; am. 1993, ch. 288, sec. 42, p. 1073.]
If 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 the refusal but need not present the draft again until it is instructed to do so or learns of the arrival of the goods.
[28-4-502, added 1967, ch. 161, sec. 4-502, p. 351; am. 1993, ch. 288, sec. 43, p. 1073.]
Unless otherwise instructed and except as provided in chapter 5, a bank presenting a documentary draft:
(1) must deliver the documents to the drawee on acceptance of the draft if it is payable more than three (3) days after presentment; otherwise, only on payment; and
(2) 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 the referee’s services, it must use diligence and good faith to ascertain the reason 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.
However, the presenting bank is under no obligation with respect to goods represented by the documents except to follow any reasonable instructions seasonably received; it has a right to reimbursement for any expense incurred in the following instructions and to prepayment of or indemnity for those expenses.
[28-4-503, added 1967, ch. 161, sec. 4-503, p. 351; am. 1993, ch. 288, sec. 44, p. 1073.]
(1) A presenting bank that, following the dishonor of a documentary 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) of this section, 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.
[28-4-504, added 1967, ch. 161, sec. 4-504, p. 351; am. 1993, ch. 288, sec. 45, p. 1074.]
This part may be cited as "Uniform Commercial Code–Funds Transfers."
[28-4-601, added 1991, ch. 135, sec. 1, p. 296.]
Except as otherwise provided in section 28-4-608, this part applies to funds transfers defined in section 28-4-604.
[28-4-602, added 1991, ch. 135, sec. 1, p. 296.]
(1) In this part:
(a) "Beneficiary" means the person to be paid by the beneficiary’s bank.
(b) "Beneficiary’s bank" means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.
(c) "Payment order" means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:
(i) the instruction does not state a condition to payment to the beneficiary other than time of payment,
(ii) the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender, and
(iii) the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank.
(d) "Receiving bank" means the bank to which the sender’s instruction is addressed.
(e) "Sender" means the person giving the instruction to the receiving bank.
(2) If an instruction complying with subsection (1)(a) is to make more than one (1) payment to a beneficiary, the instruction is a separate payment order with respect to each payment.
(3) A payment order is issued when it is sent to the receiving bank.
[28-4-603, added 1991, ch. 135, sec. 1, p. 296.]
In this part:
(1) "Funds transfer" means the series of transactions, beginning with the originator’s payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment order. A funds transfer is completed by acceptance by the beneficiary’s bank of a payment order for the benefit of the beneficiary of the originator’s payment order.
(2) "Intermediary bank" means a receiving bank other than the originator’s bank or the beneficiary’s bank.
(3) "Originator" means the sender of the first payment order in a funds transfer.
(4) "Originator’s bank" means:
(a) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or
(b) the originator if the originator is a bank.
[28-4-604, added 1991, ch. 135, sec. 1, p. 297.]
(1) In this part:
(a) "Authorized account" means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account.
(b) "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company. A branch or separate office of a bank is a separate bank for purposes of this part.
(c) "Customer" means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders.
(d) "Funds-transfer business day" of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders.
(e) "Funds-transfer system" means a wire transfer network, automated clearing house, or other communication system of a clearing house or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed.
(f) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(g) "Prove" with respect to a fact means to meet the burden of establishing the fact (section 28-1-201(b)(8)).
(2) Other definitions applying to this part and the sections in which they appear are:
"Acceptance"
"Beneficiary"
"Beneficiary’s bank"
"Executed"
"Execution date"
"Funds transfer"
"Funds-transfer system rule"
"Intermediary bank"
"Originator"
"Originator’s bank"
"Payment by beneficiary’s bank to beneficiary"
"Payment by originator to beneficiary"
"Payment by sender to receiving bank"
"Payment date"
"Payment order"
"Receiving bank"
"Security procedure"
"Sender"
(3) The following definitions in article 4 apply to this part:
"Clearing house"
"Item"
"Suspends payments"
(4) In addition article 1 contains general definitions and principles of construction and interpretation applicable throughout this part.
[28-4-605, added 1991, ch. 135, sec. 1, p. 297; am. 2004, ch. 43, sec. 32, p. 154.]
(1) The time of receipt of a payment order or communication canceling or amending a payment order is determined by the rules applicable to receipt of a notice stated in section 28-1-202. A receiving bank may fix a cut-off time or times on a funds-transfer business day for the receipt and processing of payment orders and communications canceling or amending payment orders. Different cut-off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cut-off time may apply to senders generally or different cut-off times may apply to different senders or categories of payment orders. If a payment order or communication canceling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.
(2) If this part refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this part.
[28-4-606, added 1991, ch. 135, sec. 1, p. 298; am. 2004, ch. 43, sec. 33, p. 155.]
Regulations of the board of governors of the Federal Reserve System and operating circulars of the Federal Reserve banks supersede any inconsistent provision of this part to the extent of the inconsistency.
[28-4-607, added 1991, ch. 135, sec. 1, p. 299.]
(1) Except as provided in subsection (2) of this section, this part does not apply to a funds transfer any part of which is governed by the electronic fund transfer act of 1978 (title XX, public law 95-630, 92 stat. 3728, 15 U.S.C. section 1693 et seq.) as amended from time to time.
(2) This part applies to a funds transfer that is a remittance transfer as defined in the electronic fund transfer act (15 U.S.C. section 1693o-1) as amended from time to time, unless the remittance transfer is an electronic fund transfer as defined in the electronic fund transfer act (15 U.S.C. section 1693a) as amended from time to time.
(3) In a funds transfer to which this part applies, in the event of an inconsistency between an applicable provision of this part and an applicable provision of the electronic fund transfer act, the provision of the electronic fund transfer act governs to the extent of the inconsistency.
[28-4-608, added 1991, ch. 135, sec. 1, p. 299; am. 2013, ch. 73, sec. 1, p. 188.]
"Security procedure" means a procedure established by agreement of a customer and a receiving bank for the purpose of (1) verifying that a payment order or communication amending or cancelling a payment order is that of the customer, or (2) detecting error in the transmission or the content of the payment order or communication. A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.
[28-4-609, added 1991, ch. 135, sec. 1, p. 299.]
(1) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.
(2) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if:
(a) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and
(b) the bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer.
The bank is not required to follow an instruction that violates a written agreement with the customer or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.
(3) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving banks similarly situated. A security procedure is deemed to be commercially reasonable if:
(a) the security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer, and
(b) the customer expressly agreed in writing to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.
(4) The term "sender" in this part includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subsection (1) of this section, or it is effective as the order of the customer under subsection (2) of this section.
(5) This section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.
(6) Except as provided in this section and in section 28-4-611(1)(a), rights and obligations arising under this section or section 28-4-611 may not be varied by agreement.
[28-4-610, added 1991, ch. 135, sec. 1, p. 299.]
(1) If an accepted payment order is not, under section 28-4-610(1), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to section 28-4-610(2), the following rules apply:
(a) By express written agreement, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order.
(b) The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by a person (i) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure, or (ii) who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault. Information includes any access device, computer software, or the like.
(2) This section applies to amendments of payment orders to the same extent it applies to payment orders.
[28-4-611, added 1991, ch. 135, sec. 1, p. 300.]
(a) If a receiving bank accepts a payment order issued in the name of its customer as sender which is:
(1) Not authorized and not effective as the order of the customer under section 28-4-610, or
(2) Not enforceable, in whole or in part, against the customer under section 28-4-611, the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund. However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the date the customer received notification from the bank that the order was accepted or that the customer’s account was debited with respect to the order. The bank is not entitled to any recovery from the customer on account of a failure by the customer to give notification as stated in this section.
(b) Reasonable time under subsection (a) of this section may be fixed by agreement as stated in section 28-1-302(b), but the obligation of a receiving bank to refund payment as stated in subsection (a) of this section may not otherwise be varied by agreement.
[28-4-612, added 1991, ch. 135, sec. 1, p. 300; am. 2004, ch. 43, sec. 34, p. 156.]
(1) If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order (i) erroneously instructed payment to a beneficiary not intended by the sender, (ii) erroneously instructed payment in an amount greater than the amount intended by the sender, or (iii) was an erroneously transmitted duplicate of a payment order previously sent by the sender, the following rules apply:
(a) If the sender proves that the sender or a person acting on behalf of the sender pursuant to section 28-4-614, Idaho Code, complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in paragraphs (b) and (c) of this subsection.
(b) If the funds transfer is completed on the basis of an erroneous payment order described in (i) or (iii) of this subsection, the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.
(c) If the funds transfer is completed on the basis of a payment order described in (ii) of this subsection, the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender. In that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution.
(2) If (i) the sender of an erroneous payment order described in subsection (1) of this section is not obliged to pay all or part of the order, and (ii) the sender receives notification from the receiving bank that the order was accepted by the bank or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding ninety (90) days, after the bank’s notification was received by the sender. If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender’s order.
(3) This section applies to amendments to payment orders to the same extent it applies to payment orders.
[28-4-613, added 1991, ch. 135, sec. 1, p. 301; am. 2014, ch. 97, sec. 8, p. 271; am. 2020, ch. 82, sec. 16, p. 190; am. 2021, ch. 321, sec. 3, p. 946.]
(1) If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other third-party communication system for transmittal to the bank, the system is deemed to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system. This section does not apply to a funds-transfer system of the Federal Reserve banks.
(2) This section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders.
[28-4-614, added 1991, ch. 135, sec. 1, p. 302.]
(1) Subject to subsection (2) of this section, if, in a payment order received by the beneficiary’s bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.
(2) If a payment order received by the beneficiary’s bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:
(a) Except as otherwise provided in subsection (3) of this section, if the beneficiary’s bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary’s bank need not determine whether the name and number refer to the same person.
(b) If the beneficiary’s bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary’s bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.
(3) If (i) a payment order described in subsection (2) of this section is accepted, (ii) the originator’s payment order described the beneficiary inconsistently by name and number, and (iii) the beneficiary’s bank pays the person identified by number as permitted in subsection (2)(a) of this section, the following rules apply:
(a) If the originator is a bank, the originator is obliged to pay its order.
(b) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator’s bank proves that the originator, before acceptance of the originator’s order, had notice that payment of a payment order issued by the originator might be made by the beneficiary’s bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator’s bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a writing stating the information to which the notice relates.
(4) In a case governed by the provisions of subsection (2)(a) of this section, if the beneficiary’s bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:
(a) If the originator is obliged to pay its payment order as stated in subsection (3) of this section, the originator has the right to recover.
(b) If the originator is not a bank and is not obliged to pay its payment order, the originator’s bank has the right to recover.
[28-4-615, added 1991, ch. 135, sec. 1, p. 302.]
(1) This subsection applies to a payment order identifying an intermediary bank or the beneficiary’s bank only by an identifying number.
(a) The receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank and need not determine whether the number identifies a bank.
(b) The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.
(2) This subsection applies to a payment order identifying an intermediary bank or the beneficiary’s bank both by name and an identifying number if the name and number identify different persons.
(a) If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, when it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.
(b) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary or beneficiary’s bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by subsection (2)(a) of this section, as though the sender were a bank. Proof of notice may be made by any admissible evidence. The receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a writing stating the information to which the notice relates.
(c) Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary or beneficiary’s bank if the receiving bank, at the time it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person.
(d) If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender’s payment order is a breach of the obligation stated in section 28-4-622(1)(a).
[28-4-616, added 1991, ch. 135, sec. 1, p. 303.]
(1) Subject to subsection (4) of this section, a receiving bank other than the beneficiary’s bank accepts a payment order when it executes the order.
(2) Subject to subsections (3) and (4) of this section, a beneficiary’s bank accepts a payment order at the earliest of the following times:
(a) when the bank (i) pays the beneficiary as stated in section 28-4-630(1) or 28-4-630(2), or (ii) notifies the beneficiary of receipt of the order or that the account of the beneficiary has been credited with respect to the order unless the notice indicates that the bank is rejecting the order or that funds with respect to the order may not be withdrawn or used until receipt of payment from the sender of the order;
(b) when the bank receives payment of the entire amount of the sender’s order pursuant to section 28-4-628(1)(a) or 28-4-628(1)(b); or
(c) the opening of the next funds-transfer business day of the bank following the payment date of the order if, at that time, the amount of the sender’s order is fully covered by a withdrawable credit balance in an authorized account of the sender or the bank has otherwise received full payment from the sender, unless the order was rejected before that time or is rejected within (i) one (1) hour after that time, or (ii) one (1) hour after the opening of the next business day of the sender following the payment date if that time is later. If notice of rejection is received by the sender after the payment date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the payment date to the day the sender receives notice or learns that the order was not accepted, counting that day as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest payable is reduced accordingly.
(3) Acceptance of a payment order cannot occur before the order is received by the receiving bank. Acceptance does not occur under subsection (2)(b) or (2)(c) of this section if the beneficiary of the payment order does not have an account with the receiving bank, the account has been closed, or the receiving bank is not permitted by law to receive credits for the beneficiary’s account.
(4) A payment order issued to the originator’s bank cannot be accepted until the payment date if the bank is the beneficiary’s bank, or the execution date if the bank is not the beneficiary’s bank. If the originator’s bank executes the originator’s payment order before the execution date or pays the beneficiary of the originator’s payment order before the payment date and the payment order is subsequently cancelled pursuant to section 28-4-619(2), the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.
[28-4-617, added 1991, ch. 135, sec. 1, p. 304.]
(1) A payment order is rejected by the receiving bank by a notice of rejection transmitted to the sender orally, electronically, or in writing. A notice of rejection need not use any particular words and is sufficient if it indicates that the receiving bank is rejecting the order or will not execute or pay the order. Rejection is effective when the notice is given if transmission is by a means that is reasonable in the circumstances. If notice of rejection is given by a means that is not reasonable, rejection is effective when the notice is received. If an agreement of the sender and receiving bank establishes the means to be used to reject a payment order,
(a) any means complying with the agreement is reasonable, and
(b) any means not complying is not reasonable unless no significant delay in receipt of the notice resulted from the use of the noncomplying means.
(2) The provisions of this subsection apply if a receiving bank other than the beneficiary’s bank fails to execute a payment order despite the existence on the execution date of a withdrawable credit balance in an authorized account of the sender sufficient to cover the order. If the sender does not receive notice of rejection of the order on the execution date and the authorized account of the sender does not bear interest, the bank is obliged to pay interest to the sender on the amount of the order for the number of days elapsing after the execution date to the earlier of the day the order is cancelled pursuant to section 28-4-619(4) or the day the sender receives notice or learns that the order was not executed, counting the final day of the period as an elapsed day. If the withdrawable credit balance during that period falls below the amount of the order, the amount of interest is reduced accordingly.
(3) If a receiving bank suspends payments, all unaccepted payment orders issued to it are deemed rejected at the time the bank suspends payments.
(4) Acceptance of a payment order precludes a later rejection of the order. Rejection of a payment order precludes a later acceptance of the order.
[28-4-618, added 1991, ch. 135, sec. 1, p. 305.]
(1) A communication of the sender of a payment order cancelling or amending the order may be transmitted to the receiving bank orally, electronically, or in writing. If a security procedure is in effect between the sender and the receiving bank, the communication is not effective to cancel or amend the order unless the communication is verified pursuant to the security procedure or the bank agrees to the cancellation or amendment.
(2) Subject to subsection (1) of this section, a communication by the sender cancelling or amending a payment order is effective to cancel or amend the order if notice of the communication is received at a time and in a manner affording the receiving bank a reasonable opportunity to act on the communication before the bank accepts the payment order.
(3) After a payment order has been accepted, cancellation or amendment of the order is not effective unless the receiving bank agrees or a funds-transfer system rule allows cancellation or amendment without agreement of the bank.
(a) With respect to a payment order accepted by a receiving bank other than the beneficiary’s bank, cancellation or amendment is not effective unless a conforming cancellation or amendment of the payment order issued by the receiving bank is also made.
(b) With respect to a payment order accepted by the beneficiary’s bank, cancellation or amendment is not effective unless the order was issued in execution of an unauthorized payment order, or because of a mistake by a sender in the funds transfer which resulted in the issuance of a payment order (i) that is a duplicate of a payment order previously issued by the sender, (ii) that orders payment to a beneficiary not entitled to receive payment from the originator, or (iii) that orders payment in an amount greater than the amount the beneficiary was entitled to receive from the originator. If the payment order is cancelled or amended, the beneficiary’s bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.
(4) An unaccepted payment order is cancelled by operation of law at the close of the fifth funds-transfer business day of the receiving bank after the execution date or payment date of the order.
(5) A cancelled payment order cannot be accepted. If an accepted payment order is cancelled, the acceptance is nullified and no person has any right or obligation based on the acceptance. Amendment of a payment order is deemed to be cancellation of the original order at the time of amendment and issue of a new payment order in the amended form at the same time.
(6) Unless otherwise provided in an agreement of the parties or in a funds-transfer system rule, if the receiving bank, after accepting a payment order, agrees to cancellation or amendment of the order by the sender or is bound by a funds-transfer system rule allowing cancellation or amendment without the bank’s agreement, the sender, whether or not cancellation or amendment is effective, is liable to the bank for any loss and expenses, including reasonable attorney’s fees, incurred by the bank as a result of the cancellation or amendment or attempted cancellation or amendment.
(7) A payment order is not revoked by the death or legal incapacity of the sender unless the receiving bank knows of the death or of an adjudication of incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance of the order.
(8) A funds-transfer system rule is not effective to the extent it conflicts with the provisions of subsection (3)(b) of this section.
[28-4-619, added 1991, ch. 135, sec. 1, p. 305.]
If a receiving bank fails to accept a payment order that it is obliged by express agreement to accept, the bank is liable for breach of the agreement to the extent provided in the agreement or in this part, but does not otherwise have any duty to accept a payment order or, before acceptance, to take any action, or refrain from taking action, with respect to the order except as provided in this part or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in section 28-4-617, and liability is limited to that provided in this part. A receiving bank is not the agent of the sender or beneficiary of the payment order it accepts, or of any other party to the funds transfer, and the bank owes no duty to any party to the funds transfer except as provided in this part or by express agreement.
[28-4-620, added 1991, ch. 135, sec. 1, p. 307.]
(1) A payment order is "executed" by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank. A payment order received by the beneficiary’s bank can be accepted but cannot be executed.
(2) "Execution date" of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender’s order. The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received. If the sender’s instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date.
[28-4-621, added 1991, ch. 135, sec. 1, p. 307.]
(1) Except as provided in subsections (2) through (4) of this section, if the receiving bank accepts a payment order pursuant to section 28-4-617(1), the bank has the following obligations in executing the order:
(a) The receiving bank is obliged to issue, on the execution date, a payment order complying with the sender’s order and to follow the sender’s instructions concerning (i) any intermediary bank or funds-transfer system to be used in carrying out the funds transfer, or (ii) the means by which payment orders are to be transmitted in the funds transfer. If the originator’s bank issues a payment order to an intermediary bank, the originator’s bank is obliged to instruct the intermediary bank according to the instruction of the originator. An intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts.
(b) If the sender’s instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct any intermediary bank accordingly. If a sender’s instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment date or as soon thereafter as is feasible.
(2) Unless otherwise instructed, a receiving bank executing a payment order may:
(a) use any funds-transfer system if use of that system is reasonable in the circumstances, and
(b) issue a payment order to the beneficiary’s bank or to an intermediary bank through which a payment order conforming to the sender’s order can expeditiously be issued to the beneficiary’s bank if the receiving bank exercises ordinary care in the selection of the intermediary bank.
A receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer.
(3) Unless the provisions of subsection (1)(b) apply or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first class mail or by any means reasonable in the circumstances. If the receiving bank is instructed to execute the sender’s order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by the means stated or by any means as expeditious as the means stated.
(4) Unless instructed by the sender,
(a) the receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender’s order by issuing a payment order in an amount equal to the amount of the sender’s order less the amount of the charges, and
(b) may not instruct a subsequent receiving bank to obtain payment of its charges in the same manner.
[28-4-622, added 1991, ch. 135, sec. 1, p. 307.]
(1) A receiving bank that:
(a) executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender’s order, or
(b) issues a payment order in execution of the sender’s order and then issues a duplicate order, is entitled to payment of the amount of the sender’s order under section 28-4-627(3) if the provisions of that subsection are otherwise satisfied. The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution.
(2) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender’s order is entitled to payment of the amount of the sender’s order under section 28-4-627(3) if:
(a) that subsection is otherwise satisfied, and
(b) the bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the sender’s order.
If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. The provisions of this subsection do not apply if the receiving bank executes the sender’s payment order by issuing a payment order in an amount less than the amount of the sender’s order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender.
(3) If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender’s order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued. The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution.
[28-4-623, added 1991, ch. 135, sec. 1, p. 308.]
If the sender of a payment order that is erroneously executed as stated in section 28-4-623 receives notification from the receiving bank that the order was executed or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the notification from the bank was received by the sender. If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under section 28-4-627(4) for the period before the bank learns of the execution error. The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this section.
[28-4-624, added 1991, ch. 135, sec. 1, p. 309.]
(1) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of the provisions of section 28-4-622 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds transfer for the period of delay caused by the improper execution. Except as provided in subsection (3) of this section, additional damages are not recoverable.
(2) If execution of a payment order by a receiving bank in breach of section 28-4-622 results in:
(a) noncompletion of the funds transfer,
(b) failure to use an intermediary bank designated by the originator, or
(c) issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered in subsection (1) of this section, resulting from the improper execution.
Except as provided in subsection (3) of this section, additional damages are not recoverable.
(3) In addition to the amounts payable under subsections (1) and (2) of this section, damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank.
(4) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, but are not otherwise recoverable.
(5) Reasonable attorney’s fees are recoverable if demand for compensation under subsection (1) or (2) of this section is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under subsection (4) of this section, and the agreement does not provide for damages, reasonable attorney’s fees are recoverable if demand for compensation under subsection (4) of this section, is made and refused before an action is brought on the claim.
(6) Except as stated in this section, the liability of a receiving bank under subsections (1) and (2) of this section, may not be varied by agreement.
[28-4-625, added 1991, ch. 135, sec. 1, p. 309.]
"Payment date" of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary’s bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary’s bank and, unless otherwise determined, is the day the order is received by the beneficiary’s bank.
[28-4-626, added 1991, ch. 135, sec. 1, p. 310.]
(1) The provisions of this section are subject to the provisions of sections 28-4-613 and 28-4-615.
(2) With respect to a payment order issued to the beneficiary’s bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.
(3) The provisions of this subsection are subject to the provisions of subsection (5) of this section and to section 28-4-623. With respect to a payment order issued to a receiving bank other than the beneficiary’s bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender’s order. Payment by the sender is not due until the execution date of the sender’s order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary’s bank of a payment order instructing payment to the beneficiary of that sender’s payment order.
(4) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in sections 28-4-612 and 28-4-624, interest is payable on the refundable amount from the date of payment.
(5) If a funds transfer is not completed as stated in subsection (3) of this section and an intermediary bank is obliged to refund payment as stated in subsection (4) of this section but is unable to do so because it is not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in section 28-4-622(1)(a), to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in subsection (4) of this section.
(6) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subsection (3) of this section or to receive refund under subsection (4) may not be varied by agreement.
[28-4-627, added 1991, ch. 135, sec. 1, p. 310.]
(1) Payment of the sender’s obligation under section 28-4-627 to pay the receiving bank occurs as follows:
(a) If the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a Federal Reserve bank or through a funds-transfer system.
(b) If the sender is a bank and the sender (i) credited an account of the receiving bank with the sender, or (ii) caused an account of the receiving bank in another bank to be credited, payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact.
(c) If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account.
(2) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender’s obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subsection has been exercised.
(3) If two (2) banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under section 28-4-627 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one (1) bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff, each bank has made payment to the other.
(4) In a case not covered by subsection (1) of this section, the time when payment of the sender’s obligation under section 28-4-627(2) or (3) occurs is governed by applicable principles of law that determine when an obligation is satisfied.
[28-4-628, added 1991, ch. 135, sec. 1, p. 311.]
(1) Subject to sections 28-4-619(5), 28-4-630(4) and (5), if a beneficiary’s bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.
(2) If a payment order accepted by the beneficiary’s bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first class mail or any other means reasonable in the circumstances. If the bank fails to give the required notice, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. No other damages are recoverable. Reasonable attorney’s fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.
(3) The right of a beneficiary to receive payment and damages as stated in subsection (1) of this section may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subsection (2) of this section may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.
[28-4-629, added 1991, ch. 135, sec. 1, p. 312.]
(1) If the beneficiary’s bank credits an account of the beneficiary of a payment order, payment of the bank’s obligation under section 28-4-629(1) occurs when and to the extent:
(a) the beneficiary is notified of the right to withdraw the credit,
(b) the bank lawfully applies the credit to a debt of the beneficiary, or
(c) funds with respect to the order are otherwise made available to the beneficiary by the bank.
(2) If the beneficiary’s bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank’s obligation under section 28-4-629(1) occurs is governed by principles of law that determine when an obligation is satisfied.
(3) Except as stated in subsections (4) and (5) of this section, if the beneficiary’s bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.
(4) A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary’s bank of the payment order it accepted. A beneficiary’s bank that makes a payment that is provisional under the rule is entitled to refund from the beneficiary if:
(a) the rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated,
(b) the beneficiary, the beneficiary’s bank and the originator’s bank agreed to be bound by the rule, and
(c) the beneficiary’s bank did not receive payment of the payment order that it accepted.
If the beneficiary is obliged to refund payment to the beneficiary’s bank, acceptance of the payment order by the beneficiary’s bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under section 28-4-631.
(5) The provisions of this subsection apply to a funds transfer that includes a payment order transmitted over a funds-transfer system that:
(a) nets obligations multilaterally among participants, and
(b) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one (1) or more participants that do not meet their settlement obligations. If the beneficiary’s bank in the funds transfer accepts a payment order and the system fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer,
(i) the acceptance by the beneficiary’s bank is nullified and no person has any right or obligation based on the acceptance,
(ii) the beneficiary’s bank is entitled to recover payment from the beneficiary,
(iii) no payment by the originator to the beneficiary occurs under section 28-4-631, and
(iv) subject to section 28-4-627(5), each sender in the funds transfer is excused from its obligation to pay its payment order under section 28-4-627(3) because the funds transfer has not been completed.
[28-4-630, added 1991, ch. 135, sec. 1, p. 313.]
(1) Subject to the provisions of sections 28-4-619(5), 28-4-630(4) and (5), the originator of a funds transfer pays the beneficiary of the originator’s payment order:
(a) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary’s bank in the funds transfer, and
(b) in an amount equal to the amount of the order accepted by the beneficiary’s bank, but not more than the amount of the originator’s order.
(2) If payment under subsection (1) of this section is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless:
(a) the payment under subsection (1) of this section was made by a means prohibited by the contract of the beneficiary with respect to the obligation,
(b) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary’s bank, notified the originator of the beneficiary’s refusal of the payment,
(c) funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary, and
(d) the beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract.
If payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary’s bank under section 28-4-629(1).
(3) For the purpose of determining whether discharge of an obligation occurs under subsection (2) of this section, if the beneficiary’s bank accepts a payment order in an amount equal to the amount of the originator’s payment order less charges of one (1) or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator’s order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges.
(4) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary.
[28-4-631, added 1991, ch. 135, sec. 1, p. 314.]
(1) Except as otherwise provided in this part, the rights and obligations of a party to a funds transfer may be varied by agreement of the affected party.
(2) "Funds-transfer system rule" means a rule of an association of banks:
(a) governing transmission of payment orders by means of a funds-transfer system of the association or rights and obligations with respect to those orders, or
(b) to the extent the rule governs rights and obligations between banks that are parties to a funds transfer in which a Federal Reserve bank, acting as an intermediary bank, sends a payment order to the beneficiary’s bank.
Except as otherwise provided in this part, a funds-transfer system rule governing rights and obligations between participating banks using the system may be effective even if the rule conflicts with this part and indirectly affects another party to the funds transfer who does not consent to the rule. A funds-transfer system rule may also govern rights and obligations of parties other than participating banks using the system to the extent stated in sections 28-4-629(3), 28-4-630(4), and 28-4-638(3).
[28-4-632, added 1991, ch. 135, sec. 1, p. 315.]
(1) As used in this section, "creditor process" means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account.
(2) The provisions of this subsection apply to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.
(3) If a beneficiary’s bank has received a payment order for payment to the beneficiary’s account in the bank, the following rules apply:
(a) The bank may credit the beneficiary’s account. The amount credited may be set off against an obligation owed by the beneficiary to the bank or may be applied to satisfy creditor process served on the bank with respect to the account.
(b) The bank may credit the beneficiary’s account and allow withdrawal of the amount credited unless creditor process with respect to the account is served at a time and in a manner affording the bank a reasonable opportunity to act to prevent withdrawal.
(c) If creditor process with respect to the beneficiary’s account has been served and the bank has had a reasonable opportunity to act on it, the bank may not reject the payment order except for a reason unrelated to the service of process.
(4) Creditor process with respect to a payment by the originator to the beneficiary pursuant to a funds transfer may be served only on the beneficiary’s bank with respect to the debt owed by that bank to the beneficiary. Any other bank served with the creditor process is not obliged to act with respect to the process.
[28-4-633, added 1991, ch. 135, sec. 1, p. 315.]
For proper cause and in compliance with applicable law, a court may restrain:
(1) A person from issuing a payment order to initiate a funds transfer,
(2) An originator’s bank from executing the payment order of the originator, or
(3) The beneficiary’s bank from releasing funds to the beneficiary or the beneficiary from withdrawing the funds.
A court may not otherwise restrain a person from issuing a payment order, paying or receiving payment of a payment order, or otherwise acting with respect to a funds transfer.
[28-4-634, added 1991, ch. 135, sec. 1, p. 316.]
(1) If a receiving bank has received more than one (1) payment order of the sender or one (1) or more payment orders and other items that are payable from the sender’s account, the bank may charge the sender’s account with respect to the various orders and items in any sequence.
(2) In determining whether a credit to an account has been withdrawn by the holder of the account or applied to a debt of the holder of the account, credits first made to the account are first withdrawn or applied.
[28-4-635, added 1991, ch. 135, sec. 1, p. 316.]
If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer’s objection to the payment within one (1) year after the notification was received by the customer.
[28-4-636, added 1991, ch. 135, sec. 1, p. 316.]
(1) If, under this part, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined:
(a) by agreement of the sender and receiving bank, or
(b) by a funds-transfer system rule if the payment order is transmitted through a funds-transfer system.
(2) If the amount of interest is not determined by an agreement or rule as stated in subsection (1) of this section, the amount is calculated by multiplying the applicable federal funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable federal funds rate is the average of the federal funds rates published by the Federal Reserve bank of New York for each of the days for which interest is payable divided by three hundred and sixty (360). The federal funds rate for any day on which a published rate is not available is the same as the published rate for the next preceding day for which there is a published rate. If a receiving bank that accepted a payment order is required to refund payment to the sender of the order because the funds transfer was not completed, but the failure to complete was not due to any fault by the bank, the interest payable is reduced by a percentage equal to the reserve requirement on deposits of the receiving bank.
[28-4-637, added 1991, ch. 135, sec. 1, p. 316.]
(1) The following rules apply unless the affected parties otherwise agree or the provisions of subsection (3) of this section apply:
(a) The rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located.
(b) The rights and obligations between the beneficiary’s bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary’s bank is located.
(c) The issue of when payment is made pursuant to a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary’s bank is located.
(2) If the parties described in paragraphs (a), (b) and (c) of subsection (1) of this section have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction.
(3) A funds-transfer system rule may select the law of a particular jurisdiction to govern:
(a) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system, or
(b) the rights and obligations of some or all parties to a funds transfer any part of which is carried out by means of the system.
A choice of law made pursuant to paragraph (a) of this subsection is binding on participating banks. A choice of law made pursuant to paragraph (b) of this subsection is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system. The law of a jurisdiction selected pursuant to this subsection may govern, whether or not that law bears a reasonable relation to the matter in issue.
(4) In the event of inconsistency between an agreement under subsection (2) of this section and a choice-of-law rule under subsection (3) of this section, the agreement under subsection (2) of this section prevails.
(5) If a funds transfer is made by use of more than one (1) funds-transfer system and there is inconsistency between choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction that has the most significant relationship to the matter in issue.
[28-4-638, added 1991, ch. 135, sec. 1, p. 317.]
This chapter may be cited as "Uniform Commercial Code — Letters of Credit."
[28-5-101, added 1996, ch. 7, sec. 2, p. 9.]
(1) In this chapter:
(a) "Adviser" means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed, or amended.
(b) "Applicant" means a person at whose request or for whose account a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer.
(c) "Beneficiary" means a person who, under the terms of a letter of credit, is entitled to have its complying presentation honored. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit.
(d) "Confirmer" means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.
(e) "Dishonor" of a letter of credit means failure to timely honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit.
(f) "Document" means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion (i) which is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in section 28-5-108(5) and (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.
(g) "Good faith" means honesty in fact in the conduct or transaction concerned.
(h) "Honor" of a letter of credit means performance of the issuer’s undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, "honor" occurs
(i) upon payment,
(ii) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment, or
(iii) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.
(i) "Issuer" means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes.
(j) "Letter of credit" means a definite undertaking that satisfies the requirements of section 28-5-104 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.
(k) "Nominated person" means a person whom the issuer (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) undertakes by agreement or custom and practice to reimburse.
(l) "Presentation" means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.
(m) "Presenter" means a person making a presentation as or on behalf of a beneficiary or nominated person.
(n) "Record" means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form.
(o) "Successor of a beneficiary" means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, and receiver.
(2) Definitions in other chapters applying to this chapter and the sections in which they appear are:
"Accept" or "Acceptance"
"Value"
(3) Chapter 1, title 28, Idaho Code, contains certain additional general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-5-102, added 1996, ch. 7, sec. 2, p. 10.]
(1) This chapter applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.
(2) The statement of a rule in this chapter does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this chapter.
(3) With the exception of this subsection, subsections (1) and (2), sections 28-5-102(1)(i) and (1)(j), 28-5-106(4) and 28-5-114(4), and except to the extent prohibited in sections 28-1-302 and 28-5-117(4), the effect of this chapter may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this chapter.
(4) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.
[28-5-103, added 1996, ch. 7, sec. 2, p. 11; am. 2004, ch. 43, sec. 35, p. 156.]
A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated (i) by a signature or (ii) in accordance with the agreement of the parties or the standard practice referred to in section 28-5-108(5).
[28-5-104, added 1996, ch. 7, sec. 2, p. 11.]
Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.
[28-5-105, added 1996, ch. 7, sec. 2, p. 11.]
(1) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides.
(2) After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer, and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.
(3) If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one (1) year after its stated date of issuance or, if none is stated, after the date on which it is issued.
(4) A letter of credit that states that it is perpetual expires five (5) years after its stated date of issuance, or if none is stated, after the date on which it is issued.
[28-5-106, added 1996, ch. 7, sec. 2, p. 12.]
(1) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.
(2) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.
(3) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amendment, or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.
(4) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under subsection (3) of this section. The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.
[28-5-107, added 1996, ch. 7, sec. 2, p. 12.]
(1) Except as otherwise provided in section 28-5-109, an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection (5) of this section, appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in section 28-5-113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.
(2) An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:
(a) to honor,
(b) if the letter of credit provides for honor to be completed more than seven (7) business days after presentation, to accept a draft or incur a deferred obligation, or
(c) to give notice to the presenter of discrepancies in the presentation.
(3) Except as otherwise provided in subsection (4) of this section, an issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.
(4) Failure to give the notice specified in subsection (2) of this section or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in section 28-5-109(1) or expiration of the letter of credit before presentation.
(5) An issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer’s observance of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present evidence of the standard practice.
(6) An issuer is not responsible for:
(a) the performance or nonperformance of the underlying contract, arrangement, or transaction,
(b) an act or omission of others, or
(c) observance or knowledge of the usage of a particular trade other than the standard practice referred to in subsection (5) of this section.
(7) If an undertaking constituting a letter of credit under section 28-5-102(1)(j) contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.
(8) An issuer that has dishonored a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.
(9) An issuer that has honored a presentation as permitted or required by this chapter:
(a) is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds,
(b) takes the documents free of claims of the beneficiary or presenter,
(c) is precluded from asserting a right of recourse on a draft under sections 28-3-414 and 28-3-415,
(d) except as otherwise provided in sections 28-5-110 and 28-5-117, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentation, and
(e) is discharged to the extent of its performance under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.
[28-5-108, added 1996, ch. 7, sec. 2, p. 12.]
(1) If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:
(a) the issuer shall honor the presentation, if honor is demanded by (i) a nominated person who has given value in good faith and without notice of forgery or material fraud, (ii) a confirmer who has honored its confirmation in good faith, (iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person, or (iv) an assignee of the issuer’s or nominated person’s deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person, and
(b) the issuer, acting in good faith, may honor or dishonor the presentation in any other case.
(2) If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:
(a) the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer,
(b) a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted,
(c) all of the conditions to entitle a person to the relief under Idaho law have been met, and
(d) on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for protection under subsection (1)(a) of this section.
[28-5-109, added 1996, ch. 7, sec. 2, p. 14.]
(1) If its presentation is honored, the beneficiary warrants:
(a) to the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in section 28-5-109(1); and
(b) to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit.
(2) The warranties in subsection (1) of this section are in addition to warranties arising under chapters 3, 4, 7 and 8, title 28, Idaho Code, because of the presentation or transfer of documents covered by any of those chapters.
[28-5-110, added 1996, ch. 7, sec. 2, p. 14.]
(1) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer’s obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant’s election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant’s recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document.
(2) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.
(3) If an adviser or nominated person other than a confirmer breaches an obligation under this article or an issuer breaches an obligation not covered in subsection (1) or (2) of this section, a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (1) and (2) of this section.
(4) An issuer, nominated person, or adviser who is found liable under subsection (1), (2) or (3) of this section shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date.
(5) Reasonable attorney’s fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this chapter.
(6) Damages that would otherwise be payable by a party for breach of an obligation under this article may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.
[28-5-111, added 1996, ch. 7, sec. 2, p. 14.]
(1) Except as otherwise provided in section 28-5-113, unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred.
(2) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if:
(a) the transfer would violate applicable law, or
(b) the transferor or transferee has failed to comply with any requirement stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice referred to in section 28-5-108(5) or is otherwise reasonable under the circumstances.
[28-5-112, added 1996, ch. 7, sec. 2, p. 15.]
(1) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor.
(2) A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in subsection (5) of this section, an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice referred to in section 28-5-108(5) or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer.
(3) An issuer is not obliged to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized.
(4) Honor of a purported successor’s apparently complying presentation under subsection (1) or (2) of this section has the consequences specified in section 28-5-108(9) even if the purported successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary are forged documents for the purposes of section 28-5-109.
(5) An issuer whose rights of reimbursement are not covered by subsection (4) of this section or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (2) of this section.
(6) A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section.
[28-5-113, added 1996, ch. 7, sec. 2, p. 15.]
(1) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit. The term does not include a beneficiary’s drawing rights or documents presented by the beneficiary.
(2) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit.
(3) An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.
(4) An issuer or nominated person has no obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor.
(5) Rights of a transferee beneficiary or nominated person are independent of the beneficiary’s assignment of the proceeds of a letter of credit and are superior to the assignee’s right to the proceeds.
(6) Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer’s or nominated person’s payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary’s rights to proceeds is governed by chapter 9, title 28, Idaho Code, or other law. Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary’s right to proceeds and its perfection are governed by chapter 9, title 28, Idaho Code, or other law.
[28-5-114, added 1996, ch. 7, sec. 2, p. 16.]
An action to enforce a right or obligation arising under this chapter must be commenced within one (1) year after the expiration date of the relevant letter of credit or one (1) year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.
[28-5-115, added 1996, ch. 7, sec. 2, p. 17.]
(1) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in section 28-5-104 or by a provision in the person’s letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.
(2) Unless subsection (1) of this section applies, the liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person’s undertaking. If more than one (1) address is indicated, the person is considered to be located at the address from which the person’s undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection.
(3) Except as otherwise provided in this subsection, the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the uniform customs and practice for documentary credits, to which the letter of credit, confirmation, or other undertaking is expressly made subject. If (i) this chapter would govern the liability of an issuer, nominated person, or adviser under subsection (1) or (2) of this section, (ii) the relevant undertaking incorporates rules of custom or practice, and (iii) there is conflict between this chapter and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in section 28-5-103(3).
(4) If there is conflict between this chapter and chapter 3, 4, or 9, title 28, Idaho Code, this chapter governs.
(5) The forum for settling disputes arising out of an undertaking within this chapter may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (1) of this section.
[28-5-116, added 1996, ch. 7, sec. 2, p. 17.]
(1) An issuer that honors a beneficiary’s presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary and of the applicant to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.
(2) An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter, or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection (1) of this section.
(3) A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:
(a) the issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant,
(b) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary, and
(c) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.
(4) Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections (1) and (2) of this section do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (3) of this section do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.
[28-5-117, added 1996, ch. 7, sec. 2, p. 18.]
This act applies to a letter of credit that is issued on or after the effective date of this act. This act does not apply to a transaction, event, obligation, or duty arising out of or associated with a letter of credit that was issued before the effective date of this act.
[28-5-118, added 1996, ch. 7, sec. 2, p. 18.]
A transaction arising out of or associated with a letter of credit that was issued before the effective date of this act and the rights, obligations, and interests flowing from that transaction are governed by any statute or other law amended or repealed by this act as if repeal or amendment had not occurred and may be terminated, completed, consummated, or enforced under that statute or other law.
[28-5-119, added 1996, ch. 7, sec. 2, p. 18.]
(a) An issuer or nominated person has a security interest in a document presented under a letter of credit to the extent that the issuer or nominated person honors or gives value for the presentation.
(b) So long as and to the extent that an issuer or nominated person has not been reimbursed or has not otherwise recovered the value given with respect to a security interest in a document under subsection (a) of this section, the security interest continues and is subject to chapter 9, title 28, Idaho Code, but:
(1) A security agreement is not necessary to make the security interest enforceable under section 28-9-203(b)(3), Idaho Code;
(2) If the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; and
(3) If the document is presented in a written or other tangible medium and is not a certificated security, chattel paper, a document of title, an instrument, or a letter of credit, the security interest is perfected and has priority over a conflicting security interest in the document so long as the debtor does not have possession of the document. This act applies to a letter of credit that is issued on or after the effective date of this act. This act does not apply to a transaction, event, obligation, or duty arising out of or associated with a letter of credit that was issued before the effective date of this act.
[28-5-120, added 2001, ch. 208, sec. 11, p. 810; am. 2014, ch. 97, sec. 9, p. 272.]
This chapter shall be known and may be cited as "Uniform Commercial Code – Documents of Title."
[28-7-101, added 2004, ch. 42, sec. 2, p. 80.]
(a) In this chapter, unless the context otherwise requires:
(1) "Bailee" means a person that by a warehouse receipt, bill of lading, or other document of title acknowledges possession of goods and contracts to deliver them.
(2) "Carrier" means a person that issues a bill of lading.
(3) "Consignee" means a person named in a bill of lading to which or to whose order the bill promises delivery.
(4) "Consignor" means a person named in a bill of lading as the person from which the goods have been received for shipment.
(5) "Delivery order" means a record that contains an order to deliver goods directed to a warehouse, carrier, or other person that in the ordinary course of business issues warehouse receipts or bills of lading.
(6) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(7) "Goods" means all things that are treated as movable for the purposes of a contract for storage or transportation.
(8) "Issuer" means a bailee that issues a document of title or, in the case of an unaccepted delivery order, the person that orders the possessor of goods to deliver. The term includes a person for which an agent or employee purports to act in issuing a document if the agent or employee has real or apparent authority to issue documents, even if the issuer did not receive any goods, the goods were misdescribed, or in any other respect the agent or employee violated the issuer’s instructions.
(9) "Person entitled under the document" means the holder, in the case of a negotiable document of title, or the person to which delivery of the goods is to be made by the terms of, or pursuant to instructions in a record under, a nonnegotiable document of title.
(10) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(11) "Sign" means, with present intent to authenticate or adopt a record:
(A) To execute or adopt a tangible symbol; or
(B) To attach to or logically associate with the record an electronic sound, symbol, or process.
(12) "Shipper" means a person that enters into a contract of transportation with a carrier.
(13) "Warehouse" means a person engaged in the business of storing goods for hire.
(b) Definitions in other chapters applying to this chapter and the sections in which they appear are:
(1) "Contract for sale," section 28-2-106.
(2) "Lessee in ordinary course," section 28-12-103.
(3) "Receipt" of goods, section 28-2-103.
(c) In addition, chapter 1, title 28, Idaho Code, contains general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-7-102, added 2004, ch. 42, sec. 2, p. 80.]
(a) This chapter is subject to any treaty or statute of the United States or regulatory statute of this state to the extent the treaty, statute, or regulatory statute is applicable.
(b) This chapter does not modify or repeal any law prescribing the form or content of a document of title or the services or facilities to be afforded by a bailee, or otherwise regulating a bailee’s business in respects not specifically treated in this chapter. However, violation of such a law does not affect the status of a document of title that otherwise is within the definition of a document of title.
(c) This chapter modifies, limits, and supersedes the federal electronic signatures in global and national commerce act (15 U.S.C. 7001, et seq.) but does not modify, limit, or supersede section 101(c) of that act (15 U.S.C. 7001(c)) or authorize electronic delivery of any of the notices described in section 103(b) of that act (15 U.S.C. 7003(b)).
(d) To the extent there is a conflict between the uniform electronic transactions act, chapter 50, title 28, Idaho Code, and this chapter, this chapter governs.
[28-7-103, added 2004, ch. 42, sec. 2, p. 81.]
(a) Except as otherwise provided in subsection (c) of this section, a document of title is negotiable if by its terms the goods are to be delivered to bearer or to the order of a named person.
(b) A document of title other than one described in subsection (a) of this section is nonnegotiable. A bill of lading that states 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 an order in a record signed by the same or another named person.
(c) A document of title is nonnegotiable if, at the time it is issued, the document has a conspicuous legend, however expressed, that it is nonnegotiable.
[28-7-104, added 2004, ch. 42, sec. 2, p. 81.]
(a) Upon request of a person entitled under an electronic document of title, the issuer of the electronic document may issue a tangible document of title as a substitute for the electronic document if:
(1) The person entitled under the electronic document surrenders control of the document to the issuer; and
(2) The tangible document when issued contains a statement that it is issued in substitution for the electronic document.
(b) Upon issuance of a tangible document of title in substitution for an electronic document of title in accordance with subsection (a) of this section:
(1) The electronic document ceases to have any effect or validity; and
(2) The person that procured issuance of the tangible document warrants to all subsequent persons entitled under the tangible document that the warrantor was a person entitled under the electronic document when the warrantor surrendered control of the electronic document to the issuer.
(c) Upon request of a person entitled under a tangible document of title, the issuer of the tangible document may issue an electronic document of title as a substitute for the tangible document if:
(1) The person entitled under the tangible document surrenders possession of the document to the issuer; and
(2) The electronic document when issued contains a statement that it is issued in substitution for the tangible document.
(d) Upon issuance of an electronic document of title in substitution for a tangible document of title in accordance with subsection (c) of this section:
(1) The tangible document ceases to have any effect or validity; and
(2) The person that procured issuance of the electronic document warrants to all subsequent persons entitled under the electronic document that the warrantor was a person entitled under the tangible document when the warrantor surrendered possession of the tangible document to the issuer.
[28-7-105, added 2004, ch. 42, sec. 2, p. 81.]
(a) A person has control of an electronic document of title if a system employed for evidencing the transfer of interests in the electronic document reliably establishes that person as the person to which the electronic document was issued or transferred.
(b) A system satisfies subsection (a) of this section, and a person is deemed to have control of an electronic document of title, if the document is created, stored, and assigned in such a manner that:
(1) A single authoritative copy of the document exists which is unique, identifiable, and, except as otherwise provided in subsections (b)(4), (5), and (6) of this section, unalterable;
(2) The authoritative copy identifies the person asserting control as:
(A) The person to which the document was issued; or
(B) If the authoritative copy indicates that the document has been transferred, the person to which the document was most recently transferred;
(3) The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
(4) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.
[28-7-106, added 2004, ch. 42, sec. 2, p. 82.]
(a) A warehouse receipt may be issued by any warehouse.
(b) If goods, including distilled spirits and agricultural commodities, are stored under a statute requiring a bond against withdrawal or a license for the issuance of receipts in the nature of warehouse receipts, a receipt issued for the goods is deemed to be a warehouse receipt even if issued by a person that is the owner of the goods and is not a warehouse.
[28-7-201, added 2004, ch. 42, sec. 2, p. 83.]
(a) A warehouse receipt need not be in any particular form.
(b) Unless a warehouse receipt provides for each of the following, the warehouse is liable for damages caused to a person injured by its omission:
(1) A statement of the location of the warehouse facility where the goods are stored;
(2) The date of issue of the receipt;
(3) The unique identification code of the receipt;
(4) A statement whether the goods received will be delivered to the bearer, to a named person, or to a named person or its order;
(5) The rate of storage and handling charges, unless goods are stored under a field warehousing arrangement, in which case a statement of that fact is sufficient on a nonnegotiable receipt;
(6) A description of the goods or the packages containing them;
(7) The signature of the warehouse or its agent;
(8) If the receipt is issued for goods that the warehouse owns, either solely, jointly, or in common with others, a statement of the fact of that ownership; and
(9) A statement of the amount of advances made and of liabilities incurred for which the warehouse claims a lien or security interest, unless the precise amount of advances made or liabilities incurred, at the time of the issue of the receipt, is unknown to the warehouse or to its agent that issued the receipt, in which case a statement of the fact that advances have been made or liabilities incurred and the purpose of the advances or liabilities is sufficient.
(c) A warehouse may insert in its receipt any terms that are not contrary to the uniform commercial code and do not impair its obligation of delivery under section 28-7-403 or its duty of care under section 28-7-204. Any contrary provision is ineffective.
[28-7-202, added 2004, ch. 42, sec. 2, p. 83.]
A party to or purchaser for value in good faith of a document of title, other than a bill of lading, that relies upon the description of the goods in the document may recover from the issuer damages caused by the nonreceipt or misdescription of the goods, except to the extent that:
(1) The document conspicuously indicates that the issuer does not know whether all or part of the goods in fact were received or conform to the description, such as a case in which 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 unknown," "said to contain," or words of similar import, if the indication is true; or
(2) The party or purchaser otherwise has notice of the nonreceipt or misdescription.
[28-7-203, added 2004, ch. 42, sec. 2, p. 83.]
(a) A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.
(b) 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 beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse’s liability for conversion to its own use. On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse’s liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.
(c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the bailment may be included in the warehouse receipt or storage agreement.
[28-7-204, added 2004, ch. 42, sec. 2, p. 84.]
A buyer in ordinary course of business of fungible goods sold and delivered by a warehouse that is also in the business of buying and selling such goods takes the goods free of any claim under a warehouse receipt even if the receipt is negotiable and has been duly negotiated.
[28-7-205, added 2004, ch. 42, sec. 2, p. 84.]
(a) A warehouse, by giving notice to the person on whose account the goods are held and any other person known to claim an interest in the goods, may 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 of title or, if a period is not fixed, within a stated period not less than thirty (30) days after the warehouse gives notice. If the goods are not removed before the date specified in the notice, the warehouse may sell them pursuant to section 28-7-210.
(b) If a warehouse in good faith believes that goods are about to deteriorate or decline in value to less than the amount of its lien within the time provided in subsection (a) of this section and section 28-7-210, the warehouse may specify in the notice given under subsection (a) of this section any reasonable shorter time for removal of the goods and, if the goods are not removed, may sell them at public sale held not less than one (1) week after a single advertisement or posting.
(c) If, as a result of a quality or condition of the goods of which the warehouse did not have notice at the time of deposit, the goods are a hazard to other property, the warehouse facilities, or other persons, the warehouse may sell the goods at public or private sale without advertisement or posting on reasonable notification to all persons known to claim an interest in the goods. If the warehouse, after a reasonable effort, is unable to sell the goods, it may dispose of them in any lawful manner and does not incur liability by reason of that disposition.
(d) A warehouse shall deliver the goods to any person entitled to them under this chapter upon due demand made at any time before sale or other disposition under this section.
(e) A warehouse may satisfy its lien from the proceeds of any sale or disposition under this section but shall hold the balance for delivery on the demand of any person to which the warehouse would have been bound to deliver the goods.
[28-7-206, added 2004, ch. 42, sec. 2, p. 84.]
(a) Unless the warehouse receipt provides otherwise, a warehouse shall keep separate the goods covered by each receipt so as to permit at all times identification and delivery of those goods. However, different lots of fungible goods may be commingled.
(b) If different lots of fungible goods are commingled, the goods are owned in common by the persons entitled thereto and the warehouse is severally liable to each owner for that owner’s share. If, because of overissue, a mass of fungible goods is insufficient to meet all the receipts the warehouse has issued against it, the persons entitled include all holders to which overissued receipts have been duly negotiated.
[28-7-207, added 2004, ch. 42, sec. 2, p. 85.]
If a blank in a negotiable tangible warehouse receipt has been filled in without authority, a good-faith purchaser for value and without notice of the lack of authority may treat the insertion as authorized. Any other unauthorized alteration leaves any tangible or electronic warehouse receipt enforceable against the issuer according to its original tenor.
[28-7-208, added 2004, ch. 42, sec. 2, p. 85.]
(a) A warehouse has a lien against the bailor on the goods covered by a warehouse receipt or storage agreement or on the proceeds thereof in its possession for charges for storage or transportation, including demurrage and terminal charges, insurance, labor, or other charges, present or future, in 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 similar charges or expenses in relation to other goods whenever deposited and it is stated in the warehouse receipt or storage agreement that a lien is claimed for charges and expenses in relation to other goods, the warehouse also has a lien against the goods covered by the warehouse receipt or storage agreement or on the proceeds thereof in its possession for those charges and expenses, whether or not the other goods have been delivered by the warehouse. However, as against a person to which a negotiable warehouse receipt is duly negotiated, a warehouse’s lien is limited to charges in an amount or at a rate specified in the warehouse receipt or, if no charges are so specified, to a reasonable charge for storage of the specific goods covered by the receipt subsequent to the date of the receipt.
(b) A warehouse may also reserve a security interest against the bailor for the maximum amount specified on the receipt for charges other than those specified in subsection (a) of this section, such as for money advanced and interest. The security interest is governed by chapter 9, title 28, Idaho Code.
(c) A warehouse’s lien for charges and expenses under subsection (a) of this section or a security interest under subsection (b) of this section is also effective against any person that so entrusted the bailor with possession of the goods that a pledge of them by the bailor to a good-faith purchaser for value would have been valid. However, the lien or security interest is not effective against a person that before issuance of a document of title had a legal interest or a perfected security interest in the goods and that did not:
(1) Deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor’s nominee with:
(A) Actual or apparent authority to ship, store, or sell;
(B) Power to obtain delivery under section 28-7-403; or
(C) Power of disposition under section 28-2-403, 28-12-304(2), 28-12-305(2), 28-9-320 or 28-9-321(c), or other statute or rule of law; or
(2) Acquiesce in the procurement by the bailor or its nominee of any document.
(d) A warehouse’s lien on household goods for charges and expenses in relation to the goods under subsection (a) of this section is also effective against all persons if the depositor was the legal possessor of the goods at the time of deposit. In this subsection, "household goods" means furniture, furnishings, or personal effects used by the depositor in a dwelling.
(e) A warehouse loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.
[28-7-209, added 2004, ch. 42, sec. 2, p. 85.]
(a) Except as otherwise provided in subsection (b) of this section, a warehouse’s lien may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The 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 method different from that selected by the warehouse is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The warehouse sells in a commercially reasonable manner if the warehouse sells the goods in the usual manner in any recognized market therefor, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.
(b) A warehouse may enforce its lien on goods, other than goods stored by a merchant in the course of its business, only if the following requirements are satisfied:
(1) All persons known to claim an interest in the goods must be notified.
(2) The notification must include an itemized statement of the claim, a description of the goods subject to the lien, a demand for payment within a specified time not less than ten (10) 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.
(3) The sale must conform to the terms of the notification.
(4) The sale must be held at the nearest suitable place to where the goods are held or stored.
(5) After the expiration of the time given in the notification, an advertisement of the sale must be published once a week for two (2) 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 the goods are being held, and the time and place of the sale. The sale must take place at least fifteen (15) days after the first publication. If there is no newspaper of general circulation where the sale is to be held, the advertisement must be posted at least ten (10) days before the sale in not fewer than six (6) conspicuous places in the neighborhood of the proposed sale.
(c) 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 in complying with this section. In that event, the goods may not be sold but must be retained by the warehouse subject to the terms of the receipt and this chapter.
(d) A warehouse may buy at any public sale held pursuant to this section.
(e) A purchaser in good faith of goods sold to enforce a warehouse’s lien takes the goods free of any rights of persons against which the lien was valid, despite the warehouse’s noncompliance with this section.
(f) A warehouse may satisfy its lien from the proceeds of any sale pursuant to this section but shall hold the balance, if any, for delivery on demand to any person to which the warehouse would have been bound to deliver the goods.
(g) The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.
(h) If a lien is on goods stored by a merchant in the course of its business, the lien may be enforced in accordance with subsection (a) or (b) of this section.
(i) A warehouse 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.
[28-7-210, added 2004, ch. 42, sec. 2, p. 86.]
(a) A consignee of a nonnegotiable bill of lading which has given value in good faith, or a holder to which a negotiable bill has been duly negotiated, relying upon the description of the goods in the bill or upon the date shown in the bill, may recover from the issuer damages caused by the misdating of the bill or the nonreceipt or misdescription of the goods, except to the extent that the bill indicates that the issuer does not know whether any part or all of the goods in fact were received or conform to the description, such as in a case in which the description is in terms of marks or labels or kind, quantity, or condition or the receipt or description is qualified by "contents or condition of contents of packages unknown," "said to contain," "shipper’s weight, load, and count," or words of similar import, if that indication is true.
(b) If goods are loaded by the issuer of a bill of lading:
(1) The issuer shall count the packages of goods if shipped in packages and ascertain the kind and quantity if shipped in bulk; and
(2) Words such as "shipper’s weight, load, and count," or words of similar import indicating that the description was made by the shipper are ineffective except as to goods concealed in packages.
(c) If bulk goods are loaded by a shipper that makes available to the issuer of a bill of lading adequate facilities for weighing those goods, the issuer shall ascertain the kind and quantity within a reasonable time after receiving the shipper’s request in a record to do so. In that case, "shipper’s weight" or words of similar import are ineffective.
(d) The issuer of a bill of lading, by including in the bill the words "shipper’s weight, load, and count," or words of similar import, may indicate that the goods were loaded by the shipper, and, if that statement is true, the issuer is not liable for damages caused by the improper loading. However, omission of such words does not imply liability for damages caused by improper loading.
(e) A shipper guarantees to an issuer the accuracy at the time of shipment of the description, marks, labels, number, kind, quantity, condition, and weight, as furnished by the shipper, and the shipper shall indemnify the issuer against damage caused by inaccuracies in those particulars. This right of indemnity does not limit the issuer’s responsibility or liability under the contract of carriage to any person other than the shipper.
[28-7-301, added 2004, ch. 42, sec. 2, p. 87.]
(a) The issuer of a through bill of lading, or other document of title embodying an undertaking to be performed in part by a person acting as its agent or by a performing carrier, is liable to any person entitled to recover on the bill or other document for any breach by the other person or the performing carrier of its obligation under the bill or other document. However, to the extent that the bill or other document covers an undertaking to be performed overseas or in territory not contiguous to the continental United States or an undertaking including matters other than transportation, this liability for breach by the other person or the performing carrier may be varied by agreement of the parties.
(b) If goods covered by a through bill of lading or other document of title embodying an undertaking to be performed in part by a person other than the issuer are received by that person, the person is subject, with respect to its own performance while the goods are in its possession, to the obligation of the issuer. The person’s obligation is discharged by delivery of the goods to another person pursuant to the bill or other document and does not include liability for breach by any other person or by the issuer.
(c) The issuer of a through bill of lading or other document of title described in subsection (a) of this section is entitled to recover from the performing carrier, or other person in possession of the goods when the breach of the obligation under the bill or other document occurred:
(1) The amount it may be required to pay to any person entitled to recover on the bill or other document for the breach, as may be evidenced by any receipt, judgment, or transcript of judgment; and
(2) The amount of any expense reasonably incurred by the issuer in defending any action commenced by any person entitled to recover on the bill or other document for the breach.
[28-7-302, added 2004, ch. 42, sec. 2, p. 88.]
(a) Unless the bill of lading otherwise provides, a carrier may deliver the goods to a person or destination other than that stated in the bill or may otherwise dispose of the goods, without liability for misdelivery, on instructions from:
(1) The holder of a negotiable bill;
(2) The consignor on a nonnegotiable bill, even if the consignee has given contrary instructions;
(3) The consignee on a nonnegotiable 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 possession of the tangible bill or in control of the electronic bill; or
(4) The consignee on a nonnegotiable bill, if the consignee is entitled as against the consignor to dispose of the goods.
(b) Unless instructions described in subsection (a) of this section are included in a negotiable bill of lading, a person to which the bill is duly negotiated may hold the bailee according to the original terms.
[28-7-303, added 2004, ch. 42, sec. 2, p. 89.]
(a) Except as customary in international transportation, a tangible bill of lading may not be issued in a set of parts. The issuer is liable for damages caused by violation of this subsection.
(b) If a tangible bill of lading is lawfully issued in a set of parts, each of which contains an identification code and is expressed to be valid only if the goods have not been delivered against any other part, the whole of the parts constitutes one (1) bill.
(c) If a tangible negotiable 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 which the first due negotiation is made prevails as to both the document of title and the goods even if any later holder may have received the goods from the carrier in good faith and discharged the carrier’s obligation by surrendering its part.
(d) A person that negotiates or transfers a single part of a tangible bill of lading issued in a set is liable to holders of that part as if it were the whole set.
(e) The bailee shall deliver in accordance with part 4 of this chapter against the first presented part of a tangible bill of lading lawfully issued in a set. Delivery in this manner discharges the bailee’s obligation on the whole bill.
[28-7-304, added 2004, ch. 42, sec. 2, p. 89.]
(a) Instead of issuing a bill of lading to the consignor at the place of shipment, a carrier, at the request of the consignor, may procure the bill to be issued at destination or at any other place designated in the request.
(b) Upon request of any person entitled as against a carrier to control the goods while in transit and on surrender of possession or control of any outstanding bill of lading or other receipt covering the goods, the issuer, subject to section 28-7-105, may procure a substitute bill to be issued at any place designated in the request.
[28-7-305, added 2004, ch. 42, sec. 2, p. 89.]
An unauthorized alteration or filling in of a blank in a bill of lading leaves the bill enforceable according to its original tenor.
[28-7-306, added 2004, ch. 42, sec. 2, p. 90.]
(a) A carrier has a lien on the goods covered by a bill of lading or on the proceeds thereof in its possession for charges after the date of the carrier’s 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. However, 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, a reasonable charge.
(b) A lien for charges and expenses under subsection (a) of this section on goods that 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 subject the goods to those charges and expenses. Any other lien under subsection (a) of this section is effective against the consignor and any person that permitted the bailor to have control or possession of the goods unless the carrier had notice that the bailor lacked authority.
(c) A carrier loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.
[28-7-307, added 2004, ch. 42, sec. 2, p. 90.]
(a) A carrier’s lien on goods may be enforced by public or private sale of the goods, in bulk or in packages, at any time or place and on any terms that are commercially reasonable, after notifying all persons known to claim an interest in the goods. The 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 method different from that selected by the carrier is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. The carrier sells goods in a commercially reasonable manner if the carrier sells the goods in the usual manner in any recognized market therefor, sells at the price current in that market at the time of the sale, or otherwise sells in conformity with commercially reasonable practices among dealers in the type of goods sold. A sale of more goods than apparently necessary to be offered to ensure satisfaction of the obligation is not commercially reasonable, except in cases covered by the preceding sentence.
(b) 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 in complying with this section. In that event, the goods may not be sold but must be retained by the carrier, subject to the terms of the bill of lading and this chapter.
(c) A carrier may buy at any public sale pursuant to this section.
(d) A purchaser in good faith of goods sold to enforce a carrier’s lien takes the goods free of any rights of persons against which the lien was valid, despite the carrier’s noncompliance with this section.
(e) A carrier may satisfy its lien from the proceeds of any sale pursuant to this section but shall hold the balance, if any, for delivery on demand to any person to which the carrier would have been bound to deliver the goods.
(f) The rights provided by this section are in addition to all other rights allowed by law to a creditor against a debtor.
(g) A carrier’s lien may be enforced pursuant to either subsection (a) of this section or the procedure set forth in section 28-7-210(b).
(h) A 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.
[28-7-308, added 2004, ch. 42, sec. 2, p. 90.]
(a) A carrier that issues a bill of lading, whether negotiable or nonnegotiable, shall exercise the degree of care in relation to the goods which a reasonably careful person would exercise under similar circumstances. This subsection does not affect any statute, regulation, or rule of law that imposes liability upon a common carrier for damages not caused by its negligence.
(b) Damages may be limited by a term in the bill of lading or in a transportation agreement that the carrier’s liability may not exceed a value stated in the bill or transportation agreement if the carrier’s rates are dependent upon value and the consignor is afforded an opportunity to declare a higher value and the consignor is advised of the opportunity. However, such a limitation is not effective with respect to the carrier’s liability for conversion to its own use.
(c) Reasonable provisions as to the time and manner of presenting claims and commencing actions based on the shipment may be included in a bill of lading or a transportation agreement.
[28-7-309, added 2004, ch. 42, sec. 2, p. 91.]
The obligations imposed by this chapter on an issuer apply to a document of title even if:
(1) The document does not comply with the requirements of this chapter or of any other statute, rule, or regulation regarding its issuance, form, or content;
(2) The issuer violated laws regulating the conduct of its business;
(3) The goods covered by the document were owned by the bailee when the document was issued; or
(4) The person issuing the document is not a warehouse but the document purports to be a warehouse receipt.
[28-7-401, added 2004, ch. 42, sec. 2, p. 91.]
A duplicate or any other document of title purporting to cover goods already represented by an outstanding document of the same issuer does not confer any right in the goods, except as provided in the case of tangible bills of lading in a set of parts, overissue of documents for fungible goods, substitutes for lost, stolen, or destroyed documents, or substitute documents issued pursuant to section 28-7-105. The issuer is liable for damages caused by its overissue or failure to identify a duplicate document by a conspicuous notation.
[28-7-402, added 2004, ch. 42, sec. 2, p. 91.]
(a) A bailee shall deliver the goods to a person entitled under a document of title if the person complies with subsections (b) and (c) of this section, unless and to the extent that the bailee establishes any of the following:
(1) Delivery of the goods to a person whose receipt was rightful as against the claimant;
(2) Damage to or delay, loss, or destruction of the goods for which the bailee is not liable;
(3) Previous sale or other disposition of the goods in lawful enforcement of a lien or on a warehouse’s lawful termination of storage;
(4) The exercise by a seller of its right to stop delivery pursuant to section 28-2-705 or by a lessor of its right to stop delivery pursuant to section 28-12-526;
(5) A diversion, reconsignment, or other disposition pursuant to section 28-7-303;
(6) Release, satisfaction, or any other personal defense against the claimant; or
(7) Any other lawful excuse.
(b) A person claiming goods covered by a document of title shall satisfy the bailee’s lien if the bailee so requests or if the bailee is prohibited by law from delivering the goods until the charges are paid.
(c) Unless a person claiming the goods is a person against which the document of title does not confer a right under section 28-7-503(a):
(1) The person claiming under a document shall surrender possession or control of any outstanding negotiable document covering the goods for cancellation or indication of partial deliveries; and
(2) The bailee shall cancel the document or conspicuously indicate in the document the partial delivery or the bailee is liable to any person to which the document is duly negotiated.
[28-7-403, added 2004, ch. 42, sec. 2, p. 92.]
A bailee that in good faith has received goods and delivered or otherwise disposed of the goods according to the terms of a document of title or pursuant to this chapter is not liable for the goods even if:
(1) The person from which the bailee received the goods did not have authority to procure the document or to dispose of the goods; or
(2) The person to which the bailee delivered the goods did not have authority to receive the goods.
[28-7-404, added 2004, ch. 42, sec. 2, p. 92.]
(a) The following rules apply to a negotiable tangible document of title:
(1) If the document’s original terms run to the order of a named person, the document is negotiated by the named person’s indorsement and delivery. After the named person’s indorsement in blank or to bearer, any person may negotiate the document by delivery alone.
(2) If the document’s original terms run to bearer, it is negotiated by delivery alone.
(3) If the document’s original terms run to the order of a named person and it is delivered to the named person, the effect is the same as if the document had been negotiated.
(4) Negotiation of the document after it has been indorsed to a named person requires indorsement by the named person and delivery.
(5) A document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder that 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 established that the negotiation is not in the regular course of business or financing or involves receiving the document in settlement or payment of a monetary obligation.
(b) The following rules apply to a negotiable electronic document of title:
(1) If the document’s original terms run to the order of a named person or to bearer, the document is negotiated by delivery of the document to another person. Indorsement by the named person is not required to negotiate the document.
(2) If the document’s original terms run to the order of a named person and the named person has control of the document, the effect is the same as if the document had been negotiated.
(3) A document is duly negotiated if it is negotiated in the manner stated in this subsection to a holder that 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 established that the negotiation is not in the regular course of business or financing or involves taking delivery of the document in settlement or payment of a monetary obligation.
(c) Indorsement of a nonnegotiable document of title neither makes it negotiable nor adds to the transferee’s rights.
(d) The naming in a negotiable bill of lading of a person to be notified of the arrival of the goods does not limit the negotiability of the bill or constitute notice to a purchaser of the bill of any interest of that person in the goods.
[28-7-501, added 2004, ch. 42, sec. 2, p. 93.]
(a) Subject to sections 28-7-205 and 28-7-503, a holder to which a negotiable document of title has been duly negotiated acquires thereby:
(1) Title to the document;
(2) Title to the goods;
(3) All rights accruing under the law of agency or estoppel, including rights to goods delivered to the bailee after the document was issued; and
(4) The direct obligation of the issuer to hold or deliver the goods according to the terms of the document free of any defense or claim by the issuer except those arising under the terms of the document or under this chapter, but in the case of a delivery order, the bailee’s obligation accrues only upon the bailee’s acceptance of the delivery order and the obligation acquired by the holder is that the issuer and any indorser will procure the acceptance of the bailee.
(b) Subject to section 28-7-503, title and rights acquired by due negotiation are not defeated by any stoppage of the goods represented by the document of title or by surrender of the goods by the bailee and are not impaired even if:
(1) The due negotiation or any prior due negotiation constituted a breach of duty;
(2) Any person has been deprived of possession of a negotiable tangible document or control of a negotiable electronic document by misrepresentation, fraud, accident, mistake, duress, loss, theft, or conversion; or
(3) A previous sale or other transfer of the goods or document has been made to a third person.
[28-7-502, added 2004, ch. 42, sec. 2, p. 93.]
(a) A document of title confers no right in goods against a person that before issuance of the document had a legal interest or a perfected security interest in the goods and that did not:
(1) Deliver or entrust the goods or any document of title covering the goods to the bailor or the bailor’s nominee with:
(A) Actual or apparent authority to ship, store, or sell;
(B) Power to obtain delivery under section 28-7-403; or
(C) Power of disposition under section 28-2-403, 28-12-304(2), 28-12-305(2), 28-9-320 or 28-9-321(c), or other statute or rule of law; or
(2) Acquiesce in the procurement by the bailor or its nominee of any document.
(b) Title to goods based upon an unaccepted delivery order is subject to the rights of any person to which a negotiable warehouse receipt or bill of lading covering the goods has been duly negotiated. That title may be defeated under section 28-7-504 to the same extent as the rights of the issuer or a transferee from the issuer.
(c) Title to goods based upon a bill of lading issued to a freight forwarder is subject to the rights of any person to which a bill issued by the freight forwarder is duly negotiated. However, delivery by the carrier in accordance with part 4 of this chapter pursuant to its own bill of lading discharges the carrier’s obligation to deliver.
[28-7-503, added 2004, ch. 42, sec. 2, p. 94.]
(a) A transferee of a document of title, whether negotiable or nonnegotiable, to which the document has been delivered but not duly negotiated, acquires the title and rights that its transferor had or had actual authority to convey.
(b) In the case of a transfer of a nonnegotiable document of title, until but not after the bailee receives notice of the transfer, the rights of the transferee may be defeated:
(1) By those creditors of the transferor which could treat the transfer as void under section 28-2-402 or 28-12-308;
(2) 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 the buyer’s rights;
(3) By a lessee from the transferor in ordinary course of business if the bailee has delivered the goods to the lessee or received notification of the lessee’s rights; or
(4) As against the bailee, by good-faith dealings of the bailee with the transferor.
(c) A diversion or other change of shipping instructions by the consignor in a nonnegotiable bill of lading which causes the bailee not to deliver the goods to the consignee defeats the consignee’s title to the goods if the goods have been delivered to a buyer in ordinary course of business or a lessee in ordinary course of business and, in any event, defeats the consignee’s rights against the bailee.
(d) Delivery of the goods pursuant to a nonnegotiable document of title may be stopped by a seller under section 28-2-705 or a lessor under section 28-12-526, subject to the requirements of due notification in those sections. A bailee that honors the seller’s or lessor’s instructions is entitled to be indemnified by the seller or lessor against any resulting loss or expense.
[28-7-504, added 2004, ch. 42, sec. 2, p. 94.]
The indorsement of a tangible document of title issued by a bailee does not make the indorser liable for any default by the bailee or previous indorsers.
[28-7-505, added 2004, ch. 42, sec. 2, p. 95.]
The transferee of a negotiable tangible document of title has a specifically enforceable right to have its transferor supply any necessary indorsement, but the transfer becomes a negotiation only as of the time the indorsement is supplied.
[28-7-506, added 2004, ch. 42, sec. 2, p. 95.]
If a person negotiates or delivers a document of title for value, otherwise than as a mere intermediary under section 28-7-508, unless otherwise agreed, the transferor, in addition to any warranty made in selling or leasing the goods, warrants to its immediate purchaser only that:
(1) The document is genuine;
(2) The transferor does not have knowledge of any fact that would impair the document’s validity or worth; and
(3) The negotiation or delivery is rightful and fully effective with respect to the title to the document and the goods it represents.
[28-7-507, added 2004, ch. 42, sec. 2, p. 95.]
A collecting bank or other intermediary known to be entrusted with documents of title on behalf of another or with collection of a draft or other claim against delivery of documents warrants by the delivery of the documents only its own good faith and authority even if the collecting bank or other intermediary has purchased or made advances against the claim or draft to be collected.
[28-7-508, added 2004, ch. 42, sec. 2, p. 95.]
Whether a document of title is adequate to fulfill the obligations of a contract for sale, a contract for lease, or the conditions of a letter of credit is determined by chapter 2, 5 or 12, title 28, Idaho Code.
[28-7-509, added 2004, ch. 42, sec. 2, p. 96.]
(a) If a document of title is 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 the order. If the document was negotiable, a court may not order delivery of the goods or issuance of a substitute document without the claimant’s posting security unless it finds that any person that may suffer loss as a result of nonsurrender of possession or control of the document is adequately protected against the loss. If the document was nonnegotiable, the court may require security. The court may also order payment of the bailee’s reasonable costs and attorney’s fees in any action under this subsection.
(b) A bailee that, without a court order, delivers goods to a person claiming under a missing negotiable document of title is liable to any person injured thereby. If the delivery is not in good faith, the bailee is liable for conversion. Delivery in good faith is not conversion 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 which files a notice of claim within one (1) year after the delivery.
[28-7-601, added 2004, ch. 42, sec. 2, p. 96.]
Unless a document of title was originally issued upon delivery of the goods by a person that did not have power to dispose of them, a lien does not attach by virtue of any judicial process to goods in the possession of a bailee for which a negotiable document of title is outstanding unless possession or control of the document is first surrendered to the bailee or the document’s negotiation is enjoined. The bailee may not be compelled to deliver the goods pursuant to process until possession or control of the document is surrendered to the bailee or to the court. A purchaser of the document for value without notice of the process or injunction takes free of the lien imposed by judicial process.
[28-7-602, added 2004, ch. 42, sec. 2, p. 96.]
If more than one (1) person claims title to or possession of the goods, the bailee is excused from delivery until the bailee has a reasonable time to ascertain the validity of the adverse claims or to commence an action for interpleader. The bailee may assert an interpleader either in defending an action for nondelivery of the goods or by original action.
[28-7-603, added 2004, ch. 42, sec. 2, p. 96.]
This act takes effect on July 1, 2004.
[28-7-701, added 2004, ch. 42, sec. 2, p. 96.]
Existing chapter 7, title 28, Idaho Code, and section 28-10-104, Idaho Code, are repealed.
[28-7-702, added 2004, ch. 42, sec. 2, p. 97.]
This act applies to a document of title that is issued or a bailment that arises on or after July 1, 2004. This act does not apply to a document of title that is issued or a bailment that arises before July 1, 2004, even if the document of title or bailment would be subject to this act if the document of title had been issued or bailment had arisen on or after July 1, 2004. This act does not apply to a right of action that has accrued before July 1, 2004.
[28-7-703, added 2004, ch. 42, sec. 2, p. 97.]
A document of title issued or a bailment that arises before July 1, 2004, and the rights, obligations, and interests flowing from that document or bailment are governed by any statute or other rule amended or repealed by this act as if amendment or repeal had not occurred and may be terminated, completed, consummated, or enforced under that statute or other rule.
[28-7-704, added 2004, ch. 42, sec. 2, p. 97.]
This chapter may be cited as "Uniform Commercial Code — Investment Securities."
[28-8-101, added 1995, ch. 272, sec. 2, p. 875.]
(1) In this chapter:
(a) "Adverse claim" means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer or deal with the financial asset.
(b) "Bearer form," as applied to a certificated security, means a form in which the security is payable to the bearer of the security certificate according to its terms but not by reason of an indorsement.
(c) "Broker" means a person defined as a broker or dealer under the federal securities laws, but without excluding a bank acting in that capacity.
(d) "Certificated security" means a security that is represented by a certificate.
(e) "Clearing corporation" means:
(i) A person that is registered as a "clearing agency" under the federal securities laws;
(ii) A federal reserve bank; or
(iii) Any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority.
(f) "Communicate" means to:
(i) Send a signed writing; or
(ii) Transmit information by any mechanism agreed upon by the persons transmitting and receiving the information.
(g) "Entitlement holder" means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. If a person acquires a security entitlement by virtue of section 28-8-501(2)(b) or (2)(c), that person is the entitlement holder.
(h) "Entitlement order" means a notification communicated to a securities intermediary directing transfer or redemption of a financial asset to which the entitlement holder has a security entitlement.
(i) "Financial asset," except as otherwise provided in section 28-8-103, means:
(i) A security;
(ii) An obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or
(iii) Any property that is held by a securities intermediary for another person in a securities account if the securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter.
As context requires, the term means either the interest itself or the means by which a person’s claim to it is evidenced, including a certificated or uncertificated security, a security certificate or a security entitlement.
(j) "Good faith," for purposes of the obligation of good faith in the performance or enforcement of contracts or duties within this chapter, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(k) "Indorsement" means a signature that alone or accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of assigning, transferring or redeeming the security or granting a power to assign, transfer, or redeem it.
(l) "Instruction" means a notification communicated to the issuer of an uncertificated security which directs that the transfer of the security be registered or that the security be redeemed.
(m) "Registered form," as applied to a certificated security, means a form in which:
(i) The security certificate specifies a person entitled to the security; and
(ii) A transfer of the security may be registered upon books maintained for that purpose by or on behalf of the issuer, or the security certificate so states.
(n) "Securities intermediary" means:
(i) A clearing corporation; or
(ii) A person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity.
(o) "Security," except as otherwise provided in section 28-8-103, means an obligation of an issuer or a share, participation or other interest in an issuer or in property or an enterprise of an issuer:
(i) Which is represented by a security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer;
(ii) Which is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations; and
(iii) Which:
(A) Is, or is of a type, dealt in or traded on securities exchanges or securities markets; or
(B) Is a medium for investment and by its terms expressly provides that it is a security governed by this chapter.
(p) "Security certificate" means a certificate representing a security.
(q) "Security entitlement" means the rights and property interest of an entitlement holder with respect to a financial asset specified in part 5 of this chapter.
(r) "Uncertificated security" means a security that is not represented by a certificate.
(2) Other definitions applying to this chapter and the sections in which they appear are:
Appropriate person
Control
Delivery
Investment company security
Issuer
Overissue
Protected purchaser
Securities account
(3) In addition, chapter 1, title 28, contains general definitions and principles of construction and interpretation applicable throughout this chapter.
(4) The characterization of a person, business or transaction for purposes of this chapter does not determine the characterization of the person, business or transaction for purposes of any other law, regulation or rule.
[28-8-102, added 1995, ch. 272, sec. 2, p. 875.]
(1) A share or similar equity interest issued by a corporation, business trust, joint stock company or similar entity is a security.
(2) An "investment company security" is a security. "Investment company security" means a share or similar equity interest issued by an entity that is registered as an investment company under the federal investment company laws, an interest in a unit investment trust that is so registered, or a face-amount certificate issued by a face-amount certificate company that is so registered. Investment company security does not include an insurance policy or endowment policy or annuity contract issued by an insurance company.
(3) An interest in a partnership or limited liability company is not a security unless it is dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by this chapter, or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.
(4) A writing that is a security certificate is governed by this chapter and not by chapter 3, title 28, even though it also meets the requirements of chapter 3, title 28. However, a negotiable instrument governed by chapter 3, title 28, is a financial asset if it is held in a securities account.
(5) An option or similar obligation issued by a clearing corporation to its participants is not a security, but is a financial asset.
(6) A commodity contract, as defined in section 28-9-102(a)(15), is not a security or a financial asset.
(7) A document of title is not a financial asset unless section 28-8-102(1)(i)(iii) applies.
[28-8-103, added 1995, ch. 272, sec. 2, p. 877; am. 2001, ch. 208, sec. 14, p. 811; am. 2004, ch. 42, sec. 20, p. 115.]
(1) A person acquires a security or an interest therein, under this chapter, if:
(a) The person is a purchaser to whom a security is delivered pursuant to section 28-8-301; or
(b) The person acquires a security entitlement to the security pursuant to section 28-8-501.
(2) A person acquires a financial asset, other than a security, or an interest therein, under this chapter, if the person acquires a security entitlement to the financial asset.
(3) A person who acquires a security entitlement to a security or other financial asset has the rights specified in part 5 of this chapter, but is a purchaser of any security, security entitlement, or other financial asset held by the securities intermediary only to the extent provided in section 28-8-503.
(4) Unless the context shows that a different meaning is intended, a person who is required by other law, regulation, rule or agreement to transfer, deliver, present, surrender, exchange or otherwise put in the possession of another person a security or financial asset satisfies that requirement by causing the other person to acquire an interest in the security or financial asset pursuant to subsection (1) or (2) of this section.
[28-8-104, added 1995, ch. 272, sec. 2, p. 877.]
(1) A person has notice of an adverse claim if:
(a) The person knows of the adverse claim;
(b) The person is aware of facts sufficient to indicate that there is a significant probability that the adverse claim exists and deliberately avoids information that would establish the existence of the adverse claim; or
(c) The person has a duty, imposed by statute or rule, to investigate whether an adverse claim exists, and the investigation so required would establish the existence of the adverse claim.
(2) Having knowledge that a financial asset or interest therein is or has been transferred by a representative imposes no duty of inquiry into the rightfulness of a transaction and is not notice of an adverse claim. However, a person who knows that a representative has transferred a financial asset or interest therein in a transaction that is, or whose proceeds are being used, for the individual benefit of the representative or otherwise in breach of duty has notice of an adverse claim.
(3) An act or event that creates a right to immediate performance of the principal obligation represented by a security certificate or sets a date on or after which the certificate is to be presented or surrendered for redemption or exchange does not itself constitute notice of an adverse claim except in the case of a transfer more than:
(a) One (1) year after a date set for presentment or surrender for redemption or exchange; or
(b) Six (6) months after a date set for payment of money against presentation or surrender of the certificate, if money was available for payment on that date.
(4) A purchaser of a certificated security has notice of an adverse claim if the security certificate:
(a) Whether in bearer or registered form, has been indorsed "for collection" or "for surrender" or for some other purpose not involving transfer; or
(b) Is in bearer form and has on it an unambiguous statement that it is the property of a person other than the transferor, but the mere writing of a name on the certificate is not such a statement.
(5) Filing of a financing statement under chapter 9, title 28, is not notice of an adverse claim to a financial asset.
[28-8-105, added 1995, ch. 272, sec. 2, p. 878.]
(1) A purchaser has "control" of a certificated security in bearer form if the certificated security is delivered to the purchaser.
(2) A purchaser has "control" of a certificated security in registered form if the certificated security is delivered to the purchaser, and:
(a) The certificate is indorsed to the purchaser or in blank by an effective indorsement; or
(b) The certificate is registered in the name of the purchaser, upon original issue or registration of transfer by the issuer.
(3) A purchaser has "control" of an uncertificated security if:
(a) The uncertificated security is delivered to the purchaser; or
(b) The issuer has agreed that it will comply with instructions originated by the purchaser without further consent by the registered owner.
(4) A purchaser has "control" of a security entitlement if:
(a) The purchaser becomes the entitlement holder;
(b) The securities intermediary has agreed that it will comply with entitlement orders originated by the purchaser without further consent by the entitlement holder; or
(c) Another person has control of the security entitlement on behalf of the purchaser or, having previously acquired control of the security entitlement, acknowledges that it has control on behalf of the purchaser.
(5) If an interest in a security entitlement is granted by the entitlement holder to the entitlement holder’s own securities intermediary, the securities intermediary has control.
(6) A purchaser who has satisfied the requirements of subsection (3) or (4) of this section has control, even if the registered owner in the case of subsection (3) of this section, or the entitlement holder in the case of subsection (4) of this section, retains the right to make substitutions for the uncertificated security or security entitlement, to originate instructions or entitlement orders to the issuer or securities intermediary, or otherwise to deal with the uncertificated security or security entitlement.
(7) An issuer or a securities intermediary may not enter into an agreement of the kind described in subsection (3)(b) or (4)(b) of this section without the consent of the registered owner or entitlement holder, but an issuer or a securities intermediary is not required to enter into such an agreement even though the registered owner or entitlement holder so directs. An issuer or securities intermediary that has entered into such an agreement is not required to confirm the existence of the agreement to another party unless requested to do so by the registered owner or entitlement holder.
[28-8-106, added 1995, ch. 272, sec. 2, p. 879; am. 2001, ch. 208, sec. 15, p. 812.]
(1) "Appropriate person" means:
(a) With respect to an indorsement, the person specified by a security certificate or by an effective special indorsement to be entitled to the security;
(b) With respect to an instruction, the registered owner of an uncertificated security;
(c) With respect to an entitlement order, the entitlement holder;
(d) If the person designated in paragraph (a), (b) or (c) of this subsection is deceased, the designated person’s successor taking under other law or the designated person’s personal representative acting for the estate of the decedent; or
(e) If the person designated in paragraph (a), (b) or (c) of this subsection lacks capacity, the designated person’s guardian, conservator or other similar representative who has power under other law to transfer the security or financial asset.
(2) An indorsement, instruction, or entitlement order is effective if:
(a) It is made by the appropriate person;
(b) It is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of the appropriate person, including, in the case of an instruction or entitlement order, a person who has control under section 28-8-106(3)(b) or (4)(b); or
(c) The appropriate person has ratified it or is otherwise precluded from asserting its ineffectiveness.
(3) An indorsement, instruction or entitlement order made by a representative is effective even if:
(a) The representative has failed to comply with a controlling instrument or with the law of the state having jurisdiction of the representative relationship, including any law requiring the representative to obtain court approval of the transaction; or
(b) The representative’s action in making the indorsement, instruction or entitlement order or using the proceeds of the transaction is otherwise a breach of duty.
(4) If a security is registered in the name of or specially indorsed to a person described as a representative, or if a securities account is maintained in the name of a person described as a representative, an indorsement, instruction or entitlement order made by the person is effective even though the person is no longer serving in the described capacity.
(5) Effectiveness of an indorsement, instruction or entitlement order is determined as of the date the indorsement, instruction or entitlement order is made, and an indorsement, instruction or entitlement order does not become ineffective by reason of any later change of circumstances.
[28-8-107, added 1995, ch. 272, sec. 2, p. 879.]
(1) A person who transfers a certificated security to a purchaser for value warrants to the purchaser, and an indorser, if the transfer is by indorsement, warrants to any subsequent purchaser, that:
(a) The certificate is genuine and has not been materially altered;
(b) The transferor or indorser does not know of any fact that might impair the validity of the security;
(c) There is no adverse claim to the security;
(d) The transfer does not violate any restriction on transfer;
(e) If the transfer is by indorsement, the indorsement is made by an appropriate person, or if the indorsement is by an agent, the agent has actual authority to act on behalf of the appropriate person; and
(f) The transfer is otherwise effective and rightful.
(2) A person who originates an instruction for registration of transfer of an uncertificated security to a purchaser for value warrants to the purchaser that:
(a) The instruction is made by an appropriate person, or if the instruction is by an agent, the agent has actual authority to act on behalf of the appropriate person;
(b) The security is valid;
(c) There is no adverse claim to the security; and
(d) At the time the instruction is presented to the issuer:
(i) The purchaser will be entitled to the registration of transfer;
(ii) The transfer will be registered by the issuer free from all liens, security interests, restrictions and claims other than those specified in the instruction;
(iii) The transfer will not violate any restriction on transfer; and
(iv) The requested transfer will otherwise be effective and rightful.
(3) A person who transfers an uncertificated security to a purchaser for value and does not originate an instruction in connection with the transfer warrants that:
(a) The uncertificated security is valid;
(b) There is no adverse claim to the security;
(c) The transfer does not violate any restriction on transfer; and
(d) The transfer is otherwise effective and rightful.
(4) A person who indorses a security certificate warrants to the issuer that:
(a) There is no adverse claim to the security; and
(b) The indorsement is effective.
(5) A person who originates an instruction for registration of transfer of an uncertificated security warrants to the issuer that:
(a) The instruction is effective; and
(b) At the time the instruction is presented to the issuer the purchaser will be entitled to the registration of transfer.
(6) A person who presents a certificated security for registration of transfer or for payment or exchange warrants to the issuer that the person is entitled to the registration, payment or exchange, but a purchaser for value and without notice of adverse claims to whom transfer is registered warrants only that the person has no knowledge of any unauthorized signature in a necessary indorsement.
(7) If a person acts as agent of another in delivering a certificated security to a purchaser, the identity of the principal was known to the person to whom the certificate was delivered, and the certificate delivered by the agent was received by the agent from the principal or received by the agent from another person at the direction of the principal, the person delivering the security certificate warrants only that the delivering person has authority to act for the principal and does not know of any adverse claim to the certificated security.
(8) A secured party who redelivers a security certificate received, or after payment and on order of the debtor delivers the security certificate to another person, makes only the warranties of an agent under subsection (7) of this section.
(9) Except as otherwise provided in subsection (7) of this section, a broker acting for a customer makes to the issuer and a purchaser the warranties provided in subsections (1) through (6) of this section. A broker that delivers a security certificate to its customer, or causes its customer to be registered as the owner of an uncertificated security, makes to the customer the warranties provided in subsection (1) or (2) of this section, and has the rights and privileges 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 the customer.
[28-8-108, added 1995, ch. 272, sec. 2, p. 880.]
(1) A person who originates an entitlement order to a securities intermediary warrants to the securities intermediary that:
(a) The entitlement order is made by an appropriate person, or if the entitlement order is by an agent, the agent has actual authority to act on behalf of the appropriate person; and
(b) There is no adverse claim to the security entitlement.
(2) A person who delivers a security certificate to a securities intermediary for credit to a securities account or originates an instruction with respect to an uncertificated security directing that the uncertificated security be credited to a securities account makes to the securities intermediary the warranties specified in section 28-8-108(1) or (2).
(3) If a securities intermediary delivers a security certificate to its entitlement holder or causes its entitlement holder to be registered as the owner of an uncertificated security, the securities intermediary makes to the entitlement holder the warranties specified in section 28-8-108(1) or (2).
[28-8-109, added 1995, ch. 272, sec. 2, p. 882.]
(1) The local law of the issuer’s jurisdiction, as specified in subsection (4) of this section, governs:
(a) The validity of a security;
(b) The rights and duties of the issuer with respect to registration of transfer;
(c) The effectiveness of registration of transfer by the issuer;
(d) Whether the issuer owes any duties to an adverse claimant to a security; and
(e) Whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.
(2) The local law of the securities intermediary’s jurisdiction, as specified in subsection (5) of this section, governs:
(a) Acquisition of a security entitlement from the securities intermediary;
(b) The rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement;
(c) Whether the securities intermediary owes any duties to an adverse claimant to a security entitlement; and
(d) Whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest therein from an entitlement holder.
(3) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.
(4) "Issuer’s jurisdiction" means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in subsections (1)(b) through (1)(e) of this section.
(5) The following rules determine a "securities intermediary’s jurisdiction" for purposes of this section:
(a) If an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that a particular jurisdiction is the securities intermediary’s jurisdiction for purposes of this part, this chapter, or this act, that jurisdiction is the securities intermediary’s jurisdiction.
(b) If paragraph (a) of this subsection does not apply and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.
(c) If neither paragraph (a) nor paragraph (b) of this section applies and an agreement between the securities intermediary and its entitlement holder governing the securities account expressly provides that the securities account is maintained at an office in a particular jurisdiction, that jurisdiction is the securities intermediary’s jurisdiction.
(d) If none of the preceding paragraphs apply, the securities intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder’s account is located.
(e) If none of the preceding paragraphs apply, the securities intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the securities intermediary is located.
(6) A securities intermediary’s jurisdiction is not determined by the physical location of certificates representing financial assets, or by the jurisdiction in which is organized the issuer of the financial asset with respect to which an entitlement holder has a security entitlement, or by the location of facilities for data processing or other recordkeeping concerning the account.
[28-8-110, added 1995, ch. 272, sec. 2, p. 882; am. 2001, ch. 208, sec. 16, p. 813.]
A rule adopted by a clearing corporation governing rights and obligations among the clearing corporation and its participants in the clearing corporation is effective even if the rule conflicts with this act and affects another party who does not consent to the rule.
[28-8-111, added 1995, ch. 272, sec. 2, p. 883.]
(1) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subsection (4) of this section. However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.
(2) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in subsection (4) of this section.
(3) The interest of a debtor in a security entitlement may be reached by a creditor only by legal process upon the securities intermediary with whom the debtor’s securities account is maintained, except as otherwise provided in subsection (4) of this section.
(4) The interest of a debtor in a certificated security for which the certificate is in the possession of a secured party, or in an uncertificated security registered in the name of a secured party, or a security entitlement maintained in the name of a secured party, may be reached by a creditor by legal process upon the secured party.
(5) A creditor whose debtor is the owner of a certificated security, uncertificated security or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security, or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.
[28-8-112, added 1995, ch. 272, sec. 2, p. 884.]
A contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one (1) year of its making.
[28-8-113, added 1995, ch. 272, sec. 2, p. 884.]
The following rules apply in an action on a certificated security against the issuer:
(1) Unless specifically denied in the pleadings, each signature on a security certificate or in a necessary indorsement is admitted.
(2) If the effectiveness of a signature is put in issue, the burden of establishing effectiveness is on the party claiming under the signature, but the signature is presumed to be genuine or authorized.
(3) If signatures on a security certificate are admitted or established, production of the certificate entitles a holder to recover on it unless the defendant establishes a defense or a defect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the plaintiff has the burden of establishing that the plaintiff or some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted.
[28-8-114, added 1995, ch. 272, sec. 2, p. 884.]
A securities intermediary that has transferred a financial asset pursuant to an effective entitlement order, or a broker or other agent or bailee that has dealt with a financial asset at the direction of its customer or principal, is not liable to a person having an adverse claim to the financial asset, unless the securities intermediary, or broker or other agent or bailee:
(1) Took the action after it had been served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order or other legal process; or
(2) Acted in collusion with the wrongdoer in violating the rights of the adverse claimant; or
(3) In the case of a security certificate that has been stolen, acted with notice of the adverse claim.
[28-8-115, added 1995, ch. 272, sec. 2, p. 885.]
A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of the financial asset. A securities intermediary that acquires a security entitlement to a financial asset from another securities intermediary acquires the security entitlement for value if the securities intermediary acquiring the security entitlement establishes a security entitlement to the financial asset in favor of an entitlement holder.
[28-8-116, added 1995, ch. 272, sec. 2, p. 885.]
(1) This act does not affect an action or proceeding commenced before this act takes effect.
(2) If a security interest in a security is perfected at the date this act takes effect, and the action by which the security interest was perfected would suffice to perfect a security interest under this act, no further action is required to continue perfection. If a security interest in a security is perfected at the date this act takes effect but the action by which the security interest was perfected would not suffice to perfect a security interest under this act, the security interest remains perfected for a period of four (4) months after the effective date and continues perfected thereafter if appropriate action to perfect under this act is taken within that period. If a security interest is perfected at the date this act takes effect and the security interest can be perfected by filing under this act, a financing statement signed by the secured party instead of the debtor may be filed within that period to continue perfection or thereafter to perfect.
[28-8-117, added 1995, ch. 272, sec. 2, p. 885.]
(1) With respect to an obligation on or a defense to a security, an "issuer" includes a person that:
(a) Places or authorizes the placing of its name on a security certificate, other than as authenticating trustee, registrar, transfer agent, or the like, to evidence a share, participation or other interest in its property or in an enterprise, or to evidence its duty to perform an obligation represented by the certificate;
(b) Creates a share, participation or other interest in its property or in an enterprise, or undertakes an obligation, that is an uncertificated security;
(c) Directly or indirectly creates a fractional interest in its rights or property, if the fractional interest is represented by a security certificate; or
(d) Becomes responsible for, or in place of, another person described as an issuer in this section.
(2) With respect to an obligation on or defense to a security, a guarantor is an issuer to the extent of its guaranty, whether or not its obligation is noted on a security certificate.
(3) With respect to a registration of a transfer, issuer means a person on whose behalf transfer books are maintained.
[28-8-201, added 1995, ch. 272, sec. 2, p. 885.]
(1) Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture or document or to a constitution, statute, ordinance, rule, regulation, order, or the like, to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument, indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the like, pursuant to which the security is issued.
(2) The following rules apply if an issuer asserts that a security is not valid:
(a) A security other than one issued by a government or governmental subdivision, agency, or instrumentality, 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 a constitutional provision. In that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue.
(b) Paragraph (a) of this subsection applies to an issuer that is a government or governmental subdivision, agency or instrumentality only if 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 section 28-8-205, lack of genuineness of a certificated security is a complete defense, even against a purchaser for value and without notice.
(4) All other defenses of the issuer of a security, including nondelivery and conditional delivery of a certificated security, are ineffective against a purchaser for value who has taken the certificated security without notice of the particular defense.
(5) This section does not affect the right of a party to cancel a contract for a security "when, as and if issued" or "when distributed" in the event of a material change in the character of the security that is the subject of the contract or in the plan or arrangement pursuant to which the security is to be issued or distributed.
(6) If a security is held by a securities intermediary against whom an entitlement holder has a security entitlement with respect to the security, the issuer may not assert any defense that the issuer could not assert if the entitlement holder held the security directly.
[28-8-202, added 1995, ch. 272, sec. 2, p. 886.]
After an act or event, other than a call that has been revoked, creating a right to immediate performance of the principal obligation represented by a certificated security or setting 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, if the act or event:
(1) Requires the payment of money, the delivery of a certificated security, the registration of transfer of an uncertificated security, or any of them on presentation or surrender of the security certificate, the money or security is available on the date set for payment or exchange, and the purchaser takes the security more than one (1) year after that date; or
(2) Is not covered by subsection (1) of this section and the purchaser takes the security more than two (2) years after the date set for surrender or presentation or the date on which performance became due.
[28-8-203, added 1995, ch. 272, sec. 2, p. 887.]
A restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless:
(1) Security is certificated and the restriction is noted conspicuously on the security certificate; or
(2) The security is uncertificated and the registered owner has been notified of the restriction.
[28-8-204, added 1995, ch. 272, sec. 2, p. 887.]
An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the signature is effective in favor of a purchaser for value of the certificated security if the purchaser is without notice of the lack of authority and the signing has been done by:
(1) An authenticating trustee, registrar, transfer agent or other person entrusted by the issuer with the signing of the security certificate or of similar security certificates, or the immediate preparation for signing of any of them; or
(2) An employee of the issuer, or of any of the persons listed in subsection (1) of this section, entrusted with responsible handling of the security certificate.
[28-8-205, added 1995, ch. 272, sec. 2, p. 887.]
(1) If a security certificate 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 if the blanks are incorrectly filled in, the security certificate as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.
(2) A complete security certificate that has been improperly altered, even if fraudulently, remains enforceable, but only according to its original terms.
[28-8-206, added 1995, ch. 272, sec. 2, p. 887.]
(1) Before due presentment for registration of transfer of a certificated security in registered form or of an instruction requesting registration of transfer of an uncertificated security, the issuer or indenture trustee may treat the registered owner as the person exclusively entitled to vote, receive notifications, and otherwise exercise all the rights and powers of an owner.
(2) This chapter does not affect the liability of the registered owner of a security for a call, assessment or the like.
[28-8-207, added 1995, ch. 272, sec. 2, p. 888.]
(1) A person signing a security certificate as authenticating trustee, registrar, transfer agent, or the like, warrants to a purchaser for value of the certificated security, if the purchaser is without notice of a particular defect, that:
(a) The certificate is genuine;
(b) The person’s own participation in the issue of the security is within the person’s capacity and within the scope of the authority received by the person from the issuer; and
(c) The person has reasonable grounds to believe that the certificated security is in the form and within the amount the issuer is authorized to issue.
(2) Unless otherwise agreed, a person signing under subsection (1) of this section does not assume responsibility for the validity of the security in other respects.
[28-8-208, added 1995, ch. 272, sec. 2, p. 888.]
A lien in favor of an issuer upon a certificated security is valid against a purchaser only if the right of the issuer to the lien is noted conspicuously on the security certificate.
[28-8-209, added 1995, ch. 272, sec. 2, p. 888.]
(1) In this section, "overissue" means the issue of securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate action has cured the overissue.
(2) Except as otherwise provided in subsections (3) and (4) of this section, the provisions of this chapter which validate a security or compel its issue or reissue do not apply to the extent that validation, issue or reissue would result in overissue.
(3) If an identical security not constituting an overissue is reasonably available for purchase, a person entitled to issue or validation may compel the issuer to purchase the security and deliver it if certificated or register its transfer if uncertificated, against surrender of any security certificate the person holds.
(4) If a security is not reasonably available for purchase, a person entitled to issue or validation may recover from the issuer the price the person or the last purchaser for value paid for it with interest from the date of the person’s demand.
[28-8-210, added 1995, ch. 272, sec. 2, p. 888.]
(1) Delivery of a certificated security to a purchaser occurs when:
(a) The purchaser acquires possession of the security certificate;
(b) Another person, other than a securities intermediary, either acquires possession of the security certificate on behalf of the purchaser or, having previously acquired possession of the certificate, acknowledges that it holds for the purchaser; or
(c) A securities intermediary acting on behalf of the purchaser acquires possession of the security certificate, only if the certificate is in registered form and is: (i) registered in the name of the purchaser, (ii) payable to the order of the purchaser, or (iii) specially indorsed to the purchaser by an effective indorsement and has not been indorsed to the securities intermediary or in blank.
(2) Delivery of an uncertificated security to a purchaser occurs when:
(a) The issuer registers the purchaser as the registered owner, upon original issue or registration of transfer; or
(b) Another person, other than a securities intermediary, either becomes the registered owner of the uncertificated security on behalf of the purchaser or, having previously become the registered owner, acknowledges that it holds for the purchaser.
[28-8-301, added 1995, ch. 272, sec. 2, p. 889; am. 2001, ch. 208, sec. 17, p. 814.]
(1) Except as otherwise provided in subsections (2) and (3) of this section, a purchaser of a certificated or uncertificated security acquires all rights in the security that the transferor had or had power to transfer.
(2) A purchaser of a limited interest acquires rights only to the extent of the interest purchased.
(3) A purchaser of a certificated security who as a previous holder had notice of an adverse claim does not improve its position by taking from a protected purchaser.
[28-8-302, added 1995, ch. 272, sec. 2, p. 889; am. 2001, ch. 208, sec. 18, p. 815.]
(1) "Protected purchaser" means a purchaser of a certificated or uncertificated security, or of an interest therein, who:
(a) Gives value;
(b) Does not have notice of any adverse claim to the security; and
(c) Obtains control of the certificated or uncertificated security.
(2) In addition to acquiring the rights of a purchaser, a protected purchaser also acquires its interest in the security free of any adverse claim.
[28-8-303, added 1995, ch. 272, sec. 2, p. 889.]
(1) An indorsement may be in blank or special. An indorsement in blank includes an indorsement to bearer. A special indorsement specifies to whom a security is to be transferred or who has power to transfer it. A holder may convert a blank indorsement to a special indorsement.
(2) An indorsement purporting to be only of part of a security certificate representing units intended by the issuer to be separately transferable is effective to the extent of the indorsement.
(3) An indorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on which it appears or, if the indorsement is on a separate document, until delivery of both the document and the certificate.
(4) If a security certificate in registered form has been delivered to a purchaser without a necessary indorsement, the purchaser may become a protected purchaser only when the indorsement is supplied. However, against a transferor, a transfer is complete upon delivery and the purchaser has a specifically enforceable right to have any necessary indorsement supplied.
(5) An indorsement of a security certificate in bearer form may give notice of an adverse claim to the certificate, but it does not otherwise affect a right to registration that the holder possesses.
(6) Unless otherwise agreed, a person making an indorsement assumes only the obligations provided in section 28-8-108 and not an obligation that the security will be honored by the issuer.
[28-8-304, added 1995, ch. 272, sec. 2, p. 890.]
(1) If an instruction has been originated by an appropriate person but is incomplete in any other respect, any person may complete it as authorized and the issuer may rely on it as completed, even though it has been completed incorrectly.
(2) Unless otherwise agreed, a person initiating an instruction assumes only the obligations imposed in section 28-8-108 and not an obligation that the security will be honored by the issuer.
[28-8-305, added 1995, ch. 272, sec. 2, p. 890.]
(1) A person who guarantees a signature of an indorser of a security certificate warrants that at the time of signing:
(a) The signature was genuine;
(b) The signer was an appropriate person to indorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and
(c) The signer had legal capacity to sign.
(2) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing:
(a) The signature was genuine;
(b) The signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty; and
(c) The signer had legal capacity to sign.
(3) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (2) of this section and also warrants that at the time the instruction is presented to the issuer:
(a) The person specified in the instruction as the registered owner of the uncertificated security will be the registered owner; and
(b) The transfer of the uncertificated security requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions and claims other than those specified in the instruction.
(4) A guarantor under subsections (1) and (2) of this section, or a special guarantor under subsection (3) of this section, does not otherwise warrant the rightfulness of the transfer.
(5) A person who guarantees an indorsement of a security certificate makes the warranties of a signature guarantor under subsection (1) of this section and also warrants the rightfulness of the transfer in all respects.
(6) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (3) of this section and also warrants the rightfulness of the transfer in all respects.
(7) An issuer may not require a special guaranty of signature, a guaranty of indorsement, or a guaranty of instruction as a condition to registration of transfer.
(8) The warranties under this section are made to a person taking or dealing with the security in reliance on the guaranty, and the guarantor is liable to the person for loss resulting from their breach. An indorser or originator of an instruction whose signature, indorsement, or instruction has been guaranteed is liable to a guarantor for any loss suffered by the guarantor as a result of breach of the warranties of the guarantor.
[28-8-306, added 1995, ch. 272, sec. 2, p. 890.]
Unless otherwise agreed, the transferor of a security on due demand shall supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer of the security, but if the transfer is not for value, a transferor need not comply unless the purchaser pays the necessary expenses. If the transferor fails within a reasonable time to comply with the demand, the purchaser may reject or rescind the transfer.
[28-8-307, added 1995, ch. 272, sec. 2, p. 891.]
(1) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security, the issuer shall register the transfer as requested if:
(a) Under the terms of the security the person seeking registration of transfer is eligible to have the security registered in its name;
(b) The indorsement or instruction is made by the appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;
(c) Reasonable assurance is given that the indorsement or instruction is genuine and authorized (section 28-8-402);
(d) Any applicable law relating to the collection of taxes has been complied with;
(e) The transfer does not violate any restriction on transfer imposed by the issuer in accordance with section 28-8-204;
(f) A demand that the issuer not register transfer has not become effective under section 28-8-403, or the issuer has complied with section 28-8-403(2), but no legal process or indemnity bond is obtained as provided in section 28-8-403(4); and
(g) The transfer is in fact rightful or is to a protected purchaser.
(2) If an issuer is under a duty to register a transfer of a security, the issuer is liable to a person presenting a certificated security or an instruction for registration or to the person’s principal for loss resulting from unreasonable delay in registration or failure or refusal to register the transfer.
[28-8-401, added 1995, ch. 272, sec. 2, p. 891.]
(1) An issuer may require the following assurance that each necessary indorsement or each instruction is genuine and authorized:
(a) In all cases, a guaranty of the signature of the person making an indorsement or originating an instruction including, in the case of an instruction, reasonable assurance of identity;
(b) If the indorsement is made or the instruction is originated by an agent, appropriate assurance of actual authority to sign;
(c) If the indorsement is made or the instruction is originated by a fiduciary pursuant to section 28-8-107(1)(d) or (1)(e), appropriate evidence of appointment or incumbency;
(d) If there is more than one (1) fiduciary, reasonable assurance that all who are required to sign have done so; and
(e) If the indorsement is made or the instruction is originated by a person not covered by another provision of this subsection, assurance appropriate to the case corresponding as nearly as may be to the provisions of this subsection.
(2) An issuer may elect to require reasonable assurance beyond that specified in this section.
(3) In this section:
(a) "Guaranty of the signature" means a guaranty signed by or on behalf of a person reasonably believed by the issuer to be responsible. An issuer may adopt standards with respect to responsibility if they are not manifestly unreasonable.
(b) "Appropriate evidence of appointment or incumbency" means:
(i) In the case of a fiduciary appointed or qualified by a court, a certificate issued by or under the direction or supervision of the court or an officer thereof and dated within sixty (60) days before the date of presentation for transfer; or
(ii) In any other case, a copy of a document showing the appointment or a certificate issued by or on behalf of a person reasonably believed by an issuer to be responsible or, in the absence of that document or certificate, other evidence the issuer reasonably considered appropriate.
[28-8-402, added 1995, ch. 272, sec. 2, p. 892; am. 2015, ch. 244, sec. 14, p. 1015.]
(1) A person who is an appropriate person to make an indorsement or originate an instruction may demand that the issuer not register transfer of a security by communicating to the issuer a notification that identifies the registered owner and the issue of which the security is a part and provides an address for communications directed to the person making the demand. The demand is effective only if it is received by the issuer at a time and in a manner affording the issuer reasonable opportunity to act on it.
(2) If a certificated security in registered form is presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to register transfer of an uncertificated security after a demand that the issuer not register transfer has become effective, the issuer shall promptly communicate to (i) the person who initiated the demand at the address provided in the demand and (ii) the person who presented the security for registration of transfer or initiated the instruction requesting registration of transfer a notification stating that:
(a) The certificated security has been presented for registration of transfer or instruction for registration of transfer of uncertificated security has been received;
(b) A demand that the issuer not register transfer had previously been received; and
(c) The issuer will withhold registration of transfer for a period of time stated in the notification in order to provide the person who initiated the demand an opportunity to obtain legal process or an indemnity bond.
(3) The period described in subsection (2)(c) of this section may not exceed thirty (30) days after the date of communication of the notification. A shorter period may be specified by the issuer if it is not manifestly unreasonable.
(4) An issuer is not liable to a person who initiated a demand that the issuer not register transfer for any loss the person suffers as a result of registration of a transfer pursuant to an effective indorsement or instruction if the person who initiated the demand does not, within the time stated in the issuer’s communication, either:
(a) Obtain an appropriate restraining order, injunction or other process from a court of competent jurisdiction enjoining the issuer from registering the transfer; or
(b) File with the issuer 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 it or they may suffer by refusing to register the transfer.
(5) This section does not relieve an issuer from liability for registering transfer pursuant to an indorsement or instruction that was not effective.
[28-8-403, added 1995, ch. 272, sec. 2, p. 893.]
(1) Except as otherwise provided in section 28-8-406, an issuer is liable for wrongful registration of transfer if the issuer has registered a transfer of a security to a person not entitled to it, and the transfer was registered:
(a) Pursuant to an ineffective indorsement or instruction;
(b) After a demand that the issuer not register transfer became effective under section 28-8-403(1), and the issuer did not comply with section 28-8-403(2);
(c) After the issuer had been served with an injunction, restraining order, or other legal process enjoining it from registering the transfer, issued by a court of competent jurisdiction, and the issuer had a reasonable opportunity to act on the injunction, restraining order or other legal process; or
(d) By an issuer acting in collusion with the wrongdoer.
(2) An issuer that is liable for wrongful registration of transfer under subsection (1) of this section on demand shall provide the person entitled to the security with a like certificated or uncertificated security, and any payments or distributions that the person did not receive as a result of the wrongful registration. If an overissue would result, the issuer’s liability to provide the person with a like security is governed by section 28-8-210.
(3) Except as otherwise provided in subsection (1) of this section or in a law relating to the collection of taxes, an issuer is not liable to an owner or other person suffering loss as a result of the registration of a transfer of a security if registration was made pursuant to an effective indorsement or instruction.
[28-8-404, added 1995, ch. 272, sec. 2, p. 893.]
(1) If an owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed or wrongfully taken, the issuer shall issue a new certificate if the owner:
(a) So requests before the issuer has notice that the certificate has been acquired by a protected purchaser;
(b) Files with the issuer a sufficient indemnity bond; and
(c) Satisfies other reasonable requirements imposed by the issuer.
(2) If, after the issue of a new security certificate, a protected purchaser of the original certificate presents it for registration of transfer, the issuer shall register the transfer unless an overissue would result. In that case, the issuer’s liability is governed by section 28-8-210. In addition to any rights on the indemnity bond, an issuer may recover the new certificate from a person to whom it was issued or any person taking under that person, except a protected purchaser.
[28-8-405, added 1995, ch. 272, sec. 2, p. 894.]
If a security certificate has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the issuer of that fact within a reasonable time after the owner has notice of it and the issuer registers a transfer of the security before receiving notification, the owner may not assert against the issuer a claim for registering the transfer under section 28-8-404 or a claim to a new security certificate under section 28-8-405.
[28-8-406, added 1995, ch. 272, sec. 2, p. 894.]
A person acting as authenticating trustee, transfer agent, registrar or other agent for an issuer in the registration of a transfer of its securities, in the issue of new security certificates or uncertificated securities, or in the cancellation of surrendered security certificates has the same obligation to the holder or owner of a certificated or uncertificated security with regard to the particular functions performed as the issuer has in regard to those functions.
[28-8-407, added 1995, ch. 272, sec. 2, p. 895.]
(1) "Securities account" means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
(2) Except as otherwise provided in subsections (4) and (5) of this section, a person acquires a security entitlement if a securities intermediary:
(a) Indicates by book entry that a financial asset has been credited to the person’s securities account;
(b) Receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts it for credit to the person’s securities account; or
(c) Becomes obligated under other law, regulation or rule to credit a financial asset to the person’s securities account.
(3) If a condition of subsection (2) of this section has been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.
(4) If a securities intermediary holds a financial asset for another person, and the financial asset is registered in the name of, payable to the order of, or specially indorsed to the other person, and has not been indorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a security entitlement with respect to the financial asset.
(5) Issuance of a security is not establishment of a security entitlement.
[28-8-501, added 1995, ch. 272, sec. 2, p. 895.]
An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may not be asserted against a person who acquires a security entitlement under section 28-8-501, for value and without notice of the adverse claim.
[28-8-502, added 1995, ch. 272, sec. 2, p. 895.]
(1) To the extent necessary for a securities intermediary to satisfy all security entitlements with respect to a particular financial asset, all interests in that financial asset held by the securities intermediary are held by the securities intermediary for the entitlement holders, are not property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as otherwise provided in section 28-8-511.
(2) An entitlement holder’s property interest with respect to a particular financial asset under subsection (1) of this section is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.
(3) An entitlement holder’s property interest with respect to a particular financial asset under subsection (1) of this section may be enforced against the securities intermediary only by exercise of the entitlement holder’s rights under sections 28-8-505 through 28-8-508.
(4) An entitlement holder’s property interest with respect to a particular financial asset under subsection (1) of this section may be enforced against a purchaser of the financial asset or interest therein only if:
(a) Insolvency proceedings have been initiated by or against the securities intermediary;
(b) The securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of its entitlement holders to that financial asset;
(c) The securities intermediary violated its obligations under section 28-8-504 by transferring the financial asset or interest therein to the purchaser; and
(d) The purchaser is not protected under subsection (5) of this section.
The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitlement holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser.
(5) An action based on the entitlement holder’s property interest with respect to a particular financial asset under subsection (1) of this section, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary’s obligations under section 28-8-504.
[28-8-503, added 1995, ch. 272, sec. 2, p. 895.]
(1) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has established in favor of its entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one (1) or more other securities intermediaries.
(2) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant any security interests in a financial asset it is obligated to maintain pursuant to subsection (1) of this section.
(3) A securities intermediary satisfies the duty in subsection (1) of this section if:
(a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(b) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset.
(4) This section does not apply to a clearing corporation that is itself the obligor of an option or similar obligation to which its entitlement holders have security entitlements.
[28-8-504, added 1995, ch. 272, sec. 2, p. 896.]
(1) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if:
(a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(b) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution.
(2) A securities intermediary is obligated to its entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary.
[28-8-505, added 1995, ch. 272, sec. 2, p. 897.]
A securities intermediary shall exercise rights with respect to a financial asset if directed to do so by an entitlement holder. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.
[28-8-506, added 1995, ch. 272, sec. 2, p. 897.]
(1) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if:
(a) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(b) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order.
(2) If a securities intermediary transfers a financial asset pursuant to an ineffective entitlement order, the securities intermediary shall reestablish a security entitlement in favor of the person entitled to it, and pay or credit any payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages.
[28-8-507, added 1995, ch. 272, sec. 2, p. 897.]
A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible, or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.
[28-8-508, added 1995, ch. 272, sec. 2, p. 898.]
(1) If the substance of a duty imposed upon a securities intermediary by sections 28-8-504 through 28-8-508 is the subject of other statute, regulation or rule, compliance with that statute, regulation or rule satisfies the duty.
(2) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform its duties and the entitlement holder shall exercise its rights in a commercially reasonable manner.
(3) The obligation of a securities intermediary to perform the duties imposed by sections 28-8-504 through 28-8-508 is subject to:
(a) Rights of the securities intermediary arising out of a security interest under a security agreement with the entitlement holder or otherwise; and
(b) Rights of the securities intermediary under other law, regulation, rule, or agreement to withhold performance of its duties as a result of unfulfilled obligations of the entitlement holder to the securities intermediary.
(4) Sections 28-8-504 through 28-8-508 do not require a securities intermediary to take any action that is prohibited by other statute, regulation, or rule.
[28-8-509, added 1995, ch. 272, sec. 2, p. 898.]
(1) In a case not covered by the priority rules in chapter 9, title 28, Idaho Code, or the rules stated in subsection (3) of this section, an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.
(2) If an adverse claim could not have been asserted against an entitlement holder under section 28-8-502, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.
(3) In a case not covered by the priority rules in chapter 9, title 28, Idaho Code, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in subsection (4) of this section, purchasers who have control rank according to priority in time of:
(a) The purchaser’s becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under section 28-8-106(4)(a);
(b) The securities intermediary’s agreement to comply with the purchaser’s entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under section 28-8-106(4)(b); or
(c) If the purchaser obtained control through another person under section 28-8-106(4)(c), the time on which priority would be based under this subsection if the other person were the secured party.
(4) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.
[28-8-510, added 1995, ch. 272, sec. 2, p. 899; am. 2001, ch. 208, sec. 19, p. 815.]
(1) Except as otherwise provided in subsections (2) and (3) of this section, if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.
(2) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary’s entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.
(3) If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a creditor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.
[28-8-511, added 1995, ch. 272, sec. 2, p. 899.]
This chapter may be cited as "Uniform Commercial Code — Secured Transactions."
[28-9-101, added 2001, ch. 208, sec. 2, p. 708.]
(a) In this chapter:
(1) "Accession" means goods that are physically united with other goods in such a manner that the identity of the original goods is not lost.
(2) "Account," except as used in "account for," means a right to payment of a monetary obligation, whether or not earned by performance: (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of; (ii) for services rendered or to be rendered; (iii) for a policy of insurance issued or to be issued; (iv) for a secondary obligation incurred or to be incurred; (v) for energy provided or to be provided; (vi) for the use or hire of a vessel under a charter or other contract; (vii) arising out of the use of a credit or charge card or information contained on or for use with the card; or (viii) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or a person licensed or authorized to operate the game by a state or governmental unit of a state. The term includes health care insurance receivables. The term does not include: (i) rights to payment evidenced by chattel paper or an instrument; (ii) commercial tort claims; (iii) deposit accounts; (iv) investment property; (v) letter of credit rights or letters of credit; or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.
(3) "Account debtor" means a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.
(4) "Accounting," except as used in "accounting for," means a record:
(A) authenticated by a secured party;
(B) indicating the aggregate unpaid secured obligations as of a date not more than thirty-five (35) days earlier or thirty-five (35) days later than the date of the record; and
(C) identifying the components of the obligations in reasonable detail.
(5) "Agricultural lien" means an interest, other than a security interest, in farm products:
(A) which secures payment or performance of an obligation for:
(i) goods or services furnished in connection with a debtor’s farming operation; or
(ii) rent on real property leased by a debtor in connection with its farming operation;
(B) which is created by statute in favor of a person that:
(i) in the ordinary course of its business furnished goods or services to a debtor in connection with a debtor’s farming operation; or
(ii) leased real property to a debtor in connection with the debtor’s farming operation; and
(C) whose effectiveness does not depend on the person’s possession of the personal property.
(6) "As-extracted collateral" means:
(A) oil, gas, or other minerals that are subject to a security interest that:
(i) is created by a debtor having an interest in the minerals before extraction; and
(ii) attaches to the minerals as extracted; or
(B) accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in which the debtor had an interest before extraction.
(7) "Authenticate" means:
(A) to sign; or
(B) with the intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol or process.
(8) "Bank" means an organization that is engaged in the business of banking. The term includes savings banks, savings and loan associations, credit unions and trust companies.
(9) "Cash proceeds" means proceeds that are money, checks, deposit accounts, or the like.
(10) "Certificate of title" means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this paragraph, "monetary obligation" means a monetary obligation secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. The term does not include: (i) charters or other contracts involving the use or hire of a vessel; or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.
(12) "Collateral" means the property subject to a security interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and
(C) goods that are the subject of a consignment.
(13) "Commercial tort claim" means a claim arising in tort with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the claim:
(i) arose in the course of the claimant’s business or profession; and
(ii) does not include damages arising out of personal injury to or the death of an individual.
(14) "Commodity account" means an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.
(15) "Commodity contract" means a commodity futures contract, an option on a commodity futures contract, a commodity option, or another contract if the contract or option is:
(A) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to federal commodities laws; or
(B) traded on a foreign commodity board of trade, exchange, or market, and is carried on the books of a commodity intermediary for a commodity customer.
(16) "Commodity customer" means a person for which a commodity intermediary carries a commodity contract on its books.
(17) "Commodity intermediary" means a person that:
(A) is registered as a futures commission merchant under federal commodities law; or
(B) in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities law.
(18) "Communicate" means:
(A) to send a written or other tangible record;
(B) to transmit a record by any means agreed upon by the persons sending and receiving the record; or
(C) in the case of transmission of a record to or by a filing office, to transmit a record by any means prescribed by filing office rule.
(19) "Consignee" means a merchant to which goods are delivered in a consignment.
(20) "Consignment" means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a name other than the name of the person making delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its creditors to be substantially engaged in selling the goods of others;
(B) with respect to each delivery, the aggregate value of the goods is one thousand dollars ($1,000) or more at the time of delivery;
(C) the goods are not consumer goods immediately before delivery; and
(D) the transaction does not create a security interest that secures an obligation.
(21) "Consignor" means a person that delivers goods to a consignee in a consignment.
(22) "Consumer debtor" means a debtor in a consumer transaction.
(23) "Consumer goods" means goods that are used or bought for use primarily for personal, family or household purposes.
(24) "Consumer goods transaction" means a consumer transaction in which:
(A) an individual incurs an obligation primarily for personal, family or household purposes; and
(B) a security interest in consumer goods secures the obligation.
(25) "Consumer obligor" means an obligor who is an individual and who incurred the obligation as part of a transaction entered into primarily for personal, family or household purposes.
(26) "Consumer transaction" means a transaction in which: (i) an individual incurs an obligation primarily for personal, family or household purposes; (ii) a security interest secures the obligation; and (iii) the collateral is held or acquired primarily for personal, family or household purposes. The term includes consumer goods transactions.
(27) "Continuation statement" means an amendment of a financing statement which:
(A) identifies, by its file number, the initial financing statement to which it relates; and
(B) indicates that it is a continuation statement for, or that it is filed to continue the effectiveness of, the identified financing statement.
(28) "Debtor" means:
(A) a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor;
(B) a seller of accounts, chattel paper, payment intangibles or promissory notes; or
(C) a consignee.
(29) "Deposit account" means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.
(30) "Document" means a document of title or a receipt of the type described in section 28-7-201(b), Idaho Code.
(31) "Electronic chattel paper" means chattel paper evidenced by a record or records consisting of information stored in an electronic medium.
(32) "Encumbrance" means a right, other than an ownership interest, in real property. The term includes mortgages and other liens on real property.
(33) "Equipment" means goods other than inventory, farm products or consumer goods.
(34) "Farm products" means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown, including:
(i) crops produced on trees, vines and bushes; and
(ii) aquatic goods produced in aquacultural operations;
(B) livestock, born or unborn, including aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming operation; or
(D) products of crops or livestock in their unmanufactured states.
(35) "Farming operation" means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or aquacultural operation.
(36) "File number" means the number assigned to an initial financing statement pursuant to section 28-9-519(a), Idaho Code.
(37) "Filing office" means an office designated in section 28-9-501, Idaho Code, as the place to file a financing statement.
(38) "Filing office rule" means a rule adopted pursuant to section 28-9-526, Idaho Code.
(39) "Financing statement" means a record or records composed of an initial financing statement and any filed record relating to the initial financing statement.
(40) "Fixture filing" means the filing of a financing statement covering goods that are or are to become fixtures and satisfying section 28-9-502(a) and (b), Idaho Code. The term includes the filing of a financing statement covering goods of a transmitting utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to particular real property that an interest in them arises under real property law.
(42) "General intangible" means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter of credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(44) "Goods" means all things that are movable when a security interest attaches. The term includes: (i) fixtures; (ii) standing timber that is to be cut and removed under a conveyance or contract for sale; (iii) the unborn young of animals; (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines or bushes; and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if: (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods; or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter of credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.
(45) "Governmental unit" means a subdivision, agency, department, county, parish, municipality, or other unit of the government of the United States, a state, or a foreign country. The term includes an organization having a separate corporate existence if the organization is eligible to issue debt on which interest is exempt from income taxation under the laws of the United States.
(46) "Health care insurance receivable" means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health care goods or services provided or to be provided.
(47) "Instrument" means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include: (i) investment property; (ii) letters of credit; or (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.
(48) "Inventory" means goods, other than farm products, which:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or to be furnished under a contract of service;
(C) are furnished by a person under a contract of service; or
(D) consist of raw materials, work in process, or materials used or consumed in a business.
(49) "Investment property" means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract or commodity account.
(50) "Jurisdiction of organization," with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized.
(51) "Letter of credit right" means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.
(52) "Lien creditor" means:
(A) a creditor that has acquired a lien on the property involved by attachment, levy, or the like;
(B) an assignee for benefit of creditors from the time of assignment;
(C) a trustee in bankruptcy from the date of the filing of the petition; or
(D) a receiver in equity from the time of appointment.
(53) "Manufactured home" means a structure, transportable in one (1) or more sections, which, in the traveling mode, is eight (8) body feet or more in width or forty (40) body feet or more in length, or, when erected on site, is three hundred twenty (320) or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein. The term includes any structure that meets all of the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the United States secretary of housing and urban development and complies with the standards established under title 42 of the United States Code.
(54) "Manufactured home transaction" means a secured transaction:
(A) that creates a purchase-money security interest in a manufactured home, other than a manufactured home held as inventory; or
(B) in which a manufactured home, other than a manufactured home held as inventory, is the primary collateral.
(55) "Mortgage" means a consensual interest in real property, including fixtures, which secures payment or performance of an obligation.
(56) "New debtor" means a person that becomes bound as debtor under section 28-9-203(d), Idaho Code, by a security agreement previously entered into by another person.
(57) "New value" means: (i) money; (ii) money’s worth in property, services or new credit; or (iii) release by a transferee of an interest in property previously transferred to the transferee. The term does not include an obligation substituted for another obligation.
(58) "Noncash proceeds" means proceeds other than cash proceeds.
(59) "Obligor" means a person that, with respect to an obligation secured by a security interest in or an agricultural lien on the collateral: (i) owes payment or other performance of the obligation; (ii) has provided property other than the collateral to secure payment or other performance of the obligation; or (iii) is otherwise accountable in whole or in part for payment or other performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.
(60) "Original debtor," except as used in section 28-9-310(c), Idaho Code, means a person that, as debtor, entered into a security agreement to which a new debtor has become bound under section 28-9-203(d), Idaho Code.
(61) "Payment intangible" means a general intangible under which the account debtor’s principal obligation is a monetary obligation.
(62) "Person related to," with respect to an individual, means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister, or sister-in-law of the individual;
(C) an ancestor or lineal descendant of the individual or the individual’s spouse; or
(D) any other relative, by blood or marriage, of the individual or the individual’s spouse who shares the same home with the individual.
(63) "Person related to," with respect to an organization, means:
(A) a person directly or indirectly controlling, controlled by, or under common control with the organization;
(B) an officer or director of, or a person performing similar functions with respect to, the organization;
(C) an officer or director of, or a person performing similar functions with respect to, a person described in subparagraph (A) of this paragraph;
(D) the spouse of an individual described in subparagraph (A), (B) or (C) of this paragraph; or
(E) an individual who is related by blood or marriage to an individual described in subparagraph (A), (B), (C) or (D) of this paragraph and shares the same home with the individual.
(64) "Proceeds" means the following property:
(A) whatever is acquired upon the sale, lease, license, exchange or other disposition of collateral;
(B) whatever is collected on, or distributed on account of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or
(E) to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a secured party which includes the terms on which the secured party is willing to accept collateral in full or partial satisfaction of the obligation it secures pursuant to sections 28-9-620, 28-9-621 and 28-9-622, Idaho Code.
(67) "Public-finance transaction" means a secured transaction in connection with which:
(A) debt securities are issued;
(B) all or a portion of the securities issued have an initial stated maturity of at least twenty (20) years; and
(C) the debtor, obligor, secured party, account debtor or other person obligated on collateral, assignor or assignee of a secured obligation, or assignor or assignee of a security interest is a state or a governmental unit of a state.
(68) "Public organic record" means a record that is available to the public for inspection and that is:
(A) a record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which amends or restates the initial record;
(B) an organic record of a business trust consisting of the record initially filed with a state and any record filed with the state which amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state; or
(C) a record consisting of legislation enacted by the legislature of a state or the congress of the United States which forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or United States which amends or restates the name of the organization.
(69) "Pursuant to commitment," with respect to an advance made or other value given by a secured party, means pursuant to the secured party’s obligation, whether or not a subsequent event of default or other event not within the secured party’s control has relieved or may relieve the secured party from its obligation.
(70) "Record," except as used in "for record," "of record," "record or legal title," and "record owner," means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.
(71) "Registered organization" means an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust’s organic record be filed with the state.
(72) "Secondary obligor" means an obligor to the extent that:
(A) the obligor’s obligation is secondary; or
(B) the obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another obligor, or property of either.
(73) "Secured party" means:
(A) a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment intangibles or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest or agricultural lien is created or provided for; or
(F) a person that holds a security interest arising under section 28-2-401, 28-2-505, 28-2-711(3), 28-4-210, 28-5-120 or 28-12-508(5), Idaho Code.
(74) "Security agreement" means an agreement that creates or provides for a security interest.
(75) "Send," in connection with a record or notification, means:
(A) to deposit in the mail, deliver for transmission, or transmit by any other usual means of communication, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances; or
(B) to cause the record or notification to be received within the time that it would have been received if properly sent under subparagraph (A) of this paragraph.
(76) "Software" means a computer program and any supporting information provided in connection with a transaction relating to the program. The term does not include a computer program that is included in the definition of goods.
(77) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
(78) "Supporting obligation" means a letter of credit right or secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument or investment property.
(79) "Tangible chattel paper" means chattel paper evidenced by a record or records consisting of information that is inscribed on a tangible medium.
(80) "Termination statement" means an amendment of a financing statement which:
(A) identifies, by its file number, the initial financing statement to which it relates; and
(B) indicates either that it is a termination statement or that the identified financing statement is no longer effective.
(81) "Transmitting utility" means a person primarily engaged in the business of:
(A) operating a railroad, subway, street railway, or trolley bus;
(B) transmitting communications electrically, electromagnetically or by light;
(C) transmitting goods by pipeline or sewer; or
(D) transmitting or producing and transmitting electricity, steam, gas or water.
(b) "Control" as provided in section 28-7-106, Idaho Code, and the following definitions in other chapters apply to this chapter:
| "Applicant" | | section 28-5-102, Idaho Code. | | --- | --- | --- | | "Beneficiary" | | section 28-5-102, Idaho Code. | | "Broker" | | section 28-8-102, Idaho Code. | | "Certificated security" | | section 28-8-102, Idaho Code. | | "Check" | | section 28-3-104, Idaho Code. | | "Clearing corporation" | | section 28-8-102, Idaho Code. | | "Contract for sale" | | section 28-2-106, Idaho Code. | | "Customer" | | section 28-4-104, Idaho Code. | | "Entitlement holder" | | section 28-8-102, Idaho Code. | | "Financial asset" | | section 28-8-102, Idaho Code. | | "Holder in due course" | | section 28-3-302, Idaho Code. | | "Issuer" (with respect to a letter of credit | | | | or letter of credit right) | | section 28-5-102, Idaho Code. | | "Issuer" (with respect to a security) | section 28-8-201, Idaho Code. | | | "Issuer" (with respect to documents | | | | of title) | | section 28-7-102, Idaho Code. | | "Lease" | | section 28-12-103, Idaho Code. | | "Lease agreement" | | section 28-12-103, Idaho Code. | | "Lease contract" | | section 28-12-103, Idaho Code. | | "Leasehold interest" | | section 28-12-103, Idaho Code. | | "Lessee" | | section 28-12-103, Idaho Code. | | "Lessee in ordinary course of business" | section 28-12-103, Idaho Code. | | | "Lessor" | | section 28-12-103, Idaho Code. | | "Lessor’s residual interest" | section 28-12-103, Idaho Code. | | | "Letter of credit" | | section 28-5-102, Idaho Code. | | "Merchant" | | section 28-2-104, Idaho Code. | | "Negotiable instrument" | | section 28-3-104, Idaho Code. | | "Nominated person" | | section 28-5-102, Idaho Code. | | "Note" | | section 28-3-104, Idaho Code. | | "Proceeds of a letter of credit" | section 28-5-114, Idaho Code. | | | "Prove" | | section 28-3-103, Idaho Code. | | "Sale" | | section 28-2-106, Idaho Code. | | "Securities account" | | section 28-8-501, Idaho Code. | | "Securities intermediary" | | section 28-8-102, Idaho Code. | | "Security" | | section 28-8-102, Idaho Code. | | "Security certificate" | | section 28-8-102, Idaho Code. | | "Security entitlement" | | section 28-8-102, Idaho Code. | | "Uncertificated security" | | section 28-8-102, Idaho Code. |
(c) Chapter 1, title 28, contains general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-9-102, added 2001, ch. 208, sec. 2, p. 708; am. 2002, ch. 107, sec. 1, p. 291; am. 2004, ch. 42, sec. 21, p. 116; am. 2012, ch. 145, sec. 1, p. 381.]
(a) In this section:
(1) "Purchase-money collateral" means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and
(2) "Purchase-money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.
(b) A security interest in goods is a purchase-money security interest:
(1) To the extent that the goods are purchase-money collateral with respect to that security interest;
(2) If the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase-money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and
(3) Also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.
(c) A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:
(1) The debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and
(2) The debtor acquired its interest in the software for the principal purpose of using the software in the goods.
(d) The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.
(e) If the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:
(1) In accordance with any reasonable method of application to which the parties agree;
(2) In the absence of the parties’ agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or
(3) In the absence of an agreement to a reasonable method and a timely manifestation of the obligor’s intention, in the following order:
(A) to obligations that are not secured; and
(B) if more than one (1) obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.
(f) A purchase-money security interest does not lose its status as such, even if:
(1) The purchase-money collateral also secures an obligation that is not a purchase-money obligation;
(2) Collateral that is not purchase-money collateral also secures the purchase-money obligation; or
(3) The purchase-money obligation has been renewed, refinanced, consolidated or restructured.
(g) A secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.
[28-9-103, added 2001, ch. 208, sec. 2, p. 718.]
(a) A secured party has control of a deposit account if:
(1) The secured party is the bank with which the deposit account is maintained;
(2) The debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or
(3) The secured party becomes the bank’s customer with respect to the deposit account.
(b) A secured party that has satisfied subsection (a) of this section has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.
[28-9-104, added 2001, ch. 208, sec. 2, p. 719.]
(a) A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.
(b) A system satisfies subsection (a) of this section, and a secured party has control of electronic chattel paper, if the record or records comprising the chattel paper are created, stored and assigned in such a manner that:
(1) A single authoritative copy of the record or records exists which is unique, identifiable and, except as otherwise provided in paragraphs (4), (5) and (6) of this subsection, unalterable;
(2) The authoritative copy identifies the secured party as the assignee of the record or records;
(3) The authoritative copy is communicated to and maintained by the secured party or its designated custodian;
(4) Copies or amendments that add or change an identified assignee of the authoritative copy can be made only with the consent of the secured party;
(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) Any amendment of the authoritative copy is readily identifiable as authorized or unauthorized.
[28-9-105, added 2001, ch. 208, sec. 2, p. 719; am. 2012, ch. 145, sec. 2, p. 390.]
(a) A person has control of a certificated security, uncertificated security, or security entitlement as provided in section 28-8-106.
(b) A secured party has control of a commodity contract if:
(1) The secured party is the commodity intermediary with which the commodity contract is carried; or
(2) The commodity customer, secured party and commodity intermediary have agreed that the commodity intermediary will apply any value distributed on account of the commodity contract as directed by the secured party without further consent by the commodity customer.
(c) A secured party having control of all security entitlements or commodity contracts carried in a securities account or commodity account has control over the securities account or commodity account.
[28-9-106, added 2001, ch. 208, sec. 2, p. 719.]
A secured party has control of a letter of credit right to the extent of any right to payment or performance by the issuer or any nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under section 28-5-114(3) or otherwise applicable law or practice.
[28-9-107, added 2001, ch. 208, sec. 2, p. 720.]
(a) Except as otherwise provided in subsections (c), (d) and (e) of this section, a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described.
(b) Except as otherwise provided in subsection (d) of this section, a description of collateral reasonably identifies the collateral if it identifies the collateral by:
(1) Specific listing;
(2) Category;
(3) Except as otherwise provided in subsection (e) of this section, a type of collateral defined in the uniform commercial code;
(4) Quantity;
(5) Computational or allocational formula or procedure; or
(6) Except as otherwise provided in subsection (c) of this section, any other method, if the identity of the collateral is objectively determinable.
(c) A description of collateral as "all the debtor’s assets" or "all the debtor’s personal property" or using words of similar import does not reasonably identify the collateral.
(d) Except as otherwise provided in subsection (e) of this section, a description of a security entitlement, securities account or commodity account is sufficient if it describes:
(1) The collateral by those terms or as investment property; or
(2) The underlying financial asset or commodity contract.
(e) A description only by type of collateral defined in the uniform commercial code is an insufficient description of:
(1) A commercial tort claim; or
(2) In a consumer transaction, consumer goods, a security entitlement, a securities account or a commodity account.
[28-9-108, added 2001, ch. 208, sec. 2, p. 720.]
(a) Except as otherwise provided in subsections (c) and (d), this chapter applies to:
(1) A transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;
(2) An agricultural lien;
(3) A sale of accounts, chattel paper, payment intangibles or promissory notes;
(4) A consignment;
(5) A security interest arising under section 28-2-401, 28-2-505, 28-2-711(3) or 28-12-508(5), as provided in section 28-9-110; and
(6) A security interest arising under section 28-4-210 or 28-5-120.
(b) The application of this chapter 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 which this chapter does not apply.
(c) This chapter does not apply to the extent that:
(1) A statute, regulation, or treaty of the United States preempts this chapter;
(2) Another statute of this state expressly governs the creation, perfection, priority or enforcement of a security interest created by this state or a governmental unit of this state;
(3) A statute of another state, a foreign country, or a governmental unit of another state or a foreign country, other than a statute generally applicable to security interests, expressly governs creation, perfection, priority or enforcement of a security interest created by the state, country or governmental unit; or
(4) The rights of a transferee beneficiary or nominated person under a letter of credit are independent and superior under section 28-5-114.
(d) This chapter does not apply to:
(1) A landlord’s lien, other than an agricultural lien;
(2) A lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but section 28-9-333 applies with respect to priority of the lien;
(3) An assignment of a claim for wages, salary or other compensation of an employee;
(4) A sale of accounts, chattel paper, payment intangibles or promissory notes as part of a sale of the business out of which they arose;
(5) An assignment of accounts, chattel paper, payment intangibles or promissory notes which is for the purpose of collection only;
(6) An assignment of a right to payment under a contract to an assignee that is also obligated to perform under the contract;
(7) An assignment of a single account, payment intangible or promissory note to an assignee in full or partial satisfaction of a preexisting indebtedness;
(8) A transfer of an interest in or an assignment of a claim under a policy of insurance, other than an assignment by or to a health care provider of a health care insurance receivable and any subsequent assignment of the right to payment, but sections 28-9-315 and 28-9-322 apply with respect to proceeds and priorities in proceeds;
(9) An assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral;
(10) A right of recoupment or set-off, but:
(A) section 28-9-340 applies with respect to the effectiveness of rights of recoupment or set-off against deposit accounts; and
(B) section 28-9-404 applies with respect to defenses or claims of an account debtor;
(11) The creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for:
(A) liens on real property in sections 28-9-203 and 28-9-308;
(B) fixtures in section 28-9-334;
(C) fixture filings in sections 28-9-501, 28-9-502, 28-9-512, 28-9-516 and 28-9-519; and
(D) security agreements covering personal and real property in section 28-9-604;
(12) An assignment of a claim arising in tort, other than a commercial tort claim, but sections 28-9-315 and 28-9-322 apply with respect to proceeds and priorities in proceeds;
(13) (A) A claim or right to receive compensation for injuries or sickness as described in (i) 26 U.S.C. section 104(a)(1) and (ii) on and after the effective date of this chapter, in 26 U.S.C. section 104(a)(2), as those sections may be amended from time to time. Notwithstanding the foregoing, this chapter (other than sections 28-9-406(d) and 28-9-408(a) and (c), Idaho Code, in the case of transfers made on and after the effective date of this chapter) shall apply to such compensation as described in 26 U.S.C. section 104(a)(2) if the sale, pledge, assignment or other transfer of rights to receive such compensation under a structured settlement is approved by the final order of a court pursuant to, and otherwise complies with, the requirements of paragraph (B) of this subsection.
(B) (i) Definitions. For purposes of this subsection:
"annuity issuer" means an insurer that has issued a contract to fund periodic payments under a structured settlement;
"dependents" include a payee’s spouse and minor children and all other persons for whom the payee is legally obligated to provide support, including alimony;
"discounted present value" means the present value of future payments determined by discounting such payments to the present using the most recently published applicable federal rate for determining the present value of an annuity, as issued by the United States internal revenue service;
"gross advance amount" means the sum payable to the payee or for the payee’s account as consideration for a transfer of structured settlement payment rights before any reductions for transfer expenses or other deductions to be made from such consideration;
"independent professional advice" means advice of an attorney, certified public accountant, actuary or other licensed professional adviser;
"interested parties" means, with respect to any structured settlement, the payee, any beneficiary irrevocably designated under the annuity contract to receive payments following the payee’s death, the annuity issuer, the structured settlement obligor, and any other party that has continuing rights or obligations under such structured settlement;
"net advance amount" means the gross advance amount less the aggregate amount of the actual and estimated transfer expenses required to be disclosed under paragraph (B)(ii)5. of this subsection;
"payee" means an individual who is receiving tax free payments under a structured settlement and proposes to make a transfer of payment rights thereunder;
"periodic payments" includes both recurring payments and scheduled future lump sum payments;
"qualified assignment agreement" means an agreement providing for a qualified assignment within the meaning of 26 U.S.C. section 130, as amended from time to time;
"settled claim" means the original tort claim resolved by a structured settlement;
"structured settlement" means an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim;
"structured settlement agreement" means the agreement, judgment, stipulation, or release embodying the terms of a structured settlement;
"structured settlement obligor" means, with respect to any structured settlement, the party that has the continuing obligation to make periodic payments to the payee under a structured settlement agreement or a qualified assignment agreement;
"structured settlement payment rights" means rights to receive periodic payments under a structured settlement, whether from the structured settlement obligor or the annuity issuer, where:
A. the payee is domiciled in, or the domicile or principal place of business of the structured settlement obligor or the annuity issuer is located in, this state; or
B. the structured settlement agreement was approved by a court in this state; or
C. the structured settlement agreement is expressly governed by the laws of this state;
"terms of the structured settlement" include, with respect to any structured settlement, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement and any order or other approval of any court or other government authority that authorized or approved such structured settlement;
"transfer" means any sale, assignment, pledge, hypothecation or other alienation or encumbrance of structured settlement payment rights made by a payee for consideration; provided that the term "transfer" does not include the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution, in the absence of any action to redirect the structured settlement payments to such insured depository institution, or an agent or successor in interest thereof, or otherwise to enforce such blanket security interest against the structured settlement payment rights;
"transfer agreement" means the agreement providing for a transfer of structured settlement payment rights;
"transfer expenses" means all expenses of a transfer that are required under the transfer agreement to be paid by the payee or deducted from the gross advance amount, including, without limitation, court filing fees, attorney’s fees, escrow fees, lien recordation fees, judgment and lien search fees, finder’s fees, commissions, and other payments to a broker or other intermediary; "transfer expenses" do not include preexisting obligations of the payee payable for the payee’s account from the proceeds of a transfer;
"transferee" means a party acquiring or proposing to acquire structured settlement payment rights through a transfer.
(ii) Required disclosures to payee. Not less than three (3) days prior to the date on which a payee signs a transfer agreement, the transferee shall provide to the payee a separate disclosure statement, in bold type no smaller than fourteen (14) points, setting forth:
the amounts and due dates of the structured settlement payments to be transferred;
the aggregate amount of such payments;
the discounted present value of the payments to be transferred, which shall be identified as the "calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities," and the amount of the applicable federal rate used in calculating such discounted present value;
the gross advance amount;
an itemized listing of all applicable transfer expenses, other than attorney’s fees and related disbursements payable in connection with the transferee’s application for approval of the transfer, and the transferee’s best estimate of the amount of any such fees and disbursements;
the net advance amount;
the amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee; and
a statement that the payee has the right to cancel the transfer agreement, without penalty or further obligation, not later than the third business day after the date the agreement is signed by the payee.
(iii) Approval of transfers of structured settlement payment rights.
A. the transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents;
B. the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received such advice or knowingly waived such advice in writing; and
C. the transfer does not contravene any applicable statute or the order of any court or other government authority.
(iv) Effects of transfer of structured settlement payment rights. Following a transfer of structured settlement payment rights under this subsection:
The structured settlement obligor and the annuity issuer shall, as to all parties except the transferee, be discharged and released from any and all liability for the transferred payments;
The transferee shall be liable to the structured settlement obligor and the annuity issuer:
A. if the transfer contravenes the terms of the structured settlement, for any taxes incurred by such parties as a consequence of the transfer; and
B. for any other liabilities or costs, including reasonable costs and attorney’s fees, arising from compliance by such parties with the order of the court or arising as a consequence of the transferee’s failure to comply with this subsection;
Neither the annuity issuer nor the structured settlement obligor may be required to divide any periodic payment between the payee and any transferee or assignee or between two (2) or more transferees or assignees; and
Any further transfer of structured settlement payment rights by the payee may be made only after compliance with all of the requirements of this subsection.
(v) Procedure for approval of transfers.
An application under this subsection for approval of a transfer of structured settlement payment rights shall be made by the transferee and may be brought in the county in which the payee resides, in the county in which the structured settlement obligor or the annuity issuer maintains its principal place of business, or in any court which approved the structured settlement agreement.
Not less than twenty (20) days prior to the scheduled hearing on any application for approval of a transfer of structured settlement payment rights under paragraph (B)(iii) of this subsection, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the application for its authorization, including with such notice:
A. a copy of the transferee’s application;
B. a copy of the transfer agreement;
C. a copy of the disclosure statement required under paragraph (B)(ii) of this subsection;
D. a listing of each of the payee’s dependents, together with each dependent’s age;
E. notification that any interested party is entitled to support, oppose or otherwise respond to the transferee’s application, either in person or by counsel, by submitting written comments to the court or by participating in the hearing; and
F. notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed (which shall be not less than fifteen (15) days after service of the transferee’s notice) in order to be considered by the court.
(vi) General provisions — construction.
The provisions of this subsection may not be waived by any payee.
Any transfer agreement entered into on or after the effective date of this subsection by a payee who resides in this state shall provide that disputes under such transfer agreement, including any claim that the payee has breached the agreement, shall be determined in and under the laws of this state. No such transfer agreement shall authorize the transferee or any other party to confess judgment or consent to entry of judgment against the payee.
No transfer of structured settlement payment rights shall extend to any payments that are life-contingent unless, prior to the date on which the payee signs the transfer agreement, the transferee has established and has agreed to maintain procedures reasonably satisfactory to the annuity issuer and the structured settlement obligor for (i) periodically confirming the payee’s survival, and (ii) giving the annuity issuer and the structured settlement obligor prompt written notice in the event of the payee’s death.
No payee who proposes to make a transfer of structured settlement payment rights shall incur any penalty, forfeit any application fee or other payment, or otherwise incur any liability to the proposed transferee or any assignee based on any failure of such transfer to satisfy the conditions of this subsection.
Nothing contained in this subsection shall be construed to authorize any transfer of structured settlement payment rights in contravention of any law or to imply that any transfer under a transfer agreement entered into prior to the effective date of this subsection is valid or invalid.
Compliance with the requirements set forth in paragraph (B)(ii) of this subsection and fulfillment of the conditions set forth in paragraph (B)(iii) of this subsection shall be solely the responsibility of the transferee in any transfer of structured settlement payment rights, and neither the structured settlement obligor nor the annuity issuer shall bear any responsibility for, or any liability arising from, noncompliance with such requirements or failure to fulfill such conditions.
(vii) Effective date. This subsection shall apply to any transfer of structured settlement payment rights under a transfer agreement entered into on or after the thirtieth day after the date of enactment of this subsection; provided however, that nothing contained herein shall imply that any transfer under a transfer agreement reached prior to such date is either effective or ineffective; or
(14) A claim or right to receive benefits under a special needs trust as described in 42 U.S.C. section 1396p(d)(4), as amended from time to time.
[28-9-109, added 2001, ch. 208, sec. 2, p. 720; am. 2001, ch. 299, sec. 1, p. 1078.]
A security interest arising under section 28-2-401, 28-2-505, 28-2-711(3) or 28-12-508(5) is subject to this chapter. However, until the debtor obtains possession of the goods:
(1) The security interest is enforceable, even if section 28-9-203(b)(3) has not been satisfied;
(2) Filing is not required to perfect the security interest;
(3) The rights of the secured party after default by the debtor are governed by chapter 2 or 12, title 28, Idaho Code; and
(4) The security interest has priority over a conflicting security interest created by the debtor.
[28-9-110, added 2001, ch. 208, sec. 2, p. 722.]
(a) Except as otherwise provided in the uniform commercial code, a security agreement is effective according to its terms between the parties, against purchasers of the collateral, and against creditors.
(b) A transaction subject to this chapter is subject to any applicable rule of law which establishes a different rule for consumers, to the Idaho credit code, chapters 41 through 49, title 28, Idaho Code, and any rules promulgated thereunder and to the Idaho credit union act, chapter 21, title 26, Idaho Code, and any rules promulgated thereunder.
(c) In case of conflict between this chapter and a rule of law, statute or rule described in subsection (b) of this section, the rule of law, statute or rule controls. Failure to comply with a statute or rule described in subsection (b) of this section has only the effect the statute or rule specifies.
(d) This chapter does not:
(1) Validate any rate, charge, agreement or practice that violates a rule of law, statute or rule described in subsection (b) of this section; or
(2) Extend the application of the rule of law, statute or rule to a transaction not otherwise subject to it.
[28-9-201, added 2001, ch. 208, sec. 2, p. 722.]
Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles or promissory notes, the provisions of this chapter with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.
[28-9-202, added 2001, ch. 208, sec. 2, p. 723.]
(a) A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.
(b) Except as otherwise provided in subsections (c) through (i) of this section, a security interest is enforceable against the debtor and third parties with respect to the collateral only if:
(1) Value has been given;
(2) The debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and
(3) One (1) of the following conditions is met:
(A) the debtor has authenticated a security agreement that provides a description of the collateral and, if the security interest covers timber to be cut, a description of the land concerned;
(B) the collateral is not a certificated security and is in the possession of the secured party under section 28-9-313 pursuant to the debtor’s security agreement;
(C) the collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under section 28-8-301 pursuant to the debtor’s security agreement; or
(D) the collateral is deposit accounts, electronic chattel paper, investment property, letter of credit rights, or electronic documents, and the secured party has control under section 28-7-106, 28-9-104, 28-9-105, 28-9-106 or 28-9-107 pursuant to the debtor’s security agreement.
(c) Subsection (b) of this section is subject to section 28-4-210 on the security interest of a collecting bank, section 28-5-120 on the security interest of a letter of credit issuer or nominated person, section 28-9-110 on a security interest arising under chapter 2 or 12, title 28, and section 28-9-206 on security interests in investment property.
(d) A person becomes bound as debtor by a security agreement entered into by another person if, by operation of law other than this chapter or by contract:
(1) The security agreement becomes effective to create a security interest in the person’s property; or
(2) The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.
(e) If a new debtor becomes bound as debtor by a security agreement entered into by another person:
(1) The agreement satisfies subsection (b)(3) of this section with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and
(2) Another agreement is not necessary to make a security interest in the property enforceable.
(f) The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by section 28-9-315 and is also attachment of a security interest in a supporting obligation for the collateral.
(g) The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage or other lien.
(h) The attachment of a security interest in a securities account is also attachment of a security interest in the security entitlements carried in the securities account.
(i) The attachment of a security interest in a commodity account is also attachment of a security interest in the commodity contracts carried in the commodity account.
[28-9-203, added 2001, ch. 208, sec. 2, p. 723; am. 2004, ch. 42, sec. 22, p. 125.]
(a) Except as otherwise provided in subsection (b) of this section, a security agreement may create or provide for a security interest in after-acquired collateral.
(b) A security interest does not attach under a term constituting an after-acquired property clause to:
(1) Consumer goods, other than an accession when given as additional security, unless the debtor acquires rights in them within ten (10) days after the secured party gives value; or
(2) A commercial tort claim.
(c) A security agreement may provide that collateral secures, or that accounts, chattel paper, payment intangibles or promissory notes are sold in connection with, future advances or other value, whether or not the advances or value are given pursuant to commitment.
[28-9-204, added 2001, ch. 208, sec. 2, p. 724.]
(a) A security interest is not invalid or fraudulent against creditors solely because:
(1) The debtor has the right or ability to:
(A) use, commingle or dispose of all or part of the collateral, including returned or repossessed goods;
(B) collect, compromise, enforce or otherwise deal with collateral;
(C) accept the return of collateral or make repossessions; or
(D) use, commingle or dispose of proceeds; or
(2) The secured party fails to require the debtor to account for proceeds or replace collateral.
(b) This section does not relax the requirements of possession if attachment, perfection or enforcement of a security interest depends upon possession of the collateral by the secured party.
[28-9-205, added 2001, ch. 208, sec. 2, p. 724.]
(a) A security interest in favor of a securities intermediary attaches to a person’s security entitlement if:
(1) The person buys a financial asset through the securities intermediary in a transaction in which the person is obligated to pay the purchase price to the securities intermediary at the time of the purchase; and
(2) The securities intermediary credits the financial asset to the buyer’s securities account before the buyer pays the securities intermediary.
(b) The security interest described in subsection (a) of this section secures the person’s obligation to pay for the financial asset.
(c) A security interest in favor of a person that delivers a certificated security or other financial asset represented by a writing attaches to the security or other financial asset if:
(1) The security or other financial asset:
(A) in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment; and
(B) is delivered under an agreement between persons in the business of dealing with such securities or financial assets; and
(2) The agreement calls for delivery against payment.
(d) The security interest described in subsection (c) of this section secures the obligation to make payment for the delivery.
[28-9-206, added 2001, ch. 208, sec. 2, p. 724.]
(a) Except as otherwise provided in subsection (d) of this section, a secured party shall use reasonable care in the custody and preservation of collateral in the secured party’s possession. In the case of chattel paper or an instrument, reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.
(b) Except as otherwise provided in subsection (d) of this section, if a secured party has possession of collateral:
(1) Reasonable expenses, including the cost of 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;
(2) The risk of accidental loss or damage is on the debtor to the extent of a deficiency in any effective insurance coverage;
(3) The secured party shall keep the collateral identifiable, but fungible collateral may be commingled; and
(4) The secured party may use or operate the collateral:
(A) for the purpose of preserving the collateral or its value;
(B) as permitted by an order of a court having competent jurisdiction; or
(C) except in the case of consumer goods, in the manner and to the extent agreed by the debtor.
(c) Except as otherwise provided in subsection (d) of this section, a secured party having possession of collateral or control of collateral under section 28-7-106, 28-9-104, 28-9-105, 28-9-106 or 28-9-107:
(1) May hold as additional security any proceeds, except money or funds, received from the collateral;
(2) Shall apply money or funds received from the collateral to reduce the secured obligation, unless remitted to the debtor; and
(3) May create a security interest in the collateral.
(d) If the secured party is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor:
(1) Subsection (a) of this section does not apply unless the secured party is entitled under an agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse against the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and
(2) Subsections (b) and (c) of this section do not apply.
[28-9-207, added 2001, ch. 208, sec. 2, p. 725; am. 2004, ch. 42, sec. 23, p. 126.]
(a) This section applies to cases in which there is no outstanding secured obligation and the secured party is not committed to make advances, incur obligations, or otherwise give value.
(b) Within ten (10) days after receiving an authenticated demand by the debtor:
(1) A secured party having control of a deposit account under section 28-9-104(a)(2) shall send to the bank with which the deposit account is maintained an authenticated statement that releases the bank from any further obligation to comply with instructions originated by the secured party;
(2) A secured party having control of a deposit account under section 28-9-104(a)(3) shall:
(A) pay the debtor the balance on deposit in the deposit account; or
(B) transfer the balance on deposit into a deposit account in the debtor’s name;
(3) A secured party, other than a buyer, having control of electronic chattel paper under section 28-9-105 shall:
(A) communicate the authoritative copy of the electronic chattel paper to the debtor or its designated custodian;
(B) if the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic chattel paper is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and
(C) take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party;
(4) A secured party having control of investment property under section 28-8-106(4)(b) or 28-9-106(b) shall send to the securities intermediary or commodity intermediary with which the security entitlement or commodity contract is maintained an authenticated record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement orders or directions originated by the secured party; and
(5) A secured party having control of a letter of credit right under section 28-9-107 shall send to each person having an unfulfilled obligation to pay or deliver proceeds of the letter of credit to the secured party an authenticated release from any further obligation to pay or deliver proceeds of the letter of credit to the secured party.
(6) A secured party having control of an electronic document shall:
(A) Give control of the electronic document to the debtor or its designated custodian;
(B) If the debtor designates a custodian that is the designated custodian with which the authoritative copy of the electronic document is maintained for the secured party, communicate to the custodian an authenticated record releasing the designated custodian from any further obligation to comply with instructions originated by the secured party and instructing the custodian to comply with instructions originated by the debtor; and
(C) Take appropriate action to enable the debtor or its designated custodian to make copies of or revisions to the authoritative copy which add or change an identified assignee of the authoritative copy without the consent of the secured party.
[28-9-208, added 2001, ch. 208, sec. 2, p. 726; am. 2004, ch. 42, sec. 24, p. 127.]
(a) Except as otherwise provided in subsection (c), this section applies if:
(1) There is no outstanding secured obligation; and
(2) The secured party is not committed to make advances, incur obligations, or otherwise give value.
(b) Within ten (10) days after receiving an authenticated demand by the debtor, a secured party shall send to an account debtor that has received notification of an assignment to the secured party as assignee under section 28-9-406(a) an authenticated record that releases the account debtor from any further obligation to the secured party.
(c) This section does not apply to an assignment constituting the sale of an account, chattel paper or payment intangible.
[28-9-209, added 2001, ch. 208, sec. 2, p. 727.]
(a) In this section:
(1) "Request" means a record of a type described in paragraph (2), (3) or (4) of this subsection.
(2) "Request for an accounting" means a record authenticated by a debtor requesting that the recipient provide an accounting of the unpaid obligations secured by collateral and reasonably identifying the transaction or relationship that is the subject of the request.
(3) "Request regarding a list of collateral" means a record authenticated by a debtor requesting that the recipient approve or correct a list of what the debtor believes to be the collateral securing an obligation and reasonably identifying the transaction or relationship that is the subject of the request.
(4) "Request regarding a statement of account" means a record authenticated by a debtor requesting that the recipient approve or correct a statement indicating what the debtor believes to be the aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or relationship that is the subject of the request.
(b) Subject to subsections (c), (d), (e) and (f) of this section, a secured party, other than a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor, shall comply with a request within fourteen (14) days after receipt:
(1) In the case of a request for an accounting, by authenticating and sending to the debtor an accounting; and
(2) In the case of a request regarding a list of collateral or a request regarding a statement of account, by authenticating and sending to the debtor an approval or correction.
(c) A secured party that claims a security interest in all of a particular type of collateral owned by the debtor may comply with a request regarding a list of collateral by sending to the debtor an authenticated record including a statement to that effect within fourteen (14) days after receipt.
(d) A person that receives a request regarding a list of collateral, claims no interest in the collateral when it receives the request, and claimed an interest in the collateral at an earlier time shall comply with the request within fourteen (14) days after receipt by sending to the debtor an authenticated record:
(1) Disclaiming any interest in the collateral; and
(2) If known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient’s interest in the collateral.
(e) A person that receives a request for an accounting or a request regarding a statement of account, claims no interest in the obligations when it receives the request, and claimed an interest in the obligations at an earlier time shall comply with the request within fourteen (14) days after receipt by sending to the debtor an authenticated record:
(1) Disclaiming any interest in the obligations; and
(2) If known to the recipient, providing the name and mailing address of any assignee of or successor to the recipient’s interest in the obligations.
(f) A debtor is entitled without charge to one (1) response to a request under this section during any six (6) month period. The secured party may require payment of a charge not exceeding twenty-five dollars ($25.00) for each additional response.
[28-9-210, added 2001, ch. 208, sec. 2, p. 727.]
Except as otherwise provided in sections 28-9-303 through 28-9-306, the following rules determine the law governing perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral:
(1) Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.
(2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.
(3) Except as otherwise provided in subsection (4) of this section, while tangible negotiable documents, goods, instruments, money or tangible chattel paper is located in a jurisdiction, the local law of that jurisdiction governs:
(A) Perfection of a security interest in the goods by filing a fixture filing;
(B) Perfection of a security interest in timber to be cut; and
(C) The effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.
(4) The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in as-extracted collateral.
[28-9-301, added 2001, ch. 208, sec. 2, p. 728; am. 2004, ch. 42, sec. 25, p. 129.]
While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products.
[28-9-302, added 2001, ch. 208, sec. 2, p. 728.]
(a) This section applies to goods covered by a certificate of title, even if there is no other relationship between the jurisdiction under whose certificate of title the goods are covered and the goods or the debtor.
(b) Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority. Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.
(c) The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.
[28-9-303, added 2001, ch. 208, sec. 2, p. 728.]
(a) The local law of a bank’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.
(b) The following rules determine a bank’s jurisdiction for purposes of this part:
(1) If an agreement between the bank and its customer governing the deposit account expressly provides that a particular jurisdiction is the bank’s jurisdiction for purposes of this part, this chapter, or the uniform commercial code, that jurisdiction is the bank’s jurisdiction.
(2) If paragraph (1) of this subsection does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank’s jurisdiction.
(3) If neither paragraph (1) nor (2) of this subsection applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank’s jurisdiction.
(4) If none of the preceding paragraphs apply, the bank’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer’s account is located.
(5) If none of the preceding paragraphs apply, the bank’s jurisdiction is the jurisdiction in which the chief executive office of the bank is located.
[28-9-304, added 2001, ch. 208, sec. 2, p. 729; am. 2002, ch. 107, sec. 2, p. 300.]
(a) Except as otherwise provided in subsection (c) of this section, the following rules apply:
(1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.
(2) The local law of the issuer’s jurisdiction as specified in section 28-8-110(4) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.
(3) The local law of the securities intermediary’s jurisdiction as specified in section 28-8-110(5) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a security entitlement or securities account.
(4) The local law of the commodity intermediary’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a commodity contract or commodity account.
(b) The following rules determine a commodity intermediary’s jurisdiction for purposes of this part:
(1) If an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary’s jurisdiction for purposes of this part, this chapter, or the uniform commercial code, that jurisdiction is the commodity intermediary’s jurisdiction.
(2) If paragraph (1) of this subsection does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary’s jurisdiction.
(3) If neither paragraph (1) nor (2) of this subsection applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary’s jurisdiction.
(4) If none of the preceding paragraphs apply, the commodity intermediary’s jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer’s account is located.
(5) If none of the preceding paragraphs apply, the commodity intermediary’s jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.
(c) The local law of the jurisdiction in which the debtor is located governs:
(1) Perfection of a security interest in investment property by filing;
(2) Automatic perfection of a security interest in investment property created by a broker or securities intermediary; and
(3) Automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.
[28-9-305, added 2001, ch. 208, sec. 2, p. 729.]
(a) Subject to subsection (c) of this section, the local law of the issuer’s jurisdiction or a nominated person’s jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a letter of credit right if the issuer’s jurisdiction or nominated person’s jurisdiction is a state.
(b) For purposes of this part, an issuer’s jurisdiction or nominated person’s jurisdiction is the jurisdiction whose law governs the liability of the issuer or nominated person with respect to the letter of credit right as provided in section 28-5-116.
(c) This section does not apply to a security interest that is perfected only under section 28-9-308(d).
[28-9-306, added 2001, ch. 208, sec. 2, p. 730.]
(a) In this section, "place of business" means a place where a debtor conducts its affairs.
(b) Except as otherwise provided in this section, the following rules determine a debtor’s location:
(1) A debtor who is an individual is located at the individual’s principal residence.
(2) A debtor that is an organization and has only one (1) place of business is located at its place of business.
(3) A debtor that is an organization and has more than one (1) place of business is located at its chief executive office.
(c) Subsection (b) of this section applies only if a debtor’s residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording or registration system as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) of this section does not apply, the debtor is located in the District of Columbia.
(d) A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c) of this section.
(e) A registered organization that is organized under the law of a state is located in that state.
(f) Except as otherwise provided in subsection (i) of this section, a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located:
(1) In the state that the law of the United States designates, if the law designates a state of location;
(2) In the state that the registered organization, branch or agency designates, if the law of the United States authorizes the registered organization, branch or agency to designate its state of location, including by designating its main office, home office or other comparable office; or
(3) In the District of Columbia, if neither paragraph (1) nor paragraph (2) of this subsection applies.
(g) A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) of this section notwithstanding:
(1) The suspension, revocation, forfeiture or lapse of the registered organization’s status as such in its jurisdiction of organization; or
(2) The dissolution, winding up, or cancellation of the existence of the registered organization.
(h) The United States is located in the District of Columbia.
(i) A branch or agency of a bank that is not organized under the law of the United States or a state is located in the state in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one (1) state.
(j) A foreign air carrier under the federal aviation act of 1958, as amended, is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.
(k) This section applies only for purposes of this part.
[28-9-307, added 2001, ch. 208, sec. 2, p. 731; am. 2012, ch. 145, sec. 3, p. 391.]
(a) Except as otherwise provided in this section and section 28-9-309, a security interest is perfected if it has attached and all of the applicable requirements for perfection in sections 28-9-310 through 28-9-316 have been satisfied. A security interest is perfected when it attaches if the applicable requirements are satisfied before the security interest attaches.
(b) An agricultural lien is perfected if it has become effective and all of the applicable requirements for perfection in section 28-9-310 have been satisfied. An agricultural lien is perfected when it becomes effective if the applicable requirements are satisfied before the agricultural lien becomes effective.
(c) A security interest or agricultural lien is perfected continuously if it is originally perfected by one (1) method under this chapter and is later perfected by another method under this chapter, without an intermediate period when it was unperfected.
(d) Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.
(e) Perfection of a security interest in a right to payment or performance also perfects a security interest in a security interest, mortgage or other lien on personal or real property securing the right.
(f) Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account.
(g) Perfection of a security interest in a commodity account also perfects a security interest in the commodity contracts carried in the commodity account.
[28-9-308, added 2001, ch. 208, sec. 2, p. 732.]
The following security interests are perfected when they attach:
(1) A purchase-money security interest in consumer goods, except as otherwise provided in section 28-9-311(b) with respect to consumer goods that are subject to a statute or treaty described in section 28-9-311(a);
(2) An assignment of accounts or payment intangibles which does not by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor’s outstanding accounts or payment intangibles;
(3) A sale of a payment intangible;
(4) A sale of a promissory note;
(5) A security interest created by the assignment of a health care insurance receivable to the provider of the health care goods or services;
(6) A security interest arising under section 28-2-401, 28-2-505, 28-2-711(3) or 28-12-508(5), until the debtor obtains possession of the collateral;
(7) A security interest of a collecting bank arising under section 28-4-210;
(8) A security interest of an issuer or nominated person arising under section 28-5-120;
(9) A security interest arising in the delivery of a financial asset under section 28-9-206(c);
(10) A security interest in investment property created by a broker or securities intermediary;
(11) A security interest in a commodity contract or a commodity account created by a commodity intermediary;
(12) An assignment for the benefit of all creditors of the transferor and subsequent transfers by the assignee thereunder;
(13) A security interest created by an assignment of a beneficial interest in a decedent’s estate; and
(14) A sale by an individual of an account that is a right to payment of winnings in a lottery or other game of chance.
[28-9-309, added 2001, ch. 208, sec. 2, p. 732; am. 2002, ch. 107, sec. 3, p. 301.]
(a) Except as otherwise provided in subsection (b) of this section and section 28-9-312(b), a financing statement must be filed to perfect all security interests and agricultural liens.
(b) The filing of a financing statement is not necessary to perfect a security interest:
(1) That is perfected under section 28-9-308(d), (e), (f) or (g);
(2) That is perfected under section 28-9-309 when it attaches;
(3) In property subject to a statute, regulation or treaty described in section 28-9-311(a);
(4) In goods in possession of a bailee which is perfected under section 28-9-312(d)(1) or (2);
(5) In certificated securities, documents, goods or instruments which is perfected without filing, control, or possession under section 28-9-312(e), (f) or (g);
(6) In collateral in the secured party’s possession under section 28-9-313;
(7) In a certificated security which is perfected by delivery of the security certificate to the secured party under section 28-9-313;
(8) In deposit accounts, electronic chattel paper, electronic documents, investment property, or letter of credit rights which is perfected by control under section 28-9-314;
(9) In proceeds which is perfected under section 28-9-315;
(10) That is perfected under section 28-9-316; or
(11) In timber sold by the state of Idaho.
(c) If a secured party assigns a perfected security interest or agricultural lien, a filing under this chapter is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
[28-9-310, added 2001, ch. 208, sec. 2, p. 733; am. 2004, ch. 42, sec. 26, p. 129; am. 2010, ch. 154, sec. 1, p. 329.]
(a) Except as otherwise provided in subsection (d) of this section, the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:
(1) A statute, regulation or treaty of the United States whose requirements for a security interest’s obtaining priority over the rights of a lien creditor with respect to the property preempt section 28-9-310(a), Idaho Code;
(2) Section 49-510, Idaho Code; or
(3) A statute of another jurisdiction which provides for a security interest to be indicated on a certificate of title as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the property.
(b) Compliance with the requirements of a statute, regulation or treaty described in subsection (a) of this section for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under this chapter. Except as otherwise provided in subsection (d) of this section and sections 28-9-313 and 28-9-316(d) and (e), Idaho Code, for goods covered by a certificate of title, a security interest in property subject to a statute, regulation or treaty described in subsection (a) of this section may be perfected only by compliance with those requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral.
(c) Except as otherwise provided in subsection (d) of this section and section 28-9-316(d) and (e), Idaho Code, duration and renewal of perfection of a security interest perfected by compliance with the requirements prescribed by a statute, regulation or treaty described in subsection (a) of this section are governed by the statute, regulation or treaty. In other respects, the security interest is subject to this chapter.
(d) During any period in which collateral subject to a statute specified in subsection (a)(2) of this section is inventory held for sale or lease by a person or leased by that person as lessor and that person is in the business of selling or leasing goods of that kind, this section does not apply to a security interest in that collateral created by that person as debtor.
[28-9-311, added 2001, ch. 208, sec. 2, p. 733; am. 2012, ch. 145, sec. 4, p. 392.]
(a) A security interest in chattel paper, negotiable documents, instruments or investment property may be perfected by filing.
(b) Except as otherwise provided in section 28-9-315(c) and (d) for proceeds:
(1) A security interest in a deposit account may be perfected only by control under section 28-9-314;
(2) And except as otherwise provided in section 28-9-308(d), a security interest in a letter of credit right may be perfected only by control under section 28-9-314; and
(3) A security interest in money may be perfected only by the secured party’s taking possession under section 28-9-313.
(c) While goods are in the possession of a bailee that has issued a negotiable document covering the goods:
(1) A security interest in the goods may be perfected by perfecting a security interest in the document; and
(2) A security interest perfected in the document has priority over any security interest that becomes perfected in the goods by another method during that time.
(d) While goods are in the possession of a bailee that has issued a nonnegotiable document covering the goods, a security interest in the goods may be perfected by:
(1) Issuance of a document in the name of the secured party;
(2) The bailee’s receipt of notification of the secured party’s interest; or
(3) Filing as to the goods.
(e) A security interest in certificated securities, negotiable documents or instruments is perfected without filing or the taking of possession or control for a period of twenty (20) days from the time it attaches to the extent that it arises for new value given under an authenticated security agreement.
(f) A perfected security interest in a negotiable document or goods in possession of a bailee, other than one that has issued a negotiable document for the goods, remains perfected for twenty (20) days without filing if the secured party makes available to the debtor the goods or documents representing the goods for the purpose of:
(1) Ultimate sale or exchange; or
(2) Loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with them in a manner preliminary to their sale or exchange.
(g) A perfected security interest in a certificated security or instrument remains perfected for twenty (20) days without filing if the secured party delivers the security certificate or instrument to the debtor for the purpose of:
(1) Ultimate sale or exchange; or
(2) Presentation, collection, enforcement, renewal or registration of transfer.
(h) After the twenty (20) day period specified in subsection (e), (f) or (g) of this section expires, perfection depends upon compliance with this chapter.
[28-9-312, added 2001, ch. 208, sec. 2, p. 734; am. 2004, ch. 42, sec. 27, p. 130.]
(a) Except as otherwise provided in subsection (b) of this section, a secured party may perfect a security interest in tangible negotiable documents, goods, instruments, money or tangible chattel paper by taking possession of the collateral. A secured party may perfect a security interest in certificated securities by taking delivery of the certificated securities under section 28-8-301.
(b) With respect to goods covered by a certificate of title issued by this state, a secured party may perfect a security interest in the goods by taking possession of the goods only in the circumstances described in section 28-9-316(d).
(c) With respect to collateral other than certificated securities and goods covered by a document, a secured party takes possession of collateral in the possession of a person other than the debtor, the secured party or a lessee of the collateral from the debtor in the ordinary course of the debtor’s business, when:
(1) The person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party’s benefit; or
(2) The person takes possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the secured party’s benefit.
(d) If perfection of a security interest depends upon possession of the collateral by a secured party, perfection occurs no earlier than the time the secured party takes possession and continues only while the secured party retains possession.
(e) A security interest in a certificated security in registered form is perfected by delivery when delivery of the certificated security occurs under section 28-8-301, and remains perfected by delivery until the debtor obtains possession of the security certificate.
(f) A person in possession of collateral is not required to acknowledge that it holds possession for a secured party’s benefit.
(g) If a person acknowledges that it holds possession for the secured party’s benefit:
(1) The acknowledgment is effective under subsection (c) of this section or section 28-8-301(1), even if the acknowledgment violates the rights of a debtor; and
(2) Unless the person otherwise agrees, or law other than this chapter otherwise provides, the person does not owe any duty to the secured party and is not required to confirm the acknowledgment to another person.
(h) A secured party having possession of collateral does not relinquish possession by delivering the collateral to a person other than the debtor or a lessee of the collateral from the debtor in the ordinary course of the debtor’s business if the person was instructed before the delivery or is instructed contemporaneously with the delivery:
(1) To hold possession of the collateral for the secured party’s benefit; or
(2) To redeliver the collateral to the secured party.
(i) A secured party does not relinquish possession, even if a delivery under subsection (h) of this section violates the rights of a debtor. A person to which collateral is delivered under subsection (h) of this section does not owe any duty to the secured party and is not required to confirm the delivery to another person unless the person otherwise agrees, or law other than this chapter otherwise provides.
[28-9-313, added 2001, ch. 208, sec. 2, p. 735; am. 2004, ch. 42, sec. 28, p. 131.]
(a) A security interest in investment property, deposit accounts, letter of credit rights, electronic chattel paper, or electronic documents may be perfected by control of the collateral under section 28-7-106, 28-9-104, 28-9-105, 28-9-106 or 28-9-107.
(b) A security interest in deposit accounts, electronic chattel paper, letter of credit rights, or electronic documents is perfected by control under section 28-7-106, 28-9-104, 28-9-105 or 28-9-107, when the secured party obtains control and remains perfected by control only while the secured party retains control.
(c) A security interest in investment property is perfected by control under section 28-9-106 from the time the secured party obtains control and remains perfected by control until:
(1) The secured party does not have control; and
(2) One (1) of the following occurs:
(A) if the collateral is a certificated security, the debtor has or acquires possession of the security certificate;
(B) if the collateral is an uncertificated security, the issuer has registered or registers the debtor as the registered owner; or
(C) if the collateral is a security entitlement, the debtor is or becomes the entitlement holder.
[28-9-314, added 2001, ch. 208, sec. 2, p. 736; am. 2004, ch. 42, sec. 29, p. 132.]
(a) Except as otherwise provided in this chapter and in section 28-2-403(2):
(1) A security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange or other disposition thereof unless the secured party authorized the disposition free of the security interest or agricultural lien; and
(2) A security interest attaches to any identifiable proceeds of collateral.
(b) Proceeds that are commingled with other property are identifiable proceeds:
(1) If the proceeds are goods, to the extent provided by section 28-9-336; and
(2) If the proceeds are not goods, to the extent that the secured party identifies the proceeds by a method of tracing, including application of equitable principles, that is permitted under law other than this chapter with respect to commingled property of the type involved.
(c) A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.
(d) A perfected security interest in proceeds becomes unperfected on the twenty-first day after the security interest attaches to the proceeds unless:
(1) The following conditions are satisfied:
(A) a filed financing statement covers the original collateral;
(B) the proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and
(C) the proceeds are not acquired with cash proceeds;
(2) The proceeds are identifiable cash proceeds; or
(3) The security interest in the proceeds is perfected other than under subsection (c) of this section when the security interest attaches to the proceeds or within twenty (20) days thereafter.
(e) If a filed financing statement covers the original collateral, a security interest in proceeds which remains perfected under subsection (d)(1) of this section becomes unperfected at the later of:
(1) When the effectiveness of the filed financing statement lapses under section 28-9-515 or is terminated under section 28-9-513; or
(2) The twenty-first day after the security interest attaches to the proceeds.
[28-9-315, added 2001, ch. 208, sec. 2, p. 737.]
(a) A security interest perfected pursuant to the law of the jurisdiction designated in section 28-9-301(1) or 28-9-305(c), Idaho Code, remains perfected until the earliest of:
(1) The time perfection would have ceased under the law of that jurisdiction;
(2) The expiration of four (4) months after a change of the debtor’s location to another jurisdiction; or
(3) The expiration of one (1) year after a transfer of collateral to a person that thereby becomes a debtor and is located in another jurisdiction.
(b) If a security interest described in subsection (a) of this section becomes perfected under the law of the other jurisdiction before the earliest time or event described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earliest time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(c) A possessory security interest in collateral, other than goods covered by a certificate of title and as-extracted collateral consisting of goods, remains continuously perfected if:
(1) The collateral is located in one (1) jurisdiction and subject to a security interest perfected under the law of that jurisdiction;
(2) Thereafter the collateral is brought into another jurisdiction; and
(3) Upon entry into the other jurisdiction, the security interest is perfected under the law of the other jurisdiction.
(d) Except as otherwise provided in subsection (e) of this section, a security interest in goods covered by a certificate of title which is perfected by any method under the law of another jurisdiction when the goods become covered by a certificate of title from this state remains perfected until the security interest would have become unperfected under the law of the other jurisdiction had the goods not become so covered.
(e) A security interest described in subsection (d) of this section becomes unperfected as against a purchaser of the goods for value and is deemed never to have been perfected as against a purchaser of the goods for value if the applicable requirements for perfection under section 28-9-311(b) or 28-9-313, Idaho Code, are not satisfied before the earlier of:
(1) The time the security interest would have become unperfected under the law of the other jurisdiction had the goods not become covered by a certificate of title from this state; or
(2) The expiration of four (4) months after the goods had become so covered.
(f) A security interest in deposit accounts, letter of credit rights, or investment property which is perfected under the law of the bank’s jurisdiction, the issuer’s jurisdiction, a nominated person’s jurisdiction, the securities intermediary’s jurisdiction, or the commodity intermediary’s jurisdiction, as applicable, remains perfected until the earlier of:
(1) The time the security interest would have become unperfected under the law of that jurisdiction; or
(2) The expiration of four (4) months after a change of the applicable jurisdiction to another jurisdiction.
(g) If a security interest described in subsection (f) of this section becomes perfected under the law of the other jurisdiction before the earlier of the time or the end of the period described in that subsection, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(h) The following rules apply to collateral to which a security interest attaches within four (4) months after the debtor changes its location to another jurisdiction:
(1) A financing statement filed before the change pursuant to the law of the jurisdiction designated in section 28-9-301(1) or 28-9-305(c), Idaho Code, is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral if the debtor had not changed its location.
(2) If a security interest that is perfected by a financing statement that is effective under paragraph (1) of this subsection becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in section 28-9-301(1) or 28-9-305(c), Idaho Code, or the expiration of the four (4) month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
(i) If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in section 28-9-301(1) or 28-9-305(c), Idaho Code, and the new debtor is located in another jurisdiction, the following rules apply:
(1) The financing statement is effective to perfect a security interest in collateral in which the new debtor has or acquires rights before or within four (4) months after the new debtor becomes bound under section 28-9-203(d), Idaho Code, if the financing statement would have been effective to perfect a security interest in the collateral if the collateral had been acquired by the original debtor.
(2) A security interest that is perfected by the financing statement and that becomes perfected under the law of the other jurisdiction before the earlier of the expiration of the four (4) month period or the time the financing statement would have become ineffective under the law of the jurisdiction designated in section 28-9-301(1) or 28-9-305(c), Idaho Code, remains perfected thereafter. A security interest that is perfected by the financing statement but that does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.
[28-9-316, added 2001, ch. 208, sec. 2, p. 737; am. 2012, ch. 145, sec. 5, p. 392.]
(a) A security interest or agricultural lien is subordinate to the rights of:
(1) A person entitled to priority under section 28-9-322, Idaho Code; and
(2) Except as otherwise provided in subsection (e) of this section, a person that becomes a lien creditor before the earlier of the time:
(A) the security interest or agricultural lien is perfected; or
(B) one (1) of the conditions specified in section 28-9-203(b)(3), Idaho Code, is met and a financing statement covering the collateral is filed.
(b) Except as otherwise provided in subsection (e) of this section, a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments or a certificated security takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.
(c) Except as otherwise provided in subsection (e) of this section, a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.
(d) A licensee of a general intangible or a buyer, other than a secured party, of collateral other than tangible chattel paper, tangible documents, goods, instruments or a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.
(e) Except as otherwise provided in sections 28-9-320 and 28-9-321, Idaho Code, if a person files a financing statement with respect to a purchase-money security interest before or within twenty (20) days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.
[28-9-317, added 2001, ch. 208, sec. 2, p. 738; am. 2004, ch. 42, sec. 30, p. 132; am. 2012, ch. 145, sec. 6, p. 394.]
(a) A debtor that has sold an account, chattel paper, payment intangible or promissory note does not retain a legal or equitable interest in the collateral sold.
(b) For purposes of determining the rights of creditors of, and purchasers for value of an account or chattel paper from, a debtor that has sold an account or chattel paper, while the buyer’s security interest is unperfected, the debtor is deemed to have rights and title to the account or chattel paper identical to those the debtor sold.
[28-9-318, added 2001, ch. 208, sec. 2, p. 739.]
(a) Except as otherwise provided in subsection (b) of this section, for purposes of determining the rights of creditors of, and purchasers for value of goods from, a consignee, while the goods are in the possession of the consignee, the consignee is deemed to have rights and title to the goods identical to those the consignor had or had power to transfer.
(b) For purposes of determining the rights of a creditor of a consignee, law other than this chapter determines the rights and title of a consignee while goods are in the consignee’s possession if, under this part, a perfected security interest held by the consignor would have priority over the rights of the creditor.
[28-9-319, added 2001, ch. 208, sec. 2, p. 739.]
(a) Except as otherwise provided in subsection (e) of this section, a buyer in ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence. A buyer who, in the ordinary course of business, buys farm products from a person engaged in farming operations or a commission merchant or selling agent who in the ordinary course of business sells farm products for a person engaged in farming operations shall take and sell free of a security interest created by his seller, even though the security interest is perfected and the buyer or commission merchant or selling agent knows of the existence of such interest, if he has registered with the secretary of state pursuant to section 28-9-523(h) and the security interest is not listed on the most recent master list or cumulative supplement distributed by the secretary of state pursuant to section 28-9-523(i), unless he has received written notification, as that term is used in applicable federal law and regulation, of the security interest from the secretary of state, his seller or the secured party.
(b) Except as otherwise provided in subsection (e) of this section, a buyer of goods from a person who used or bought the goods for use primarily for personal, family or household purposes takes free of a security interest, even if perfected, if the buyer buys:
(1) Without knowledge of the security interest;
(2) For value;
(3) Primarily for the buyer’s personal, family or household purposes; and
(4) Before the filing of a financing statement covering the goods.
(c) To the extent that it affects the priority of a security interest over a buyer of goods under subsection (b) of this section, the period of effectiveness of a filing made in the jurisdiction in which the seller is located is governed by section 28-9-316(a) and (b).
(d) A buyer in ordinary course of business buying oil, gas, or other minerals at the wellhead or minehead or after extraction takes free of an interest arising out of an encumbrance.
(e) Subsections (a) and (b) of this section do not affect a security interest in goods in the possession of the secured party under section 28-9-313.
[28-9-320, added 2001, ch. 208, sec. 2, p. 740.]
(a) In this section, "licensee in ordinary course of business" means a person that becomes a licensee of a general intangible in good faith, without knowledge that the license violates the rights of another person in the general intangible, and in the ordinary course from a person in the business of licensing general intangibles of that kind. A person becomes a licensee in the ordinary course if the license to the person comports with the usual or customary practices in the kind of business in which the licensor is engaged or with the licensor’s own usual or customary practices.
(b) A licensee in ordinary course of business takes its rights under a nonexclusive license free of a security interest in the general intangible created by the licensor, even if the security interest is perfected and the licensee knows of its existence.
(c) A lessee in ordinary course of business takes its leasehold interest free of a security interest in the goods created by the lessor, even if the security interest is perfected and the lessee knows of its existence.
[28-9-321, added 2001, ch. 208, sec. 2, p. 740.]
(a) Except as otherwise provided in this section, priority among conflicting security interests and agricultural liens in the same collateral is determined according to the following rules:
(1) Conflicting perfected security interests and agricultural liens rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection.
(2) A perfected security interest or agricultural lien has priority over a conflicting unperfected security interest or agricultural lien.
(3) The first security interest or agricultural lien to attach or become effective has priority if conflicting security interests and agricultural liens are unperfected.
(b) For the purposes of subsection (a)(1) of this section:
(1) The time of filing or perfection as to a security interest in collateral is also the time of filing or perfection as to a security interest in proceeds; and
(2) The time of filing or perfection as to a security interest in collateral supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting obligation.
(c) Except as otherwise provided in subsection (f) of this section, a security interest in collateral which qualifies for priority over a conflicting security interest under section 28-9-327, 28-9-328, 28-9-329, 28-9-330 or 28-9-331 also has priority over a conflicting security interest in:
(1) Any supporting obligation for the collateral; and
(2) Proceeds of the collateral if:
(A) the security interest in proceeds is perfected;
(B) the proceeds are cash proceeds or of the same type as the collateral; and
(C) in the case of proceeds that are proceeds of proceeds, all intervening proceeds are cash proceeds, proceeds of the same type as the collateral, or an account relating to the collateral.
(d) Subject to subsection (e) of this section and except as otherwise provided in subsection (f) of this section, if a security interest in chattel paper, deposit accounts, negotiable documents, instruments, investment property, or letter of credit rights is perfected by a method other than filing, conflicting perfected security interests in proceeds of the collateral rank according to priority in time of filing.
(e) Subsection (d) of this section applies only if the proceeds of the collateral are not cash proceeds, chattel paper, negotiable documents, instruments, investment property or letter of credit rights.
(f) Subsections (a) through (e) of this section are subject to:
(1) Subsection (g) of this section and the other provisions of this part;
(2) Section 28-4-210 with respect to a security interest of a collecting bank;
(3) Section 28-5-120 with respect to a security interest of an issuer or nominated person; and
(4) Section 28-9-110 with respect to a security interest arising under chapter 2 or 12.
(g) A perfected agricultural lien on collateral has priority over a conflicting security interest in or agricultural lien on the same collateral if the statute creating the agricultural lien so provides.
[28-9-322, added 2001, ch. 208, sec. 2, p. 741.]
(a) As used in this section:
(1) "Agricultural chemical" means fertilizers and other chemicals applied to crops or land which is to be used for the raising of crops, including pesticides, soil amendments and plant regulators.
(2) "Fall agricultural chemical security interest" means a security interest in specific crops growing or to be grown granted by a grower to a supplier to secure the grower’s obligation to repay value given by the supplier to enable the grower to purchase from the supplier (A) agricultural chemicals to apply to such crops or to land on which such crops will be grown, and (B) application of such agricultural chemicals if such application is performed by the supplier. To qualify as a fall agricultural chemical security interest, the security interest must also satisfy the following conditions:
(i) Before supplying the agricultural chemicals to the grower, the supplier and grower provide the lender with a notification statement and opportunity to respond in accordance with this section;
(ii) The security interest is perfected within twenty (20) days after the agricultural chemicals are delivered to the grower; and
(iii) The agricultural chemicals are actually applied to the grower’s land or crops during the period September 1 through December 15.
(3) "Grower" shall mean a specified debtor of a lender.
(4) "Lender" shall mean the holder of an existing perfected security interest in crops of a grower.
(5) "Letter of response" shall mean a statement by a lender containing the information specified in subsection (j) of this section.
(6) "Notification statement" shall mean a statement by a supplier containing the information specified in subsection (h) of this section.
(7) "Supplier" shall mean a person who supplies agricultural chemicals to a grower.
(b) A supplier may obtain a fall agricultural chemical security interest as provided in this section. To the extent not otherwise expressly provided in this section, the provisions of this chapter apply to a fall agricultural chemical security interest. The amount secured by a fall agricultural security interest shall be the lesser of: (i) the agreed charges for the agricultural chemicals and application costs provided pursuant to the notification statement; or (ii) the amount of the anticipated charges as reflected in the notification statement.
(c) A fall agricultural chemical security interest attaches to the existing crops upon the land where the agricultural chemical is applied, or if crops are not planted at the time of the application, to the next production crop from that land. It does not attach to crops already harvested or which are harvested before December 15 from such land, or to crops to be grown on such land after the next production crop, or to crops grown on other land than that identified in the notification statement.
(d) A fall agricultural chemical security interest is perfected by filing a financing statement.
(e) A fall agricultural chemical security interest shall have priority over a conflicting security interest in the same crops and identifiable proceeds thereof except for a prior perfected fall agricultural chemical security interest. In the event of any commingling of crops or proceeds covered by a fall agricultural chemical security interest with other crops or proceeds, the burden of proving the applicability of the fall agricultural chemical security interest to any particular crops or proceeds is on the supplier asserting it.
(f) Nothing in this section is intended to limit the priority of agricultural liens established by the statutes creating such liens, and a perfected agricultural lien shall have priority over a conflicting security interest (including a fall agricultural chemical security interest) if the statute creating the agricultural lien provides such priority.
(g) A supplier may notify the lender that the supplier intends to supply agricultural chemicals to the grower and that the supplier requests the lender to issue a letter of response. In order to so notify the lender, the supplier shall provide a notification statement to the lender in an envelope marked CROP SECURITY INTEREST NOTIFICATION STATEMENT, sent by certified mail addressed to the lender at the address for such lender shown on such lender’s most recently filed UCC-1F financing statement regarding that grower.
(h) A notification statement shall contain:
(1) The name, address and signature of the supplier providing the notification statement;
(2) The date the notification statement was prepared;
(3) The name and address of the lender;
(4) The name and address of the person to whom the lender’s response to the supplier should be addressed;
(5) A description and anticipated date of the application of agricultural chemicals and the anticipated charges for the agricultural chemicals, including anticipated application costs;
(6) The name, address and signature of the grower to whom the supplier furnished or intends to furnish agricultural chemicals;
(7) A reasonable description of the real estate sufficient to identify the same where the agricultural chemicals are to be applied;
(8) The name and address of the owner (if other than the grower) of such real property;
(9) A description of the crops growing or to be grown on such real property as to which the supplier intends to supply agricultural chemicals and upon which the supplier claims or intends to obtain a security interest;
(10) The social security number or federal tax identification number of the grower to whom the supplier intends to provide agricultural chemicals; and
(11) The social security number or federal tax identification number of the supplier providing the notice.
(i) Within fifteen (15) days after actual receipt of a notification statement, the lender shall deposit in the U.S. mail, certified, a letter of response to the supplier. A copy of the lender’s letter of response shall be sent to the grower.
(j) A letter of response shall contain the name, address and signature of the lender, and either
(1) A statement by the lender that there is an outstanding commitment for operating financing from the lender to the grower, and that the lender shall reserve the amount in the notification statement for the purpose of honoring drafts or other demands for payment by the supplier accompanied by invoices signed by the grower or other proof of delivery signed by the grower; or
(2) A statement by the lender that the lender shall subordinate the priority of its security interest in specified crops of the grower to the priority of the security interest in such crops obtained or to be obtained by the supplier, and specifying that the maximum amount of such subordination shall be the amount stated in the notification statement; or
(3) A statement by the lender that it declines to either reserve funds or subordinate its security interest.
(k) If the lender’s letter of response states that the lender declines to either reserve funds or subordinate its security interest, the respective rights of the lender and the supplier are not affected by this section and the relative priority between the lender’s security interest in crops, and any security interest obtained by the supplier in such crops, shall be determined according to the ordinary rules governing the priority of conflicting security interests in the same collateral, unless the supplier’s security interest is a fall agricultural chemical security interest.
(l) If the lender does not mail its letter of response to the supplier within fifteen (15) days after receiving the notification statement, and the supplier has perfected a security interest in such crops or perfects such security interest within ten (10) days after the expiration of the fifteen (15) day period for the lender to respond, the supplier’s perfected security interest in such crops shall take priority over the lender’s perfected security interest in such crops, but only to the extent of the lesser of (1) the amount stated in the notification statement, or (2) the unpaid agreed charges for the agricultural chemicals identified in the notification statement and actually applied to, or for the benefit of, such crops.
(m) Any amounts repaid by any person on the grower’s obligation for which the supplier has obtained an agricultural chemical security interest shall reduce the value of the agricultural chemical security interest on a dollar-for-dollar basis, and amounts may not be reborrowed or readvanced under the same notification statement. If the supplier receives proceeds of any collateral of the lender (other than proceeds of the crops covered by the fall agricultural security interest), such proceeds shall be turned over to the lender. In order to obtain the benefits of this section, any additional sales of agricultural chemicals not included in the original notification statement must be the subject of a new notification statement, to which the lender may issue a new letter of response.
(n) No one but the supplier shall be entitled to rely on a letter of response. Rights (if any) under a letter of response are not assignable, except in connection with an assignment by the supplier of the entire security interest to which such letter of response relates. By issuing a letter of response and performing thereunder, the lender does not become a partner, joint venturer or fiduciary of either the grower or the supplier.
(o) (1) The secretary of state shall publish a form substantially as follows:
Name of supplier
Address
SSN/TIN
Date notification statement was prepared
Name of lender
Address
Name of person to whom lender’s response to supplier should be addressed
Address
Description and anticipated date of the application of agricultural chemicals
Anticipated charges for the agricultural chemicals
Anticipated charges for application, if not included in charges for chemicals
Name of grower
Address
SSN/TIN
Reasonable description of the real estate where the agricultural chemicals are to be applied
.
Name of owner of real property (if other than grower)
.
Address
Crops growing or to be grown on such real property as to which the supplier intends to supply agricultural chemicals and upon which supplier intends to obtain a security interest
.
Signature of supplier
Signature of grower
(2) On the reverse side of the form described in subsection (1) of this section, the secretary of state shall provide a form for the lender’s letter of response, substantially as follows:
Name of lender
Address
Lender responds to notification statement as follows (choose one):
□ An outstanding commitment for operating financing exists for
this grower. Of that commitment, lender hereby reserves the amount specified in the notification statement for the purpose of honoring drafts or other demands for payment by supplier, accompanied by invoices signed by grower or other proof of delivery signed by grower.
□ Lender hereby subordinates the priority of its security
interest in (specify crops) ……………….. of grower to the priority of the security interest in such crops obtained or to be obtained by supplier, such subordination to be in the amount specified in the notification statement.
□ Lender declines to either reserve funds or subordinate its
security interest.
Signature of lender
(3) Suppliers and lenders are required to use the form published by the secretary of state.
[28-9-322A, added 2001, ch. 208, sec. 2, p. 742.]
(a) Except as otherwise provided in subsection (c) of this section, for purposes of determining the priority of a perfected security interest under section 28-9-322(a)(1), perfection of the security interest dates from the time an advance is made to the extent that the security interest secures an advance that:
(1) Is made while the security interest is perfected only:
(A) under section 28-9-309 when it attaches; or
(B) temporarily under section 28-9-312(e), (f) or (g); and
(2) Is not made pursuant to a commitment entered into before or while the security interest is perfected by a method other than under section 28-9-309 or 28-9-312(e), (f) or (g).
(b) Except as otherwise provided in subsection (c) of this section, a security interest is subordinate to the rights of a person that becomes a lien creditor to the extent that the security interest secures an advance made more than forty-five (45) days after the person becomes a lien creditor unless the advance is made:
(1) Without knowledge of the lien; or
(2) Pursuant to a commitment entered into without knowledge of the lien.
(c) Subsections (a) and (b) of this section do not apply to a security interest held by a secured party that is a buyer of accounts, chattel paper, payment intangibles, or promissory notes or a consignor.
(d) Except as otherwise provided in subsection (e) of this section, a buyer of goods other than a buyer in ordinary course of business takes free of a security interest to the extent that it secures advances made after the earlier of:
(1) The time the secured party acquires knowledge of the buyer’s purchase; or
(2) Forty-five (45) days after the purchase.
(e) Subsection (d) of this section does not apply if the advance is made pursuant to a commitment entered into without knowledge of the buyer’s purchase and before the expiration of the forty-five (45) day period.
(f) Except as otherwise provided in subsection (g) of this section, a lessee of goods, other than a lessee in ordinary course of business, takes the leasehold interest free of a security interest to the extent that it secures advances made after the earlier of:
(1) The time the secured party acquires knowledge of the lease; or
(2) Forty-five (45) days after the lease contract becomes enforceable.
(g) Subsection (f) of this section does not apply if the advance is made pursuant to a commitment entered into without knowledge of the lease and before the expiration of the forty-five (45) day period.
[28-9-323, added 2001, ch. 208, sec. 2, p. 746.]
(a) Except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods and, except as otherwise provided in section 28-9-327, a perfected security interest in its identifiable proceeds also has priority, if the purchase-money security interest is perfected when the debtor receives possession of the collateral or within twenty (20) days thereafter.
(b) Subject to subsection (c) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in inventory has priority over a conflicting security interest in the same inventory, has priority over a conflicting security interest in chattel paper or an instrument constituting proceeds of the inventory and in proceeds of the chattel paper, if so provided in section 28-9-330, and, except as otherwise provided in section 28-9-327, also has priority in identifiable cash proceeds of the inventory to the extent the identifiable cash proceeds are received on or before the delivery of the inventory to a buyer, if:
(1) The purchase-money security interest is perfected when the debtor receives possession of the inventory;
(2) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
(3) The holder of the conflicting security interest receives the notification within five (5) years before the debtor receives possession of the inventory; and
(4) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory.
(c) Subsections (b)(2) through (b)(4) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of inventory:
(1) If the purchase-money security interest is perfected by filing, before the date of the filing; or
(2) If the purchase-money security interest is temporarily perfected without filing or possession under section 28-9-312(f), before the beginning of the twenty (20) day period thereunder.
(d) Subject to subsection (e) of this section and except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in livestock that are farm products has priority over a conflicting security interest in the same livestock and, except as otherwise provided in section 28-9-327, a perfected security interest in their identifiable proceeds and identifiable products in their unmanufactured states also has priority, if:
(1) The purchase-money security interest is perfected when the debtor receives possession of the livestock;
(2) The purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest;
(3) The holder of the conflicting security interest receives the notification within six (6) months before the debtor receives possession of the livestock; and
(4) The notification states that the person sending the notification has or expects to acquire a purchase-money security interest in livestock of the debtor and describes the livestock.
(e) Subsections (d)(2) through (d)(4) of this section apply only if the holder of the conflicting security interest had filed a financing statement covering the same types of livestock:
(1) If the purchase-money security interest is perfected by filing, before the date of the filing; or
(2) If the purchase-money security interest is temporarily perfected without filing or possession under section 28-9-312(f), before the beginning of the twenty (20) day period thereunder.
(f) Except as otherwise provided in subsection (g) of this section, a perfected purchase-money security interest in software has priority over a conflicting security interest in the same collateral and, except as otherwise provided in section 28-9-327, a perfected security interest in its identifiable proceeds also has priority, to the extent that the purchase-money security interest in the goods in which the software was acquired for use has priority in the goods and proceeds of the goods under this section.
(g) If more than one (1) security interest qualifies for priority in the same collateral under subsection (a), (b), (d) or (f) of this section:
(1) A security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of collateral; and
(2) In all other cases, section 28-9-322(a) applies to the qualifying security interests.
[28-9-324, added 2001, ch. 208, sec. 2, p. 747.]
(a) Except as otherwise provided in subsection (b) of this section, a security interest created by a debtor is subordinate to a security interest in the same collateral created by another person if:
(1) The debtor acquired the collateral subject to the security interest created by the other person;
(2) The security interest created by the other person was perfected when the debtor acquired the collateral; and
(3) There is no period thereafter when the security interest is unperfected.
(b) Subsection (a) of this section subordinates a security interest only if the security interest:
(1) Otherwise would have priority solely under section 28-9-322(a) or 28-9-324; or
(2) Arose solely under section 28-2-711(3) or 28-12-508(5).
[28-9-325, added 2001, ch. 208, sec. 2, p. 748.]
(a) Subject to subsection (b) of this section, a security interest that is created by a new debtor in collateral in which the new debtor has or acquires rights and perfected by a filed financing statement that would be ineffective to perfect the security interest but for the application of sections 28-9-316(i)(1) and 28-9-508, Idaho Code, is subordinate to a security interest in the same collateral which is perfected other than by such a filed financing statement.
(b) The other provisions of this part determine the priority among conflicting security interests in the same collateral perfected by filed financing statements described in subsection (a) of this section. However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor’s having become bound.
[28-9-326, added 2001, ch. 208, sec. 2, p. 749; am. 2012, ch. 145, sec. 7, p. 395.]
The following rules govern priority among conflicting security interests in the same deposit account:
(1) A security interest held by a secured party having control of the deposit account under section 28-9-104 has priority over a conflicting security interest held by a secured party that does not have control.
(2) Except as otherwise provided in subsections (3) and (4) of this section, security interests perfected by control under section 28-9-314 rank according to priority in time of obtaining control.
(3) Except as otherwise provided in subsection (4) of this section, a security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party.
(4) A security interest perfected by control under section 28-9-104(a)(3) has priority over a security interest held by the bank with which the deposit account is maintained.
[28-9-327, added 2001, ch. 208, sec. 2, p. 749.]
The following rules govern priority among conflicting security interests in the same investment property:
(1) A security interest held by a secured party having control of investment property under section 28-9-106 has priority over a security interest held by a secured party that does not have control of the investment property.
(2) Except as otherwise provided in subsections (3) and (4) of this section, conflicting security interests held by secured parties each of which has control under section 28-9-106 rank according to priority in time of:
(A) If the collateral is a security, obtaining control;
(B) If the collateral is a security entitlement carried in a securities account and:
(i) if the secured party obtained control under section 28-8-106(4)(a), the secured party’s becoming the person for which the securities account is maintained;
(ii) if the secured party obtained control under section 28-8-106(4)(b), the securities intermediary’s agreement to comply with the secured party’s entitlement orders with respect to security entitlements carried or to be carried in the securities account; or
(iii) if the secured party obtained control through another person under section 28-8-106(4)(c), the time on which priority would be based under this paragraph if the other person were the secured party; or
(C) If the collateral is a commodity contract carried with a commodity intermediary, the satisfaction of the requirement for control specified in section 28-9-106(b)(2) with respect to commodity contracts carried or to be carried with the commodity intermediary.
(3) A security interest held by a securities intermediary in a security entitlement or a securities account maintained with the securities intermediary has priority over a conflicting security interest held by another secured party.
(4) A security interest held by a commodity intermediary in a commodity contract or a commodity account maintained with the commodity intermediary has priority over a conflicting security interest held by another secured party.
(5) A security interest in a certificated security in registered form which is perfected by taking delivery under section 28-9-313(a) and not by control under section 28-9-314 has priority over a conflicting security interest perfected by a method other than control.
(6) Conflicting security interests created by a broker, securities intermediary or commodity intermediary which are perfected without control under section 28-9-106 rank equally.
(7) In all other cases, priority among conflicting security interests in investment property is governed by sections 28-9-322 and 28-9-323.
[28-9-328, added 2001, ch. 208, sec. 2, p. 749.]
The following rules govern priority among conflicting security interests in the same letter of credit right:
(1) A security interest held by a secured party having control of the letter of credit right under section 28-9-107 has priority to the extent of its control over a conflicting security interest held by a secured party that does not have control.
(2) Security interests perfected by control under section 28-9-314 rank according to priority in time of obtaining control.
[28-9-329, added 2001, ch. 208, sec. 2, p. 750.]
(a) A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed merely as proceeds of inventory subject to a security interest if:
(1) In good faith and in the ordinary course of the purchaser’s business, the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under section 28-9-105; and
(2) The chattel paper does not indicate that it has been assigned to an identified assignee other than the purchaser.
(b) A purchaser of chattel paper has priority over a security interest in the chattel paper which is claimed other than merely as proceeds of inventory subject to a security interest if the purchaser gives new value and takes possession of the chattel paper or obtains control of the chattel paper under section 28-9-105 in good faith, in the ordinary course of the purchaser’s business, and without knowledge that the purchase violates the rights of the secured party.
(c) Except as otherwise provided in section 28-9-327, a purchaser having priority in chattel paper under subsection (a) or (b) of this section also has priority in proceeds of the chattel paper to the extent that:
(1) Section 28-9-322 provides for priority in the proceeds; or
(2) The proceeds consist of the specific goods covered by the chattel paper or cash proceeds of the specific goods, even if the purchaser’s security interest in the proceeds is unperfected.
(d) Except as otherwise provided in section 28-9-331(a), a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.
(e) For purposes of subsections (a) and (b) of this section, the holder of a purchase-money security interest in inventory gives new value for chattel paper constituting proceeds of the inventory.
(f) For purposes of subsections (b) and (d) of this section, if chattel paper or an instrument indicates that it has been assigned to an identified secured party other than the purchaser, a purchaser of the chattel paper or instrument has knowledge that the purchase violates the rights of the secured party.
[28-9-330, added 2001, ch. 208, sec. 2, p. 750.]
(a) This chapter does not limit the rights of a holder in due course of a negotiable instrument, a holder to which a negotiable document of title has been duly negotiated, or a protected purchaser of a security. These holders or purchasers take priority over an earlier security interest, even if perfected, to the extent provided in chapters 3, 7 and 8.
(b) This chapter does not limit the rights of or impose liability on a person to the extent that the person is protected against the assertion of a claim under chapter 8.
(c) Filing under this chapter does not constitute notice of a claim or defense to the holders, or purchasers, or persons described in subsections (a) and (b) of this section.
[28-9-331, added 2001, ch. 208, sec. 2, p. 751.]
(a) A transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.
(b) A transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the rights of the secured party.
[28-9-332, added 2001, ch. 208, sec. 2, p. 751.]
(a) In this section, "possessory lien" means an interest, other than a security interest or an agricultural lien:
(1) Which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person’s business;
(2) Which is created by statute or rule of law in favor of the person; and
(3) Whose effectiveness depends on the person’s possession of the goods.
(b) A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise.
[28-9-333, added 2001, ch. 208, sec. 2, p. 752.]
(a) A security interest under this chapter may be created in goods that are fixtures or may continue in goods that become fixtures. A security interest does not exist under this chapter in ordinary building materials incorporated into an improvement on land.
(b) This chapter does not prevent creation of an encumbrance upon fixtures under real property law.
(c) In cases not governed by subsections (d) through (h) of this section, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor.
(d) Except as otherwise provided in subsection (h) of this section, a perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property and:
(1) The security interest is a purchase-money security interest;
(2) The interest of the encumbrancer or owner arises before the goods become fixtures; and
(3) The security interest is perfected by a fixture filing before the goods become fixtures or within twenty (20) days thereafter.
(e) A perfected security interest in fixtures has priority over a conflicting interest of an encumbrancer or owner of the real property if:
(1) The debtor has an interest of record in the real property or is in possession of the real property and the security interest:
(A) is perfected by a fixture filing before the interest of the encumbrancer or owner is of record; and
(B) has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner;
(2) Before the goods become fixtures, the security interest is perfected by any method permitted by this chapter and the fixtures are readily removable:
(A) factory or office machines;
(B) equipment that is not primarily used or leased for use in the operation of the real property; or
(C) replacements of domestic appliances that are consumer goods;
(3) The conflicting interest is a lien on the real property obtained by legal or equitable proceedings after the security interest was perfected by any method permitted by this chapter; or
(4) The security interest is:
(A) created in a manufactured home in a manufactured home transaction; and
(B) perfected pursuant to a statute described in section 28-9-311(a)(2).
(f) A security interest in fixtures, whether or not perfected, has priority over a conflicting interest of an encumbrancer or owner of the real property if:
(1) The encumbrancer or owner has, in an authenticated record, consented to the security interest or disclaimed an interest in the goods as fixtures; or
(2) The debtor has a right to remove the goods as against the encumbrancer or owner.
(g) The priority of the security interest under subsection (f)(2) of this section continues for a reasonable time if the debtor’s right to remove the goods as against the encumbrancer or owner terminates.
(h) A mortgage is a construction mortgage to the extent that it secures an obligation incurred for the construction of an improvement on land, including the acquisition cost of the land, if a recorded record of the mortgage so indicates. Except as otherwise provided in subsections (e) and (f) of this section, a security interest in fixtures is subordinate to a construction mortgage if a record of the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of the construction. A mortgage has this priority to the same extent as a construction mortgage to the extent that it is given to refinance a construction mortgage.
(i) A perfected security interest in crops growing on real property has priority over a conflicting interest of an encumbrancer or owner of the real property if the debtor has an interest of record in or is in possession of the real property.
[28-9-334, added 2001, ch. 208, sec. 2, p. 752.]
(a) A security interest may be created in an accession and continues in collateral that becomes an accession.
(b) If a security interest is perfected when the collateral becomes an accession, the security interest remains perfected in the collateral.
(c) Except as otherwise provided in subsections (d) and (g) of this section, the other provisions of this part determine the priority of a security interest in an accession.
(d) Except as otherwise provided in subsection (g) of this section, a security interest in an accession is subordinate to a security interest in the whole which is perfected by compliance with the requirements of a certificate of title statute under section 28-9-311(b).
(e) After default, subject to part 6, a secured party may remove an accession from other goods if the security interest in the accession has priority over the claims of every person having an interest in the whole.
(f) A secured party that removes an accession from other goods under subsection (e) of this section shall promptly reimburse any holder of a security interest or other lien on, or owner of, the whole or of the other goods, other than the debtor, for the cost of repair of any physical injury to the whole or the other goods. The secured party need not reimburse the holder or owner for any diminution in value of the whole or the other goods caused by the absence of the accession removed or by any necessity for replacing it. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.
(g) A security interest in an accession has priority over a security interest in the whole which is perfected by compliance with the requirements of a certificate-of-title statute under subsection (b) of section 28-9-311, Idaho Code, if the security interest in the accession is a purchase money security interest that is perfected when the debtor receives possession of the accession or within twenty (20) days thereafter.
[28-9-335, added 2001, ch. 208, sec. 2, p. 753.]
(a) In this section, "commingled goods" means goods that are physically united with other goods in such a manner that their identity is lost in a product or mass.
(b) A security interest does not exist in commingled goods as such. However, a security interest may attach to a product or mass that results when goods become commingled goods.
(c) If collateral becomes commingled goods, a security interest attaches to the product or mass.
(d) If a security interest in collateral is perfected before the collateral becomes commingled goods, the security interest that attaches to the product or mass under subsection (c) of this section is perfected.
(e) Except as otherwise provided in subsection (f) of this section, the other provisions of this part determine the priority of a security interest that attaches to the product or mass under subsection (c) of this section.
(f) If more than one (1) security interest attaches to the product or mass under subsection (c) of this section, the following rules determine priority:
(1) A security interest that is perfected under subsection (d) of this section has priority over a security interest that is unperfected at the time the collateral becomes commingled goods.
(2) If more than one (1) security interest is perfected under subsection (d) of this section, the security interests rank equally in proportion to the value of the collateral at the time it became commingled goods.
[28-9-336, added 2001, ch. 208, sec. 2, p. 754.]
If, while a security interest in goods is perfected by any method under the law of another jurisdiction, this state issues a certificate of title that does not show that the goods are subject to the security interest or contain a statement that they may be subject to security interests not shown on the certificate:
(1) A buyer of the goods, other than a person in the business of selling goods of that kind, takes free of the security interest if the buyer gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest; and
(2) The security interest is subordinate to a conflicting security interest in the goods that attaches, and is perfected under section 28-9-311(b), after issuance of the certificate and without the conflicting secured party’s knowledge of the security interest.
[28-9-337, added 2001, ch. 208, sec. 2, p. 754.]
If a security interest or agricultural lien is perfected by a filed financing statement providing information described in section 28-9-516(b)(5) which is incorrect at the time the financing statement is filed:
(1) The security interest or agricultural lien is subordinate to a conflicting perfected security interest in the collateral to the extent that the holder of the conflicting security interest gives value in reasonable reliance upon the incorrect information; and
(2) A purchaser, other than a secured party, of the collateral takes free of the security interest or agricultural lien to the extent that, in reasonable reliance upon the incorrect information, the purchaser gives value and, in the case of tangible chattel paper, tangible documents, goods, instruments, or a security certificate, receives delivery of the collateral.
[28-9-338, added 2001, ch. 208, sec. 2, p. 755; am. 2004, ch. 42, sec. 31, p. 133.]
This article does not preclude subordination by agreement by a person entitled to priority.
[28-9-339, added 2001, ch. 208, sec. 2, p. 755.]
(a) Except as otherwise provided in subsection (c) of this section, a bank with which a deposit account is maintained may exercise any right of recoupment or set-off against a secured party that holds a security interest in the deposit account.
(b) Except as otherwise provided in subsection (c) of this section, the application of this chapter to a security interest in a deposit account does not affect a right of recoupment or set-off of the secured party as to a deposit account maintained with the secured party.
(c) The exercise by a bank of a set-off against a deposit account is ineffective against a secured party that holds a security interest in the deposit account which is perfected by control under section 28-9-104(a)(3), if the set-off is based on a claim against the debtor.
[28-9-340, added 2001, ch. 208, sec. 2, p. 755.]
Except as otherwise provided in section 28-9-340(c), and unless the bank otherwise agrees in an authenticated record, a bank’s rights and duties with respect to a deposit account maintained with the bank are not terminated, suspended or modified by:
(1) The creation, attachment or perfection of a security interest in the deposit account;
(2) The bank’s knowledge of the security interest; or
(3) The bank’s receipt of instructions from the secured party.
[28-9-341, added 2001, ch. 208, sec. 2, p. 755.]
This chapter does not require a bank to enter into an agreement of the kind described in section 28-9-104(a)(2), even if its customer so requests or directs. A bank that has entered into such an agreement is not required to confirm the existence of the agreement to another person unless requested to do so by its customer.
[28-9-342, added 2001, ch. 208, sec. 2, p. 755.]
(a) Except as otherwise provided in subsection (b) of this section and sections 28-9-406, 28-9-407, 28-9-408 and 28-9-409, whether a debtor’s rights in collateral may be voluntarily or involuntarily transferred is governed by law other than this chapter.
(b) An agreement between the debtor and secured party which prohibits a transfer of the debtor’s rights in collateral or makes the transfer a default does not prevent the transfer from taking effect.
[28-9-401, added 2001, ch. 208, sec. 2, p. 756.]
The existence of a security interest, agricultural lien, or authority given to a debtor to dispose of or use collateral, without more, does not subject a secured party to liability in contract or tort for the debtor’s acts or omissions.
[28-9-402, added 2001, ch. 208, sec. 2, p. 756.]
(a) In this section, "value" has the meaning provided in section 28-3-303(1).
(b) Except as otherwise provided in this section, an agreement between an account debtor and an assignor not to assert against an assignee any claim or defense that the account debtor may have against the assignor is enforceable by an assignee that takes an assignment:
(1) For value;
(2) In good faith;
(3) Without notice of a claim of a property or possessory right to the property assigned; and
(4) Without notice of a defense or claim in recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under section 28-3-305(1).
(c) Subsection (b) of this section does not apply to defenses of a type that may be asserted against a holder in due course of a negotiable instrument under section 28-3-305(2).
(d) In a consumer transaction, if a record evidences the account debtor’s obligation, law other than this chapter requires that the record include a statement to the effect that the rights of an assignee are subject to claims or defenses that the account debtor could assert against the original obligee, and the record does not include such a statement:
(1) The record has the same effect as if the record included such a statement; and
(2) The account debtor may assert against an assignee those claims and defenses that would have been available if the record included such a statement.
(e) This section is subject to law other than this chapter which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family or household purposes.
(f) Except as otherwise provided in subsection (d) of this section, this section does not displace law other than this chapter which gives effect to an agreement by an account debtor not to assert a claim or defense against an assignee.
[28-9-403, added 2001, ch. 208, sec. 2, p. 756.]
(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) through (e) of this section, the rights of an assignee are subject to:
(1) All terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and
(2) Any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.
(b) Subject to subsection (c) of this section and except as otherwise provided in subsection (d) of this section, the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) of this section only to reduce the amount the account debtor owes.
(c) This section is subject to law other than this chapter which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family or household purposes.
(d) In a consumer transaction, if a record evidences the account debtor’s obligation, law other than this chapter requires that the record include a statement to the effect that the account debtor’s recovery against an assignee with respect to claims and defenses against the assignor may not exceed amounts paid by the account debtor under the record, and the record does not include such a statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included such a statement.
(e) This section does not apply to an assignment of a health care insurance receivable.
[28-9-404, added 2001, ch. 208, sec. 2, p. 757.]
(a) A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor. This subsection is subject to subsections (b) through (d) of this section.
(b) Subsection (a) of this section applies to the extent that:
(1) The right to payment or a part thereof under an assigned contract has not been fully earned by performance; or
(2) The right to payment or a part thereof has been fully earned by performance and the account debtor has not received notification of the assignment under section 28-9-406(a).
(c) This section is subject to law other than this chapter which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family or household purposes.
(d) This section does not apply to an assignment of a health care insurance receivable.
[28-9-405, added 2001, ch. 208, sec. 2, p. 757.]
(a) Subject to subsections (b) through (i) of this section, an account debtor on an account, chattel paper or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.
(b) Subject to subsection (h) of this section, notification is ineffective under subsection (a) of this section:
(1) If it does not reasonably identify the rights assigned;
(2) To the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor’s duty to pay a person other than the seller and the limitation is effective under law other than this chapter; or
(3) At the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:
(A) only a portion of the account, chattel paper or payment intangible has been assigned to that assignee;
(B) a portion has been assigned to another assignee; or
(C) the account debtor knows that the assignment to that assignee is limited.
(c) Subject to subsection (h) of this section, if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a) of this section.
(d) Except as otherwise provided in subsection (e) of this section and sections 28-9-407 and 28-12-303, Idaho Code, and subject to subsection (h) of this section, a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:
(1) Prohibits, restricts or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, the account, chattel paper, payment intangible or promissory note; or
(2) Provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible or promissory note.
(e) Subsection (d) of this section does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under section 28-9-610, Idaho Code, or an acceptance of collateral under section 28-9-620, Idaho Code.
(f) Except as otherwise provided in sections 28-9-407 and 28-12-303, Idaho Code, and subject to subsections (h) and (i) of this section, a rule of law, statute, rule or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, rule or regulation:
(1) Prohibits, restricts or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; or
(2) Provides that the assignment or transfer or the creation, attachment, perfection or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy under the account or chattel paper.
(g) Subject to subsection (h) of this section, an account debtor may not waive or vary its option under subsection (b)(3) of this section.
(h) This section is subject to law other than this chapter which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family or household purposes.
(i) This section does not apply to an assignment of a health care insurance receivable, an award of compensation made pursuant to the crime victims compensation act, chapter 10, title 72, Idaho Code, or a lottery prize subject to the provisions of chapter 74, title 67, Idaho Code.
[28-9-406, added 2001, ch. 208, sec. 2, p. 758; am. 2012, ch. 145, sec. 8, p. 395.]
(a) Except as otherwise provided in subsection (b) of this section, a term in a lease agreement is ineffective to the extent that it:
(1) Prohibits, restricts or requires the consent of a party to the lease to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, an interest of a party under the lease contract or in the lessor’s residual interest in the goods; or
(2) Provides that the assignment or transfer or the creation, attachment, perfection or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the lease.
(b) Except as otherwise provided in section 28-12-303(7), a term described in subsection (a)(2) of this section is effective to the extent that there is:
(1) A transfer by the lessee of the lessee’s right of possession or use of the goods in violation of the term; or
(2) A delegation of a material performance of either party to the lease contract in violation of the term.
(c) The creation, attachment, perfection or enforcement of a security interest in the lessor’s interest under the lease contract or the lessor’s residual interest in the goods is not a transfer that materially impairs the lessee’s prospect of obtaining return performance or materially changes the duty of or materially increases the burden or risk imposed on the lessee within the purview of section 28-12-303(4) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the lessor.
[28-9-407, added 2001, ch. 208, sec. 2, p. 759.]
(a) Except as otherwise provided in subsection (b) of this section, a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health care insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health care insurance receivable, or general intangible, is ineffective to the extent that the term:
(1) Would impair the creation, attachment or perfection of a security interest; or
(2) Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health care insurance receivable, or general intangible.
(b) Subsection (a) of this section applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory note, other than a sale pursuant to a disposition under section 28-9-610, Idaho Code, or an acceptance of collateral under section 28-9-620, Idaho Code.
(c) A rule of law, statute, rule or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health care insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute or regulation:
(1) Would impair the creation, attachment or perfection of a security interest; or
(2) Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health care insurance receivable, or general intangible.
(d) To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health care insurance receivable or general intangible or a rule of law, statute or regulation described in subsection (c) of this section would be effective under law other than this chapter but is ineffective under subsection (a) or (c) of this section, the creation, attachment, or perfection of a security interest in the promissory note, health care insurance receivable, or general intangible:
(1) Is not enforceable against the person obligated on the promissory note or the account debtor;
(2) Does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;
(3) Does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party;
(4) Does not entitle the secured party to use or assign the debtor’s rights under the promissory note, health care insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health care insurance receivable, or general intangible;
(5) Does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor; and
(6) Does not entitle the secured party to enforce the security interest in the promissory note, health care insurance receivable, or general intangible.
[28-9-408, added 2001, ch. 208, sec. 2, p. 760; am. 2012, ch. 145, sec. 9, p. 396.]
(a) A term in a letter of credit or a rule of law, statute, rule, regulation, custom or practice applicable to the letter of credit which prohibits, restricts or requires the consent of an applicant, issuer or nominated person to a beneficiary’s assignment of or creation of a security interest in a letter of credit right is ineffective to the extent that the term or rule of law, statute, rule, regulation, custom or practice:
(1) Would impair the creation, attachment or perfection of a security interest in the letter of credit right; or
(2) Provides that the assignment or the creation, attachment or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the letter of credit right.
(b) To the extent that a term in a letter of credit is ineffective under subsection (a) of this section but would be effective under law other than this chapter or a custom or practice applicable to the letter of credit, to the transfer of a right to draw or otherwise demand performance under the letter of credit, or to the assignment of a right to proceeds of the letter of credit, the creation, attachment, or perfection of a security interest in the letter of credit right:
(1) Is not enforceable against the applicant, issuer, nominated person or transferee beneficiary;
(2) Imposes no duties or obligations on the applicant, issuer, nominated person or transferee beneficiary; and
(3) Does not require the applicant, issuer, nominated person or transferee beneficiary to recognize the security interest, pay or render performance to the secured party, or accept payment or other performance from the secured party.
[28-9-409, added 2001, ch. 208, sec. 2, p. 761.]
(a) Except as otherwise provided in subsection (b) of this section, if the local law of this state governs perfection of a security interest or agricultural lien, the office in which to file a financing statement to perfect the security interest or agricultural lien is:
(1) The office designated for the filing or recording of a record of a mortgage on the related real property, if:
(A) the collateral is as-extracted collateral or timber to be cut; or
(B) the financing statement is filed as a fixture filing and the collateral is goods that are or are to become fixtures; or
(2) The office of the secretary of state or any office duly authorized by the secretary of state, in all other cases, including a case in which the collateral is goods that are or are to become fixtures and the financing statement is not filed as a fixture filing.
(b) The office in which to file a financing statement to perfect a security interest in collateral, including fixtures, of a transmitting utility is the office of the secretary of state. The financing statement also constitutes a fixture filing as to the collateral indicated in the financing statement which is or is to become a fixture.
[28-9-501, added 2001, ch. 208, sec. 2, p. 761.]
(a) Subject to subsection (b) of this section, a financing statement is sufficient only if it:
(1) Provides the name of the debtor;
(2) Provides the name of the secured party or a representative of the secured party; and
(3) Indicates the collateral covered by the financing statement.
(b) Except as otherwise provided in section 28-9-501(b), Idaho Code, to be sufficient, a financing statement that covers as-extracted collateral or timber to be cut, or which is filed as a fixture filing and covers goods that are or are to become fixtures, must satisfy subsection (a) of this section and also:
(1) Indicate that it covers this type of collateral;
(2) Indicate that it is to be filed in the real property records;
(3) Provide a description of the real property to which the collateral is related sufficient to give constructive notice of a mortgage under the law of this state if the description were contained in a record of the mortgage of the real property; and
(4) If the debtor does not have an interest of record in the real property, provide the name of a record owner.
(c) A record of a mortgage is effective, from the date of recording, as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut only if:
(1) The record indicates the goods or accounts that it covers;
(2) The goods are or are to become fixtures related to the real property described in the record or the collateral is related to the real property described in the record and is as-extracted collateral or timber to be cut;
(3) The record satisfies the requirements for a financing statement in this section, but:
(A) the record need not indicate that it is to be filed in the real property records; and
(B) the record sufficiently provides the name of a debtor who is an individual if it provides the individual name of the debtor or the surname and first personal name of the debtor, even if the debtor is an individual to whom section 28-9-503(a)(4), Idaho Code, applies; and
(4) The record is recorded.
(d) A financing statement may be filed before a security agreement is made or a security interest otherwise attaches.
(e) A financing statement covering farm products is sufficient if it:
(1) Contains the names and addresses of both the debtor and the secured party;
(2) Is signed, authorized or otherwise authenticated by the debtor;
(3) Contains the debtor’s social security number or other unique number, combination of numbers and letters, or other identifier selected by the secretary of state using a selection system or method approved by the secretary of agriculture, or in the case of a debtor doing business other than as an individual, the debtor’s internal revenue service taxpayer identification number or other approved unique identifier;
(4) Contains a description by category of the farm products subject to the security interest and the amount of such products, where applicable;
(5) Indicates the county or counties in which the farm products are produced or located.
(f) A financing statement covering farm products must be amended in writing and similarly signed, authorized or authenticated, and filed, to reflect any material changes. In the event such form is not incorporated within the financing statement, the effectiveness and continuation of that form is to be treated as if it were a part of the financing statement with which it is filed.
(g) If the financing statement covering farm products, or an amendment to such statement, is filed electronically, neither the debtor’s nor the secured party’s signature shall be required.
(h) In order to terminate a financing statement covering farm products, the amendment must be terminated in writing and signed or authenticated by the secured party.
[28-9-502, added 2001, ch. 208, sec. 2, p. 762; am. 2007, ch. 317, sec. 1, p. 945; am. 2012, ch. 145, sec. 10, p. 398.]
(a) A financing statement sufficiently provides the name of the debtor:
(1) Except as otherwise provided in paragraph (3) of this subsection, if the debtor is a registered organization or the collateral is held in a trust that is a registered organization, only if the financing statement provides the name that is stated to be the registered organization’s name on the public organic record most recently filed with or issued or enacted by the registered organization’s jurisdiction of organization which purports to state, amend or restate the registered organization’s name;
(2) Subject to subsection (f) of this section, if the collateral is being administered by the personal representative of a decedent, only if the financing statement provides, as the name of the debtor, the name of the decedent and, in a separate part of the financing statement, indicates that the collateral is being administered by a personal representative;
(3) If the collateral is held in a trust that is not a registered organization, only if the financing statement:
(A) provides, as the name of the debtor:
(i) if the organic record of the trust specifies a name for the trust, the name so specified; or
(ii) if the organic record of the trust does not specify a name for the trust, the name of the settlor or testator; and
(B) in a separate part of the financing statement:
(i) if the name is provided in accordance with subparagraph (A)(i) of this paragraph, indicates that the collateral is held in a trust; or
(ii) if the name is provided in accordance with subparagraph (A)(ii) of this paragraph, provides additional information sufficient to distinguish the trust from other trusts having one (1) or more of the same settlors or the same testator and indicates that the collateral is held in a trust, unless the additional information so indicates;
(4) Subject to subsection (g) of this section, if the debtor is an individual to whom this state has issued a driver’s license or an Idaho identification card that has not expired, only if it provides the name of the individual which is indicated on the driver’s license or the Idaho identification card;
(5) If the debtor is an individual to whom paragraph (4) of this subsection does not apply, only if it provides the individual name of the debtor or the surname and first personal name of the debtor; and
(6) In other cases:
(A) if the debtor has a name, only if it provides the organizational name of the debtor; and
(B) if the debtor does not have a name, only if it provides the names of the partners, members, associates or other persons comprising the debtor, in a manner that each name provided would be sufficient if the person named were the debtor.
(b) A financing statement that provides the name of the debtor in accordance with subsection (a) of this section is not rendered ineffective by the absence of:
(1) A trade name or other name of the debtor; or
(2) Unless required under subsection (a)(6)(B) of this section, names of partners, members, associates or other persons comprising the debtor.
(c) A financing statement that provides only the debtor’s trade name does not sufficiently provide the name of the debtor.
(d) Failure to indicate the representative capacity of a secured party or representative of a secured party does not affect the sufficiency of a financing statement.
(e) A financing statement may provide the name of more than one (1) debtor and the name of more than one (1) secured party.
(f) The name of the decedent indicated on the order appointing the personal representative of the decedent issued by the court having jurisdiction over the collateral is sufficient as the "name of the decedent" under subsection (a)(2) of this section.
(g) If this state has issued to an individual more than one (1) driver’s license or Idaho identification card of a kind described in subsection (a)(4) of this section, the one that was issued most recently is the one to which subsection (a)(4) of this section refers.
(h) The "name of the settlor or testator" means:
(1) If the settlor is a registered organization, the name of the registered organization indicated on the public organic record filed with or issued or enacted by the registered organization’s jurisdiction of organization; or
(2) In other cases, the name of the settlor or testator indicated in the trust’s organic record.
[28-9-503, added 2001, ch. 208, sec. 2, p. 763; am. 2012, ch. 145, sec. 11, p. 399.]
A financing statement sufficiently indicates the collateral that it covers if the financing statement provides:
(1) A description of the collateral pursuant to section 28-9-108; or
(2) An indication that the financing statement covers all assets or all personal property.
[28-9-504, added 2001, ch. 208, sec. 2, p. 764.]
(a) A consignor, lessor, or other bailor of goods, a licensor, or a buyer of a payment intangible or promissory note may file a financing statement, or may comply with a statute or treaty described in section 28-9-311(a), using the terms "consignor," "consignee," "lessor," "lessee," "bailor," "bailee," "licensor," "licensee," "owner," "registered owner," "buyer," "seller," or words of similar import, instead of the terms "secured party" and "debtor."
(b) This part applies to the filing of a financing statement under subsection (a) of this section and, as appropriate, to compliance that is equivalent to filing a financing statement under section 28-9-311(b), but the filing or compliance is not of itself a factor in determining whether the collateral secures an obligation. If it is determined for another reason that the collateral secures an obligation, a security interest held by the consignor, lessor, bailor, licensor, owner or buyer which attaches to the collateral is perfected by the filing or compliance.
[28-9-505, added 2001, ch. 208, sec. 2, p. 764.]
(a) A financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.
(b) Except as otherwise provided in subsection (c) of this section, a financing statement that fails sufficiently to provide the name of the debtor in accordance with section 28-9-503(a) is seriously misleading.
(c) If a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with section 28-9-503(a), the name provided does not make the financing statement seriously misleading.
(d) For purposes of section 28-9-508(b), the "debtor’s correct name" in subsection (c) of this section means the correct name of the new debtor.
[28-9-506, added 2001, ch. 208, sec. 2, p. 764.]
(a) A filed financing statement remains effective with respect to collateral that is sold, exchanged, leased, licensed, or otherwise disposed of and in which a security interest or agricultural lien continues, even if the secured party knows of or consents to the disposition.
(b) Except as otherwise provided in subsection (c) of this section and section 28-9-508, Idaho Code, a financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes seriously misleading under section 28-9-506, Idaho Code.
(c) If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under section 28-9-503(a), Idaho Code, so that the financing statement becomes seriously misleading under section 28-9-506, Idaho Code:
(1) The financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four (4) months after, the filed financing statement becomes seriously misleading; and
(2) The financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four (4) months after the filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four (4) months after that event.
[28-9-507, added 2001, ch. 208, sec. 2, p. 764; am. 2012, ch. 145, sec. 12, p. 400.]
(a) Except as otherwise provided in this section, a filed financing statement naming an original debtor is effective to perfect a security interest in collateral in which a new debtor has or acquires rights to the extent that the financing statement would have been effective had the original debtor acquired rights in the collateral.
(b) If the difference between the name of the original debtor and that of the new debtor causes a filed financing statement that is effective under subsection (a) of this section to be seriously misleading under section 28-9-506:
(1) The financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four (4) months after, the new debtor becomes bound under section 28-9-203(d); and
(2) The financing statement is not effective to perfect a security interest in collateral acquired by the new debtor more than four (4) months after the new debtor becomes bound under section 28-9-203(d) unless an initial financing statement providing the name of the new debtor is filed before the expiration of that time.
(c) This section does not apply to collateral as to which a filed financing statement remains effective against the new debtor under section 28-9-507(a).
[28-9-508, added 2001, ch. 208, sec. 2, p. 765.]
(a) A person may file an initial financing statement, amendment that adds collateral covered by a financing statement, or amendment that adds a debtor to a financing statement only if:
(1) The debtor authorizes the filing in an authenticated record or pursuant to subsection (b) or (c) of this section; or
(2) The person holds an agricultural lien that has become effective at the time of filing and the financing statement covers only collateral in which the person holds an agricultural lien.
(b) By authenticating or becoming bound as debtor by a security agreement, a debtor or new debtor authorizes the filing of an initial financing statement, and an amendment, covering:
(1) The collateral described in the security agreement; and
(2) Property that becomes collateral under section 28-9-315(a)(2), whether or not the security agreement expressly covers proceeds.
(c) By acquiring collateral in which a security interest or agricultural lien continues under section 28-9-315(a)(1), a debtor authorizes the filing of an initial financing statement, and an amendment, covering the collateral and property that becomes collateral under section 28-9-315(a)(2).
(d) A person may file an amendment other than an amendment that adds collateral covered by a financing statement or an amendment that adds a debtor to a financing statement only if:
(1) The secured party of record authorizes the filing; or
(2) The amendment is a termination statement for a financing statement as to which the secured party of record has failed to file or send a termination statement as required by section 28-9-513(a) or (c), the debtor authorizes the filing, and the termination statement indicates that the debtor authorized it to be filed.
(e) If there is more than one (1) secured party of record for a financing statement, each secured party of record may authorize the filing of an amendment under subsection (d) of this section.
[28-9-509, added 2001, ch. 208, sec. 2, p. 765.]
(a) A filed record is effective only to the extent that it was filed by a person that may file it under section 28-9-509.
(b) A record authorized by one (1) secured party of record does not affect the financing statement with respect to another secured party of record.
(c) A continuation statement that is not filed within the six (6) month period prescribed by section 28-9-515(d) is ineffective.
[28-9-510, added 2001, ch. 208, sec. 2, p. 766.]
(a) A secured party of record with respect to a financing statement is a person whose name is provided as the name of the secured party or a representative of the secured party in an initial financing statement that has been filed. If an initial financing statement is filed under section 28-9-514(a), the assignee named in the initial financing statement is the secured party of record with respect to the financing statement.
(b) If an amendment of a financing statement which provides the name of a person as a secured party or a representative of a secured party is filed, the person named in the amendment is a secured party of record. If an amendment is filed under section 28-9-514(b), the assignee named in the amendment is a secured party of record.
(c) A person remains a secured party of record until the filing of an amendment of the financing statement which deletes the person.
[28-9-511, added 2001, ch. 208, sec. 2, p. 766.]
(a) Subject to section 28-9-509, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or, subject to subsection (e) of this section, otherwise amend the information provided in, a financing statement by filing an amendment that:
(1) Identifies, by its file number, the initial financing statement to which the amendment relates; and
(2) If the amendment relates to an initial financing statement filed or recorded in a filing office described in section 28-9-501(a)(1), provides the information specified in section 28-9-502(b).
(b) Except as otherwise provided in section 28-9-515, the filing of an amendment does not extend the period of effectiveness of the financing statement.
(c) A financing statement that is amended by an amendment that adds collateral is effective as to the added collateral only from the date of the filing of the amendment.
(d) A financing statement that is amended by an amendment that adds a debtor is effective as to the added debtor only from the date of the filing of the amendment.
(e) An amendment is ineffective to the extent it:
(1) Purports to delete all debtors and fails to provide the name of a debtor to be covered by the financing statement; or
(2) Purports to delete all secured parties of record and fails to provide the name of a new secured party of record.
[28-9-512, added 2001, ch. 208, sec. 2, p. 766.]
(a) A secured party shall cause the secured party of record for a financing statement to file a termination statement for the financing statement if the financing statement covers consumer goods and:
(1) There is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or
(2) The debtor did not authorize the filing of the initial financing statement.
(b) To comply with subsection (a) of this section, a secured party shall cause the secured party of record to file the termination statement:
(1) Within one (1) month after there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; or
(2) If earlier, within twenty (20) days after the secured party receives an authenticated demand from a debtor.
(c) In cases not governed by subsection (a) of this section, within twenty (20) days after a secured party receives an authenticated demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:
(1) Except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value;
(2) The financing statement covers accounts or chattel paper that has been sold but as to which the account debtor or other person obligated has discharged its obligation;
(3) The financing statement covers goods that were the subject of a consignment to the debtor but are not in the debtor’s possession; or
(4) The debtor did not authorize the filing of the initial financing statement.
(d) Except as otherwise provided in section 28-9-510, upon the filing of a termination statement with the filing office, the financing statement to which the termination statement relates ceases to be effective. Except as otherwise provided in section 28-9-510, for purposes of sections 28-9-519(g), 28-9-522(a) and 28-9-523(c), the filing with the filing office of a termination statement relating to a financing statement that indicates that the debtor is a transmitting utility also causes the effectiveness of the financing statement to lapse.
[28-9-513, added 2001, ch. 208, sec. 2, p. 767.]
(a) Except as otherwise provided in subsection (c) of this section, an initial financing statement may reflect an assignment of all of the secured party’s power to authorize an amendment to the financing statement by providing the name and mailing address of the assignee as the name and address of the secured party.
(b) Except as otherwise provided in subsection (c) of this section, a secured party of record may assign of record all or part of its power to authorize an amendment to a financing statement by filing in the filing office an amendment of the financing statement which:
(1) Identifies, by its file number, the initial financing statement to which it relates;
(2) Provides the name of the assignor; and
(3) Provides the name and mailing address of the assignee.
(c) An assignment of record of a security interest in a fixture covered by a record of a mortgage which is effective as a financing statement filed as a fixture filing under section 28-9-502(c) may be made only by an assignment of record of the mortgage in the manner provided by law of this state other than the uniform commercial code.
[28-9-514, added 2001, ch. 208, sec. 2, p. 768.]
(a) Except as otherwise provided in section 28-9-705(g), Idaho Code, and subsections (b), (e), (f) and (g) of this section, a filed financing statement is effective for a period of five (5) years after the date of filing.
(b) Except as otherwise provided in subsections (e), (f) and (g) of this section, an initial financing statement filed in connection with a public finance transaction or manufactured home transaction is effective for a period of thirty (30) years after the date of filing if it indicates that it is filed in connection with a public finance transaction or manufactured home transaction.
(c) The effectiveness of a filed financing statement lapses on the expiration of the period of its effectiveness unless before the lapse a continuation statement is filed pursuant to subsection (d) of this section. Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless the security interest is perfected otherwise. If the security interest or agricultural lien becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral for value.
(d) Except as otherwise provided in section 28-9-705(g), Idaho Code, a continuation statement may be filed only within six (6) months before the expiration of the five (5) year period specified in subsection (a) of this section or the thirty (30) year period specified in subsection (b) of this section, whichever is applicable.
(e) Except as otherwise provided in sections 28-9-510 and 28-9-705(g), Idaho Code, upon timely filing of a continuation statement, the effectiveness of the initial financing statement continues for a period of five (5) years commencing on the day on which the financing statement would have become ineffective in the absence of the filing. Upon the expiration of the five (5) year period, the financing statement lapses in the same manner as provided in subsection (c) of this section, unless, before the lapse, another continuation statement is filed pursuant to subsection (d) of this section. Succeeding continuation statements may be filed in the same manner to continue the effectiveness of the initial financing statement.
(f) If a debtor is a transmitting utility and a filed initial financing statement so indicates, the financing statement is effective until a termination statement is filed.
(g) A record of a mortgage that is effective as a financing statement filed as a fixture filing under section 28-9-502(c), Idaho Code, remains effective as a financing statement filed as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real property.
[28-9-515, added 2001, ch. 208, sec. 2, p. 768; am. 2002, ch. 107, sec. 4, p. 302; am. 2012, ch. 145, sec. 13, p. 401.]
(a) Except as otherwise provided in subsection (b) of this section, communication of a record to a filing office and tender of the filing fee or acceptance of the record by the filing office constitutes filing.
(b) Filing does not occur with respect to a record that a filing office refuses to accept because:
(1) The record is not communicated by a method or medium of communication authorized by the filing office;
(2) An amount equal to or greater than the applicable filing fee is not tendered;
(3) The filing office is unable to index the record because:
(A) in the case of an initial financing statement, the record does not provide a name for the debtor;
(B) in the case of an amendment or information statement, the record:
(i) does not identify the initial financing statement as required by section 28-9-512 or 28-9-518, Idaho Code, as applicable; or
(ii) identifies an initial financing statement whose effectiveness has lapsed under section 28-9-515, Idaho Code;
(C) in the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor’s surname; or
(D) in the case of a record filed, or recorded, in the filing office described in section 28-9-501(a)(1), Idaho Code, the record does not provide a sufficient description of the real property to which it relates;
(4) In the case of an initial financing statement or an amendment that adds a secured party of record, the record does not provide a name and mailing address for the secured party of record;
(5) In the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, except for financing statements covering farm products and amendments of such financing statements, the record does not:
(A) provide a mailing address for the debtor; or
(B) indicate whether the name provided as the name of the debtor is the name of an individual or an organization;
(6) In the case of an assignment reflected in an initial financing statement under section 28-9-514(a), Idaho Code, or an amendment filed under section 28-9-514(b), Idaho Code, the record does not provide a name and mailing address for the assignee;
(7) In the case of a continuation statement, the record is not filed within the six (6) month period prescribed by section 28-9-515(d), Idaho Code;
(8) In the case of a financing statement covering farm products, the financing statement does not contain all of the information specified in section 28-9-502(e), Idaho Code, and does not conform to the official form for farm products financing statements published by the secretary of state; or
(9) In the case of an amendment or correction statement relating to a financing statement covering farm products, the amendment or correction statement does not conform to the official form for amendment or correction statements relating to financing statements covering farm products published by the secretary of state.
(10) The filing office is prohibited from accepting the filing pursuant to the provisions of section 28-9-516A, Idaho Code.
(c) For purposes of subsection (b) of this section:
(1) A record does not provide information if the filing office is unable to read or decipher the information; and
(2) A record that does not indicate that it is an amendment or identify an initial financing statement to which it relates, as required by section 28-9-512, 28-9-514 or 28-9-518, Idaho Code, is an initial financing statement.
(d) A record that is communicated to the filing office with tender of the filing fee, but which the filing office refuses to accept for a reason other than one set forth in subsection (b) of this section, is effective as a filed record except as against a purchaser of the collateral which gives value in reasonable reliance upon the absence of the record from the files.
[28-9-516, added 2001, ch. 208, sec. 2, p. 769; am. 2004, ch. 304, sec. 1, p. 852; am. 2012, ch. 145, sec. 14, p. 402.]
(1) The filing officer shall not file an initial financing statement or financing statement amendment:
(a) Which contains an assumed business name for either an individual or a business entity other than a general partnership if the assumed business name is designated as an assumed business name and the true name of the person using the assumed business name is not included.
(b) When an individual debtor and an individual secured party would, as a result of the filing, appear to be the same individual on the financing statement.
(2) The filing officer may require, prior to filing, reasonable proof from the secured party that an individual debtor is in fact a "transmitting utility" as defined in section 28-9-102, Idaho Code, if a filing indicates that the debtor is a transmitting utility.
(3) The filing officer may, prior to filing, cause to be unreadable any signatures, social security account numbers, taxpayer identification numbers, and employer identification numbers that appear on financing statements or financing statement amendments.
(4) The secretary of state may petition the district court in Ada county for an order to show cause why filings not in compliance with subsections (1) and (2) of this section should not be deleted from the files and records of the secretary of state.
[28-9-516A, added 2003, ch. 206, sec. 1, p. 549; am. 2012, ch. 145, sec. 15, p. 403.]
The failure of the filing office to index a record correctly does not affect the effectiveness of the filed record.
[28-9-517, added 2001, ch. 208, sec. 2, p. 770.]
(a) A person may file in the filing office an information statement with respect to a record indexed there under the person’s name if the person believes that the record is inaccurate or was wrongfully filed.
(b) An information statement under subsection (a) of this section must:
(1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;
(2) Indicate that it is an information statement; and
(3) Provide the basis for the person’s belief that the record is inaccurate and indicate the manner in which the person believes the record should be amended to cure any inaccuracy or provide the basis for the person’s belief that the record was wrongfully filed.
(c) A person may file in the filing office an information statement with respect to a record filed there if the person is a secured party of record with respect to the financing statement to which the record relates and believes that the person that filed the record was not entitled to do so under section 28-9-509(d), Idaho Code.
(d) An information statement under subsection (c) of this section must:
(1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;
(2) Indicate that it is an information statement; and
(3) Provide the basis for the person’s belief that the person that filed the record was not entitled to do so under section 28-9-509(d), Idaho Code.
(e) The filing of an information statement does not affect the effectiveness of an initial financing statement or other filed record.
(f) An information statement may be filed in connection with the previous filing of a financing statement covering farm products under section 28-9-502, Idaho Code.
[28-9-518, added 2001, ch. 208, sec. 2, p. 770; am. 2007, ch. 317, sec. 2, p. 946; am. 2012, ch. 145, sec. 16, p. 404.]
(a) For each record filed in a filing office, the filing office shall:
(1) Assign a unique number to the filed record;
(2) Create a record that bears the number assigned to the filed record and the date and time of filing;
(3) Maintain the filed record for public inspection; and
(4) Index the filed record in accordance with subsections (c), (d) and (e) of this section.
(b) A file number assigned after January 1, 2002, must include a digit that:
(1) Is mathematically derived from or related to the other digits of the file number; and
(2) Aids the filing office in determining whether a number communicated as the file number includes a single digit or transpositional error.
(c) Except as otherwise provided in subsections (d) and (e) of this section, the filing office shall:
(1) Index an initial financing statement according to the name of the debtor and index all filed records relating to the initial financing statement in a manner that associates with one another an initial financing statement and all filed records relating to the initial financing statement; and
(2) Index a record that provides a name of a debtor which was not previously provided in the financing statement to which the record relates also according to the name that was not previously provided.
(d) If a financing statement is filed as a fixture filing or covers as-extracted collateral or timber to be cut, it must be filed for record and the filing office shall index it:
(1) Under the names of the debtor and of each owner of record shown on the financing statement as if they were the mortgagors under a mortgage of the real property described; and
(2) To the extent that the law of this state provides for indexing of records of mortgages under the name of the mortgagee, under the name of the secured party as if the secured party were the mortgagee thereunder, or, if indexing is by description, as if the financing statement were a record of a mortgage of the real property described.
(e) If a financing statement is filed as a fixture filing or covers as-extracted collateral or timber to be cut, the filing office shall index an assignment filed under section 28-9-514(a) or an amendment filed under section 28-9-514(b):
(1) Under the name of the assignor as grantor; and
(2) To the extent that the law of this state provides for indexing a record of the assignment of a mortgage under the name of the assignee, under the name of the assignee.
(f) The filing office shall maintain a capability:
(1) To retrieve a record by the name of the debtor and by the file number assigned to the initial financing statement to which the record relates; and
(2) To associate and retrieve with one another an initial financing statement and each filed record relating to the initial financing statement.
(g) The filing office may not remove a debtor’s name from the index until one (1) year after the effectiveness of a financing statement naming the debtor lapses under section 28-9-515 with respect to all secured parties of record.
(h) The filing office shall perform the acts required by subsections (a) through (e) of this section at the time and in the manner prescribed by filing office rule, but not later than two (2) business days after the filing office receives the record in question.
(i) Subsections (b) and (h) of this section do not apply to a filing office described in section 28-9-501(a)(1).
[28-9-519, added 2001, ch. 208, sec. 2, p. 771.]
(a) A filing office shall refuse to accept a record for filing for a reason set forth in section 28-9-516(b) and may refuse to accept a record for filing only for a reason set forth in section 28-9-516(b).
(b) If a filing office refuses to accept a record for filing, it shall communicate to the person that presented the record the fact of and reason for the refusal and the date and time the record would have been filed had the filing office accepted it. The communication must be made at the time and in the manner prescribed by filing office rule but, in the case of a filing office described in section 28-9-501(a)(2), in no event more than two (2) business days after the filing office receives the record.
(c) A filed financing statement satisfying section 28-9-502(a) and (b) is effective, even if the filing office is required to refuse to accept it for filing under subsection (a) of this section. However, section 28-9-338 applies to a filed financing statement providing information described in section 28-9-516(b)(5) which is incorrect at the time the financing statement is filed.
(d) If a record communicated to a filing office provides information that relates to more than one (1) debtor, this part applies as to each debtor separately.
[28-9-520, added 2001, ch. 208, sec. 2, p. 772.]
(a) A filing office that accepts written records may not refuse to accept a written initial financing statement in the form and format as prescribed by the secretary of state that is in compliance with the standards of the uniform commercial code, except for a reason set forth in section 28-9-516(b), Idaho Code.
(b) A filing office that accepts written records may not refuse to accept a written record in the form and format as prescribed by the secretary of state that is in compliance with the standards of the uniform commercial code, except for a reason set forth in section 28-9-516(b), Idaho Code.
[28-9-521, added 2012, ch. 145, sec. 18, p. 404; am. 2025, ch. 111, sec. 1, p. 591.]
(a) The filing office shall maintain a record of the information provided in a filed financing statement for at least one (1) year after the effectiveness of the financing statement has lapsed under section 28-9-515 with respect to all secured parties of record. The record must be retrievable by using the name of the debtor and by using the file number assigned to the initial financing statement to which the record relates.
(b) Except to the extent that a statute governing disposition of public records provides otherwise, the filing office immediately may destroy any written record evidencing a financing statement. However, if the filing office destroys a written record, it shall maintain another record of the financing statement which complies with subsection (a) of this section.
[28-9-522, added 2001, ch. 208, sec. 2, p. 777.]
(a) If a person that files a written record requests an acknowledgment of the filing, the filing office shall send to the person an image of the record showing the number assigned to the record pursuant to section 28-9-519(a)(1) and the date and time of the filing of the record. However, if the person furnishes a copy of the record to the filing office, the filing office may instead:
(1) Note upon the copy the number assigned to the record pursuant to section 28-9-519(a)(1) and the date and time of the filing of the record; and
(2) Send the copy to the person.
(b) If a person files a record other than a written record, the filing office shall communicate to the person an acknowledgment that provides:
(1) The information in the record;
(2) The number assigned to the record pursuant to section 28-9-519(a)(1); and
(3) The date and time of the filing of the record.
(c) The filing office shall communicate or otherwise make available in a record the following information to any person that requests it:
(1) Whether there is on file on a date and time specified by the filing office, but not a date earlier than three (3) business days before the filing office receives the request, any financing statement that:
(A) designates a particular debtor;
(B) has not lapsed under section 28-9-515 with respect to all secured parties of record; and
(C) if the request so states, has lapsed under section 28-9-515 and a record of which is maintained by the filing office under section 28-9-522(a);
(2) The date and time of filing of each financing statement; and
(3) The information provided in each financing statement.
(d) In complying with its duty under subsection (c) of this section, the filing office may communicate information in any medium. However, if requested, the filing office shall communicate information by issuing a record that can be admitted into evidence in the courts of this state without extrinsic evidence of its authenticity.
(e) The filing office shall perform the acts required by subsections (a) through (d) of this section at the time and in the manner prescribed by filing office rule, but in the case of a filing office described in section 28-9-501(a)(2), not later than two (2) business days after the filing office receives the request.
(f) At least weekly, the filing office shall offer to sell or license to the public on a nonexclusive basis, in bulk, copies of all records filed in it under this part, in every medium from time to time available to the filing office.
(g) The secretary of state shall maintain a central filing system containing the information filed with his office pursuant to section 28-9-502(e). Under this system the secretary shall record the date and time of filing and compile the information into a master list organized according to farm products. The list shall be organized within each farm product category in alphabetical order according to the last name of the borrower or, in the case of borrowers doing business other than as individuals, the first word in the name of such borrower. The list shall be further organized according to and contain information required by federal law and regulation. The secretary of state shall, by duly adopted administrative rule, designate the categories of farm products to be used in compiling the master list. The secretary of state may establish and maintain, pursuant to duly adopted administrative rule, a separate system for filing of financing statements and search, retrieval and dissemination of information relating to financing statements for farm products, and require separate search requests for such information pursuant to a fee schedule to be established in such administrative rule.
(h) The secretary of state shall maintain a list of all buyers of farm products, commission merchants, and selling agents who register with the secretary of state indicating an interest in receiving the lists described in subsection (i) of this section.
(i) The secretary of state shall distribute complete master lists for each farm product category at least quarterly to each buyer, commission merchant and selling agent registered under subsection (h) of this section and distribute either complete lists or cumulative supplements, which supplements shall be issued not less frequently than semimonthly, of financing statements covering farm products filed subsequent to the last date of filing for financing statements on the last preceding quarterly master list, which the buyer, commission merchant or selling agent has requested. The date of receipt for lists and supplements shall be the third calendar day following the date of mailing by the secretary of state, or in the event the mail is not delivered on that day, the first day thereafter on which mail is delivered.
(j) Upon the request of any person the secretary of state shall provide, within twenty-four (24) hours, an oral confirmation of the filing of the financing statement covering farm products followed by a written confirmation.
(k) Upon request of any person, the filing officer shall furnish copies of particular filed financing statements covering farm products or statements of assignment covering farm products at a uniform cost of one dollar ($1.00) per page if the requestor provides the filing officer with the file numbers of the statement to be copied.
[28-9-523, added 2001, ch. 208, sec. 2, p. 777.]
Delay by the filing office beyond a time limit prescribed by this part is excused if:
(1) The delay is caused by interruption of communication or computer facilities, war, emergency conditions, failure of equipment, or other circumstances beyond control of the filing office; and
(2) The filing office exercises reasonable diligence under the circumstances.
[28-9-524, added 2001, ch. 208, sec. 2, p. 778.]
(a) Except as otherwise provided in subsection (e) of this section, the fee for filing and indexing a record under this part, other than an initial financing statement of the kind described in section 28-9-502(c), is:
(1) Six dollars ($6.00) if the record is communicated in writing and consists of one (1) or two (2) pages;
(2) Twelve dollars ($12.00) if the record is communicated in writing and consists of more than two (2) pages; and
(3) Three dollars ($3.00) if the record is communicated by another medium authorized by filing office rule.
(b) Except as otherwise provided in subsection (e) of this section, the fee for filing and indexing an initial financing statement of the kind described in section 28-9-502(c) is the amount specified in subsection (c) of this section, if applicable.
(c) The number of names required to be indexed does not affect the amount of the fee in subsections (a) and (b) of this section.
(d) The fee for responding to a request for information from the filing office, including for issuing a certificate showing whether there is on file any financing statement naming a particular debtor, is twelve dollars ($12.00).
(e) This section does not require a fee with respect to a record of a mortgage which is effective as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut under section 28-9-502(c). However, the recording and satisfaction fees that otherwise would be applicable to the record of the mortgage apply.
(f) The secretary of state shall, by administrative rule, establish a fee schedule for filing and indexing and other matters relating to filing of financing statements covering farm products and for public access to the secretary of state’s files which are open to public inspection. A secured party shall provide an itemization of fees paid by the secured party for filing, searches or other matters related to filing of financing statements covering farm products pertaining to that debtor.
[28-9-525, added 2001, ch. 208, sec. 2, p. 779.]
(a) The secretary of state shall promulgate rules to implement this chapter. The filing office rules must be:
(1) Consistent with this chapter; and
(2) Promulgated in accordance with the administrative procedure act, chapter 52, title 67, Idaho Code.
(b) To keep the filing office rules and practices of the filing office in harmony with the rules and practices of filing offices in other jurisdictions that enact substantially this part, and to keep the technology used by the filing office compatible with the technology used by filing offices in other jurisdictions that enact substantially this part, the secretary of state, so far as is consistent with the purposes, policies and provisions of this chapter, in adopting, amending and repealing filing office rules, shall:
(1) Consult with filing offices in other jurisdictions that enact substantially this part; and
(2) Consult the most recent version of the model rules promulgated by the international association of corporate administrators or any successor organization; and
(3) Take into consideration the rules and practices of, and the technology used by, filing offices in other jurisdictions that enact substantially this part.
[28-9-526, added 2001, ch. 208, sec. 2, p. 779.]
(a) After default, a secured party has the rights provided in this part and, except as otherwise provided in section 28-9-602, those provided by agreement of the parties. A secured party:
(1) May reduce a claim to judgment, foreclose or otherwise enforce the claim, security interest or agricultural lien by any available judicial procedure; and
(2) If the collateral is documents, may proceed either as to the documents or as to the goods they cover.
(b) A secured party in possession of collateral or control of collateral under section 28-7-106, 28-9-104, 28-9-105, 28-9-106 or 28-9-107 has the rights and duties provided in section 28-9-207.
(c) The rights under subsections (a) and (b) of this section are cumulative and may be exercised simultaneously.
(d) Except as otherwise provided in subsection (g) of this section and section 28-9-605, after default, a debtor and an obligor have the rights provided in this part and by agreement of the parties.
(e) If a secured party has reduced its claim to judgment, the lien of any levy that may be made upon the collateral by virtue of an execution based upon the judgment relates back to the earliest of:
(1) The date of perfection of the security interest or agricultural lien in the collateral;
(2) The date of filing a financing statement covering the collateral; or
(3) Any date specified in a statute under which the agricultural lien was created.
(f) A sale pursuant to an execution is a foreclosure of the security interest or agricultural lien by judicial procedure within the meaning of this section. A secured party may purchase at the sale and thereafter hold the collateral free of any other requirements of this chapter.
(g) Except as otherwise provided in section 28-9-607(c), this part imposes no duties upon a secured party that is a consignor or is a buyer of accounts, chattel paper, payment intangibles, or promissory notes.
[28-9-601, added 2001, ch. 208, sec. 2, p. 780; am. 2004, ch. 42, sec. 32, p. 133.]
Except as otherwise provided in section 28-9-624, to the extent that they give rights to a debtor or obligor and impose duties on a secured party, the debtor or obligor may not waive or vary the rules stated in the following listed sections:
(1) Section 28-9-207(b)(4)(C), which deals with use and operation of the collateral by the secured party;
(2) Section 28-9-210, which deals with requests for an accounting and requests concerning a list of collateral and statement of account;
(3) Section 28-9-607(c), which deals with collection and enforcement of collateral;
(4) Sections 28-9-608(a) and 28-9-615(c) to the extent that they deal with application or payment of noncash proceeds of collection, enforcement, or disposition;
(5) Sections 28-9-608(a) and 28-9-615(d) to the extent that they require accounting for or payment of surplus proceeds of collateral;
(6) Section 28-9-609 to the extent that it imposes upon a secured party that takes possession of collateral without judicial process the duty to do so without breach of the peace;
(7) Sections 28-9-610(b), 28-9-611, 28-9-613 and 28-9-614, which deal with disposition of collateral;
(8) Section 28-9-615(f), which deals with calculation of a deficiency or surplus when a disposition is made to the secured party, a person related to the secured party, or a secondary obligor;
(9) Section 28-9-616, which deals with explanation of the calculation of a surplus or deficiency;
(10) Sections 28-9-620, 28-9-621 and 28-9-622, which deal with acceptance of collateral in satisfaction of obligation;
(11) Section 28-9-623, which deals with redemption of collateral;
(12) Section 28-9-624, which deals with permissible waivers; and
(13) Sections 28-9-625 and 28-9-626, which deal with the secured party’s liability for failure to comply with this chapter.
[28-9-602, added 2001, ch. 208, sec. 2, p. 780.]
(a) The parties may determine by agreement the standards measuring the fulfillment of the rights of a debtor or obligor and the duties of a secured party under a rule stated in section 28-9-602 if the standards are not manifestly unreasonable.
(b) Subsection (a) of this section does not apply to the duty under section 28-9-609 to refrain from breaching the peace.
[28-9-603, added 2001, ch. 208, sec. 2, p. 781.]
(a) If a security agreement covers both personal and real property, a secured party may proceed:
(1) Under this part as to the personal property without prejudicing any rights with respect to the real property; or
(2) As to both the personal property and the real property in accordance with the rights with respect to the real property, in which case the other provisions of this part do not apply.
(b) Subject to subsection (c) of this section, if a security agreement covers goods that are or become fixtures, a secured party may proceed:
(1) Under this part; or
(2) In accordance with the rights with respect to real property, in which case the other provisions of this part do not apply.
(c) Subject to the other provisions of this part, if a secured party holding a security interest in fixtures has priority over all owners and encumbrancers of the real property, the secured party, after default, may remove the collateral from the real property.
(d) A secured party that removes collateral shall promptly reimburse any encumbrancer or owner of the real property, other than the debtor, for the cost of repair of any physical injury caused by the removal. The secured party need not reimburse the encumbrancer or owner for any diminution in value of the real property caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the secured party gives adequate assurance for the performance of the obligation to reimburse.
[28-9-604, added 2001, ch. 208, sec. 2, p. 781.]
A secured party does not owe a duty based on its status as secured party:
(1) To a person that is a debtor or obligor, unless the secured party knows:
(A) That the person is a debtor or obligor;
(B) The identity of the person; and
(C) How to communicate with the person; or
(2) To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:
(A) That the person is a debtor; and
(B) The identity of the person.
[28-9-605, added 2001, ch. 208, sec. 2, p. 782.]
For purposes of this part, a default occurs in connection with an agricultural lien at the time the secured party becomes entitled to enforce the lien in accordance with the statute under which it was created.
[28-9-606, added 2001, ch. 208, sec. 2, p. 782.]
(a) If so agreed, and in any event after default, a secured party:
(1) May notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party;
(2) May take any proceeds to which the secured party is entitled under section 28-9-315, Idaho Code;
(3) May enforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral;
(4) If it holds a security interest in a deposit account perfected by control under section 28-9-104(a)(1), Idaho Code, may apply the balance of the deposit account to the obligation secured by the deposit account; and
(5) If it holds a security interest in a deposit account perfected by control under section 28-9-104(a)(2) or (3), Idaho Code, may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party.
(b) If necessary to enable a secured party to exercise, under subsection (a)(3) of this section, the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:
(1) A copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and
(2) The secured party’s sworn affidavit in recordable form stating that:
(A) a default has occurred with respect to the obligation secured by the mortgage; and
(B) the secured party is entitled to enforce the mortgage nonjudicially.
(c) A secured party shall proceed in a commercially reasonable manner if the secured party:
(1) Undertakes to collect from or enforce an obligation of an account debtor or other person obligated on collateral; and
(2) Is entitled to charge back uncollected collateral or otherwise to full or limited recourse against the debtor or a secondary obligor.
(d) A secured party may deduct from the collections made pursuant to subsection (c) of this section reasonable expenses of collection and enforcement, including reasonable attorney’s fees and legal expenses incurred by the secured party.
(e) This section does not determine whether an account debtor, bank, or other person obligated on collateral owes a duty to a secured party.
[28-9-607, added 2001, ch. 208, sec. 2, p. 782; am. 2012, ch. 145, sec. 19, p. 409.]
(a) If a security interest or agricultural lien secures payment or performance of an obligation, the following rules apply:
(1) A secured party shall apply or pay over for application the cash proceeds of collection or enforcement under section 28-9-607 in the following order to:
(A) the reasonable expenses of collection and enforcement and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party;
(B) the satisfaction of obligations secured by the security interest or agricultural lien under which the collection or enforcement is made; and
(C) the satisfaction of obligations secured by any subordinate security interest in or other lien on the collateral subject to the security interest or agricultural lien under which the collection or enforcement is made if the secured party receives an authenticated demand for proceeds before distribution of the proceeds is completed.
(2) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder complies, the secured party need not comply with the holder’s demand under subsection (1)(C) of this section.
(3) A secured party need not apply or pay over for application noncash proceeds of collection and enforcement under section 28-9-607 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
(4) A secured party shall account to and pay a debtor for any surplus, and the obligor is liable for any deficiency.
(b) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles or promissory notes, the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.
[28-9-608, added 2001, ch. 208, sec. 2, p. 783.]
(a) After default, a secured party:
(1) May take possession of the collateral; and
(2) Without removal, may render equipment unusable and dispose of collateral on a debtor’s premises under section 28-9-610.
(b) A secured party may proceed under subsection (a) of this section:
(1) Pursuant to judicial process; or
(2) Without judicial process, if it proceeds without breach of the peace.
(c) If so agreed, and in any event after default, a secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties.
[28-9-609, added 2001, ch. 208, sec. 2, p. 784.]
(a) After default, a secured party may sell, lease, license or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.
(b) Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. If commercially reasonable, a secured party may dispose of collateral by public or private proceedings, by one (1) or more contracts, as a unit or in parcels, and at any time and place and on any terms.
(c) A secured party may purchase collateral:
(1) At a public disposition; or
(2) At a private disposition only if the collateral is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations.
(d) A contract for sale, lease, license, or other disposition includes the warranties relating to title, possession, quiet enjoyment, and the like which by operation of law accompany a voluntary disposition of property of the kind subject to the contract.
(e) A secured party may disclaim or modify warranties under subsection (d) of this section:
(1) In a manner that would be effective to disclaim or modify the warranties in a voluntary disposition of property of the kind subject to the contract of disposition; or
(2) By communicating to the purchaser a record evidencing the contract for disposition and including an express disclaimer or modification of the warranties.
(f) A record is sufficient to disclaim warranties under subsection (e) of this section if it indicates "There is no warranty relating to title, possession, quiet enjoyment, or the like in this disposition" or uses words of similar import.
[28-9-610, added 2001, ch. 208, sec. 2, p. 784.]
(a) In this section, "notification date" means the earlier of the date on which:
(1) A secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or
(2) The debtor and any secondary obligor waive the right to notification.
(b) Except as otherwise provided in subsection (d) of this section, a secured party that disposes of collateral under section 28-9-610 shall send to the persons specified in subsection (c) of this section a reasonable authenticated notification of disposition.
(c) To comply with subsection (b) of this section, the secured party shall send an authenticated notification of disposition to:
(1) The debtor;
(2) Any secondary obligor; and
(3) If the collateral is other than consumer goods:
(A) any other person from which the secured party has received, before the notification date, an authenticated notification of a claim of an interest in the collateral;
(B) any other secured party or lienholder that, ten (10) days before the notification date, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:
(i) identified the collateral;
(ii) was indexed under the debtor’s name as of that date; and
(iii) was filed in the office in which to file a financing statement against the debtor covering the collateral as of that date; and
(C) any other secured party that, ten (10) days before the notification date, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in section 28-9-311(a).
(d) Subsection (b) of this section does not apply if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market.
(e) A secured party complies with the requirement for notification prescribed by subsection (c)(3)(B) of this section if:
(1) Not later than twenty (20) days or earlier than thirty (30) days before the notification date, the secured party requests, in a commercially reasonable manner, information concerning financing statements indexed under the debtor’s name in the office indicated in subsection (c)(3)(B) of this section; and
(2) Before the notification date, the secured party:
(A) did not receive a response to the request for information; or
(B) received a response to the request for information and sent an authenticated notification of disposition to each secured party or other lienholder named in that response whose financing statement covered the collateral.
[28-9-611, added 2001, ch. 208, sec. 2, p. 784.]
(a) Except as otherwise provided in subsection (b) of this section, whether a notification is sent within a reasonable time is a question of fact.
(b) A notification of disposition sent after default and ten (10) days or more before the earliest time of disposition set forth in the notification is sent within a reasonable time before the disposition.
[28-9-612, added 2001, ch. 208, sec. 2, p. 785.]
Except in a consumer goods transaction, the following rules apply:
(1) The contents of a notification of disposition are sufficient if the notification:
(A) Describes the debtor and the secured party;
(B) Describes the collateral that is the subject of the intended disposition;
(C) States the method of intended disposition;
(D) States that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for an accounting; and
(E) States the time and place of a public disposition or the time after which any other disposition is to be made.
(2) Whether the contents of a notification that lacks any of the information specified in subsection (1) of this section are nevertheless sufficient is a question of fact.
(3) The contents of a notification providing substantially the information specified in subsection (1) of this section are sufficient, even if the notification includes:
(A) Information not specified by subsection (1) of this section; or
(B) Minor errors that are not seriously misleading.
(4) A particular phrasing of the notification is not required.
(5) The following form of notification and the form appearing in section 28-9-614(3), when completed, each provides sufficient information:
NOTIFICATION OF DISPOSITION OF COLLATERAL
To: ……………..(Name of debtor, obligor, or other person to which the notification is sent)………….
From: ……………….(Name, address, and telephone number of secured party)…………..
Name of Debtor(s): ………..(Include only if debtor(s) are not an addressee)……….
(For a public disposition:)
We will sell (or lease or license, as applicable) the ……..(describe collateral)……. (to the highest qualified bidder) in public as follows:
Day and Date: …………………………………………
Time: …………………………………………
Place: …………………………………………
(For a private disposition:)
We will sell (or lease or license, as applicable) the ……..(describe collateral)……… privately sometime after …………….(day and date)……….
You are entitled to an accounting of the unpaid indebtedness secured by the property that we intend to sell (or lease or license, as applicable) (for a charge of $………). You may request an accounting by calling us at ………(telephone number)……..
[28-9-613, added 2001, ch. 208, sec. 2, p. 786.]
In a consumer goods transaction, the following rules apply:
(1) A notification of disposition must provide the following information:
(A) The information specified in section 28-9-613(1);
(B) A description of any liability for a deficiency of the person to which the notification is sent;
(C) A telephone number from which the amount that must be paid to the secured party to redeem the collateral under section 28-9-623 is available; and
(D) A telephone number or mailing address from which additional information concerning the disposition and the obligation secured is available.
(2) A particular phrasing of the notification is not required.
(3) The following form of notification, when completed, provides sufficient information:
……..(Name and address of secured party)………….
……..(Date)……………………………………
NOTICE OF OUR PLAN TO SELL PROPERTY
……..(Name and address of any obligor who is also a debtor)……….
Subject: ………(Identification of Transaction)…………………..
We have your …………(describe collateral)……….., because you broke promises in our agreement.
(For a public disposition:)
We will sell ……………..(describe collateral)……………. at public sale. A sale could include a lease or license. The sale will be held as follows:
Date: ……………………….
Time: ……………………….
Place: ……………………….
You may attend the sale and bring bidders if you want.
(For a private disposition:)
We will sell ……………(describe collateral)………….. at private sale sometime after ………(date)……. A sale could include a lease or license.
The money that we get from the sale (after paying our costs) will reduce the amount you owe. If we get less money than you owe, you …………..(will or will not, as applicable)……. still owe us the difference. If we get more money than you owe, you will get the extra money, unless we must pay it to someone else.
You can get the property back at any time before we sell it by paying us the full amount you owe (not just the past due payments), including our expenses. To learn the exact amount you must pay, call us at …….(telephone number)…….
If you want us to explain to you in writing how we have figured the amount that you owe us, you may call us at ……….(telephone number)………. (or write us at ……….(secured party’s address)…………) and request a written explanation. (We will charge you $…………. for the explanation if we sent you another written explanation of the amount you owe us within the last six months.)
If you need more information about the sale call us at …..(telephone number)….. (or write us at …………(secured party’s address)…………….). We are sending this notice to the following other people who have an interest in ………….(describe collateral)…………… or who owe money under your agreement: …………(Names of all other debtors and obligors, if any)………..
(4) A notification in the form of subsection (3) of this section is sufficient, even if additional information appears at the end of the form.
(5) A notification in the form of subsection (3) of this section is sufficient, even if it includes errors in information not required by subsection (1) of this section, unless the error is misleading with respect to rights arising under this chapter.
(6) If a notification under this section is not in the form of subsection (3) of this section, law other than this chapter determines the effect of including information not required by subsection (1) of this section.
[28-9-614, added 2001, ch. 208, sec. 2, p. 786.]
(a) A secured party shall apply or pay over for application the cash proceeds of disposition under section 28-9-610 in the following order to:
(1) The reasonable expenses of retaking, holding, preparing for disposition, processing and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party;
(2) The satisfaction of obligations secured by the security interest or agricultural lien under which the disposition is made;
(3) The satisfaction of obligations secured by any subordinate security interest in or other subordinate lien on the collateral if:
(A) the secured party receives from the holder of the subordinate security interest or other lien an authenticated demand for proceeds before distribution of the proceeds is completed; and
(B) in a case in which a consignor has an interest in the collateral, the subordinate security interest or other lien is senior to the interest of the consignor; and
(4) A secured party that is a consignor of the collateral if the secured party receives from the consignor an authenticated demand for proceeds before distribution of the proceeds is completed.
(b) If requested by a secured party, a holder of a subordinate security interest or other lien shall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holder does so, the secured party need not comply with the holder’s demand under subsection (a)(3) of this section.
(c) A secured party need not apply or pay over for application noncash proceeds of disposition under section 28-9-610 unless the failure to do so would be commercially unreasonable. A secured party that applies or pays over for application noncash proceeds shall do so in a commercially reasonable manner.
(d) If the security interest under which a disposition is made secures payment or performance of an obligation, after making the payments and applications required by subsection (a) of this section and permitted by subsection (c) of this section:
(1) Unless subsection (a)(4) of this section requires the secured party to apply or pay over cash proceeds to a consignor, the secured party shall account to and pay a debtor for any surplus; and
(2) The obligor is liable for any deficiency.
(e) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles or promissory notes:
(1) The debtor is not entitled to any surplus; and
(2) The obligor is not liable for any deficiency.
(f) The surplus or deficiency following a disposition is calculated based on the amount of proceeds that would have been realized in a disposition complying with this part to a transferee other than the secured party, a person related to the secured party, or a secondary obligor if:
(1) The transferee in the disposition is the secured party, a person related to the secured party or a secondary obligor; and
(2) The amount of proceeds of the disposition is significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.
(g) A secured party that receives cash proceeds of a disposition in good faith and without knowledge that the receipt violates the rights of the holder of a security interest or other lien that is not subordinate to the security interest or agricultural lien under which the disposition is made:
(1) Takes the cash proceeds free of the security interest or other lien;
(2) Is not obligated to apply the proceeds of the disposition to the satisfaction of obligations secured by the security interest or other lien; and
(3) Is not obligated to account to or pay the holder of the security interest or other lien for any surplus.
[28-9-615, added 2001, ch. 208, sec. 2, p. 788.]
(a) In this section:
(1) "Explanation" means a writing that:
(A) states the amount of the surplus or deficiency;
(B) provides an explanation in accordance with subsection (c) of this section of how the secured party calculated the surplus or deficiency;
(C) states, if applicable, that future debits, credits, charges, including additional credit service charges or interest, rebates, and expenses may affect the amount of the surplus or deficiency; and
(D) provides a telephone number or mailing address from which additional information concerning the transaction is available.
(2) "Request" means a record:
(A) authenticated by a debtor or consumer obligor;
(B) requesting that the recipient provide an explanation; and
(C) sent after disposition of the collateral under section 28-9-610.
(b) In a consumer goods transaction in which the debtor is entitled to a surplus or a consumer obligor is liable for a deficiency under section 28-9-615, the secured party shall:
(1) Send an explanation to the debtor or consumer obligor, as applicable, after the disposition and:
(A) before or when the secured party accounts to the debtor and pays any surplus or first makes written demand on the consumer obligor after the disposition for payment of the deficiency; and
(B) within fourteen (14) days after receipt of a request; or
(2) In the case of a consumer obligor who is liable for a deficiency, within fourteen (14) days after receipt of a request, send to the consumer obligor a record waiving the secured party’s right to a deficiency.
(c) To comply with subsection (a)(1)(B) of this section, a writing must provide the following information in the following order:
(1) The aggregate amount of obligations secured by the security interest under which the disposition was made, and, if the amount reflects a rebate of unearned interest or credit service charge, an indication of that fact, calculated as of a specified date:
(A) if the secured party takes or receives possession of the collateral after default, not more than thirty-five (35) days before the secured party takes or receives possession; or
(B) if the secured party takes or receives possession of the collateral before default or does not take possession of the collateral, not more than thirty-five (35) days before the disposition;
(2) The amount of proceeds of the disposition;
(3) The aggregate amount of the obligations after deducting the amount of proceeds;
(4) The amount, in the aggregate or by type, and types of expenses, including expenses of retaking, holding, preparing for disposition, processing, and disposing of the collateral, and attorney’s fees secured by the collateral which are known to the secured party and relate to the current disposition;
(5) The amount, in the aggregate or by type, and types of credits, including rebates of interest or credit service charges, to which the obligor is known to be entitled and which are not reflected in the amount in paragraph (1) of this subsection; and
(6) The amount of the surplus or deficiency.
(d) A particular phrasing of the explanation is not required. An explanation complying substantially with the requirements of subsection (a) of this section is sufficient, even if it includes minor errors that are not seriously misleading.
(e) A debtor or consumer obligor is entitled without charge to one (1) response to a request under this section during any six (6) month period in which the secured party did not send to the debtor or consumer obligor an explanation pursuant to subsection (b)(1) of this section. The secured party may require payment of a charge not exceeding twenty-five dollars ($25.00) for each additional response.
[28-9-616, added 2001, ch. 208, sec. 2, p. 789.]
(a) A secured party’s disposition of collateral after default:
(1) Transfers to a transferee for value all of the debtor’s rights in the collateral;
(2) Discharges the security interest under which the disposition is made; and
(3) Discharges any subordinate security interest or other subordinate lien.
(b) A transferee that acts in good faith takes free of the rights and interests described in subsection (a) of this section, even if the secured party fails to comply with this chapter or the requirements of any judicial proceeding.
(c) If a transferee does not take free of the rights and interests described in subsection (a) of this section, the transferee takes the collateral subject to:
(1) The debtor’s rights in the collateral;
(2) The security interest or agricultural lien under which the disposition is made; and
(3) Any other security interest or other lien.
[28-9-617, added 2001, ch. 208, sec. 2, p. 790.]
(a) A secondary obligor acquires the rights and becomes obligated to perform the duties of the secured party after the secondary obligor:
(1) Receives an assignment of a secured obligation from the secured party;
(2) Receives a transfer of collateral from the secured party and agrees to accept the rights and assume the duties of the secured party; or
(3) Is subrogated to the rights of a secured party with respect to collateral.
(b) An assignment, transfer or subrogation described in subsection (a) of this section:
(1) Is not a disposition of collateral under section 28-9-610; and
(2) Relieves the secured party of further duties under this chapter.
[28-9-618, added 2001, ch. 208, sec. 2, p. 791.]
(a) In this section, "transfer statement" means a record authenticated by a secured party stating:
(1) That the debtor has defaulted in connection with an obligation secured by specified collateral;
(2) That the secured party has exercised its postdefault remedies with respect to the collateral;
(3) That, by reason of the exercise, a transferee has acquired the rights of the debtor in the collateral; and
(4) The name and mailing address of the secured party, debtor and transferee.
(b) A transfer statement entitles the transferee to the transfer of record of all rights of the debtor in the collateral specified in the statement in any official filing, recording, registration, or certificate of title system covering the collateral. If a transfer statement is presented with the applicable fee and request form to the official or office responsible for maintaining the system, the official or office shall:
(1) Accept the transfer statement;
(2) Promptly amend its records to reflect the transfer; and
(3) If applicable, issue a new appropriate certificate of title in the name of the transferee.
(c) A transfer of the record or legal title to collateral to a secured party under subsection (b) of this section or otherwise is not of itself a disposition of collateral under this chapter and does not of itself relieve the secured party of its duties under this chapter.
[28-9-619, added 2001, ch. 208, sec. 2, p. 791.]
(a) A secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:
(1) The debtor consents to the acceptance under subsection (c) of this section;
(2) The secured party does not receive, within the time set forth in subsection (d) of this section, a notification of objection to the proposal authenticated by:
(A) a person to which the secured party was required to send a proposal under section 28-9-621; or
(B) any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal; and
(3) Subsection (e) of this section does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to section 28-9-624.
(b) A purported or apparent acceptance of collateral under this section is ineffective unless:
(1) The secured party consents to the acceptance in an authenticated record or sends a proposal to the debtor; and
(2) The conditions of subsection (a) of this section are met.
(c) For purposes of this section:
(1) A debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default; and
(2) A debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default or the secured party:
(A) sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;
(B) in the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and
(C) does not receive a notification of objection authenticated by the debtor within twenty (20) days after the proposal is sent.
(d) To be effective under subsection (a)(2) of this section, a notification of objection must be received by the secured party:
(1) In the case of a person to which the proposal was sent pursuant to section 28-9-621, within twenty (20) days after notification was sent to that person; and
(2) In other cases:
(A) within twenty (20) days after the last notification was sent pursuant to section 28-9-621; or
(B) if a notification was not sent, before the debtor consents to the acceptance under subsection (c) of this section.
(e) A secured party that has taken possession of collateral shall dispose of the collateral pursuant to section 28-9-610 within the time specified in subsection (f) of this section if:
(1) Sixty percent (60%) of the cash price has been paid in the case of a purchase-money security interest in consumer goods; or
(2) Sixty percent (60%) of the principal amount of the obligation secured has been paid in the case of a nonpurchase-money security interest in consumer goods.
(f) To comply with subsection (e) of this section, the secured party shall dispose of the collateral:
(1) Within ninety (90) days after taking possession; or
(2) Within any longer period to which the debtor and all secondary obligors have agreed in an agreement to that effect entered into and authenticated after default.
[28-9-620, added 2001, ch. 208, sec. 2, p. 792.]
(a) A secured party that desires to accept collateral in full or partial satisfaction of the obligation it secures shall send its proposal to:
(1) Any person from which the secured party has received, before the debtor consented to the acceptance, an authenticated notification of a claim of an interest in the collateral;
(2) Any other secured party or lienholder that, ten (10) days before the debtor consented to the acceptance, held a security interest in or other lien on the collateral perfected by the filing of a financing statement that:
(A) identified the collateral;
(B) was indexed under the debtor’s name as of that date; and
(C) was filed in the office or offices in which to file a financing statement against the debtor covering the collateral as of that date; and
(3) Any other secured party that, ten (10) days before the debtor consented to the acceptance, held a security interest in the collateral perfected by compliance with a statute, regulation, or treaty described in section 28-9-311(a).
(b) A secured party that desires to accept collateral in partial satisfaction of the obligation it secures shall send its proposal to any secondary obligor in addition to the persons described in subsection (a) of this section.
[28-9-621, added 2001, ch. 208, sec. 2, p. 793.]
(a) A secured party’s acceptance of collateral in full or partial satisfaction of the obligation it secures:
(1) Discharges the obligation to the extent consented to by the debtor;
(2) Transfers to the secured party all of a debtor’s rights in the collateral;
(3) Discharges the security interest or agricultural lien that is the subject of the debtor’s consent and any subordinate security interest or other subordinate lien; and
(4) Terminates any other subordinate interest.
(b) A subordinate interest is discharged or terminated under subsection (a) of this section, even if the secured party fails to comply with this chapter.
[28-9-622, added 2001, ch. 208, sec. 2, p. 793.]
(a) A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral.
(b) To redeem collateral, a person shall tender:
(1) Fulfillment of all obligations secured by the collateral; and
(2) The reasonable expenses and attorney’s fees described in section 28-9-615(a)(1).
(c) A redemption may occur at any time before a secured party:
(1) Has collected collateral under section 28-9-607;
(2) Has disposed of collateral or entered into a contract for its disposition under section 28-9-610; or
(3) Has accepted collateral in full or partial satisfaction of the obligation it secures under section 28-9-622.
[28-9-623, added 2001, ch. 208, sec. 2, p. 794.]
(a) A debtor or secondary obligor may waive the right to notification of disposition of collateral under section 28-9-611 only by an agreement to that effect entered into and authenticated after default.
(b) A debtor may waive the right to require disposition of collateral under section 28-9-620(e) only by an agreement to that effect entered into and authenticated after default.
(c) Except in a consumer goods transaction, a debtor or secondary obligor may waive the right to redeem collateral under section 28-9-623 only by an agreement to that effect entered into and authenticated after default.
[28-9-624, added 2001, ch. 208, sec. 2, p. 794.]
(a) If it is established that a secured party is not proceeding in accordance with this chapter, a court may order or restrain collection, enforcement or disposition of collateral on appropriate terms and conditions.
(b) Subject to subsections (c) and (d) of this section, a person is liable for damages in the amount of any loss caused by a failure to comply with this chapter. Loss caused by a failure to comply may include loss resulting from the debtor’s inability to obtain, or increased costs of, alternative financing.
(c) Except as otherwise provided in section 28-9-628:
(1) A person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under subsection (b) of this section for its loss; and
(2) If the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this part may recover for that failure in any event, an amount not less than the credit service charge plus ten percent (10%) of the principal amount of the obligation or the time price differential plus ten percent (10%) of the cash price.
(d) A debtor whose deficiency is eliminated under section 28-9-626 may recover damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under section 28-9-626 may not otherwise recover under subsection (b) of this section for noncompliance with the provisions of this part relating to collection, enforcement, disposition or acceptance.
(e) In addition to any damages recoverable under subsection (b) of this section, the debtor, consumer obligor or person named as a debtor in a filed record, as applicable, may recover one hundred dollars ($100) in each case from a person that:
(1) Files a record that the person is not entitled to file under section 28-9-509(a);
(2) Fails to cause the secured party of record to file or send a termination statement as required by section 28-9-513(a) or (c).
(f) If a secured party fails to comply with a request regarding a list of collateral or a statement of account under section 28-9-210, the secured party may claim a security interest only as shown in the statement included in the request as against a person that is reasonably misled by the failure.
[28-9-625, added 2001, ch. 208, sec. 2, p. 794.]
In an action arising from a transaction in which the amount of a deficiency or surplus is in issue, the following rules apply:
(a) A secured party need not prove compliance with the provisions of this part relating to collection, enforcement, disposition or acceptance unless the debtor or a secondary obligor places the secured party’s compliance in issue.
(b) If the secured party’s compliance is placed in issue, the secured party has the burden of establishing that the collection, enforcement, disposition or acceptance was conducted in accordance with this part.
(c) Except as otherwise provided in section 28-9-628, if a secured party fails to prove that the collection, enforcement, disposition or acceptance was conducted in accordance with the provisions of this part relating to collection, enforcement, disposition or acceptance, the liability of a debtor or a secondary obligor for a deficiency is limited to an amount by which the sum of the secured obligation, expenses and attorney’s fees exceeds the greater of:
(1) The proceeds of the collection, enforcement, disposition or acceptance; or
(2) The amount of proceeds that would have been realized had the noncomplying secured party proceeded in accordance with the provisions of this part relating to collection, enforcement, disposition or acceptance.
(d) For purposes of subsection (c)(2) of this section, the amount of proceeds that would have been realized is equal to the sum of the secured obligation, expenses and attorney’s fees unless the secured party proves that the amount is less than that sum.
(e) If a deficiency or surplus is calculated under section 28-9-615(f), the debtor or obligor has the burden of establishing that the amount of proceeds of the disposition is significantly below the range of prices that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.
[28-9-626, added 2001, ch. 208, sec. 2, p. 795; am. 2002, ch. 107, sec. 5, p. 302.]
(a) The fact that a greater amount could have been obtained by a collection, enforcement, disposition or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition or acceptance was made in a commercially reasonable manner.
(b) A disposition of collateral is made in a commercially reasonable manner if the disposition is made:
(1) In the usual manner on any recognized market;
(2) At the price current in any recognized market at the time of the disposition; or
(3) Otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.
(c) A collection, enforcement, disposition or acceptance is commercially reasonable if it has been approved:
(1) In a judicial proceeding;
(2) By a bona fide creditors’ committee;
(3) By a representative of creditors; or
(4) By an assignee for the benefit of creditors.
(d) Approval under subsection (c) of this section need not be obtained, and lack of approval does not mean that the collection, enforcement, disposition or acceptance is not commercially reasonable.
[28-9-627, added 2001, ch. 208, sec. 2, p. 795.]
(a) Unless a secured party knows that a person is a debtor or obligor, knows the identity of the person, and knows how to communicate with the person:
(1) The secured party is not liable to the person, or to a secured party or lienholder that has filed a financing statement against the person, for failure to comply with this chapter; and
(2) The secured party’s failure to comply with this chapter does not affect the liability of the person for a deficiency.
(b) A secured party is not liable because of its status as secured party:
(1) To a person that is a debtor or obligor, unless the secured party knows:
(A) that the person is a debtor or obligor;
(B) the identity of the person; and
(C) how to communicate with the person; or
(2) To a secured party or lienholder that has filed a financing statement against a person, unless the secured party knows:
(A) that the person is a debtor; and
(B) the identity of the person.
(c) A secured party is not liable to any person, and a person’s liability for a deficiency is not affected, because of any act or omission arising out of the secured party’s reasonable belief that a transaction is not a consumer goods transaction or a consumer transaction or that goods are not consumer goods, if the secured party’s belief is based on its reasonable reliance on:
(1) A debtor’s representation concerning the purpose for which collateral was to be used, acquired or held; or
(2) An obligor’s representation concerning the purpose for which a secured obligation was incurred.
(d) A secured party is not liable to any person under section 28-9-625(c)(2) for its failure to comply with section 28-9-616.
(e) A secured party is not liable under section 28-9-625(c)(2) more than once with respect to any one (1) secured obligation.
[28-9-628, added 2001, ch. 208, sec. 2, p. 796.]
(a) Except as otherwise provided in this part, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act takes effect.
(b) Except as otherwise provided in subsection (c) of this section and sections 28-9-703 through 28-9-709:
(1) Transactions and liens that were not governed by former chapter 9, title 28, Idaho Code, were validly entered into or created before this act takes effect, and would be subject to this act if they had been entered into or created after this act takes effect, and the rights, duties, and interests flowing from those transactions and liens remain valid after this act takes effect; and
(2) The transactions and liens may be terminated, completed, consummated and enforced as required or permitted by this act or by the law that otherwise would apply if this act had not taken effect.
(c) This act does not affect an action, case or proceeding commenced before this act takes effect.
[28-9-702, added 2001, ch. 208, sec. 2, p. 797.]
(a) A security interest that is enforceable immediately before this act takes effect and would have priority over the rights of a person that becomes a lien creditor at that time is a perfected security interest under this act if, when this act takes effect, the applicable requirements for enforceability and perfection under this act are satisfied without further action.
(b) Except as otherwise provided in section 28-9-705, if, immediately before this act takes effect, a security interest is enforceable and would have priority over the rights of a person that becomes a lien creditor at that time, but the applicable requirements for enforceability or perfection under this act are not satisfied when this act takes effect, the security interest:
(1) Is a perfected security interest for one (1) year after this act takes effect;
(2) Remains enforceable thereafter only if the security interest becomes enforceable under section 28-9-203 before the year expires; and
(3) Remains perfected thereafter only if the applicable requirements for perfection under this act are satisfied before the year expires.
[28-9-703, added 2001, ch. 208, sec. 2, p. 797.]
A security interest that is enforceable immediately before this act takes effect but which would be subordinate to the rights of a person that becomes a lien creditor at that time:
(1) Remains an enforceable security interest for one (1) year after this act takes effect;
(2) Remains enforceable thereafter if the security interest becomes enforceable under section 28-9-203 when this act takes effect or within one (1) year thereafter; and
(3) Becomes perfected:
(A) Without further action, when this act takes effect if the applicable requirements for perfection under this act are satisfied before or at that time; or
(B) When the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.
[28-9-704, added 2001, ch. 208, sec. 2, p. 797.]
(a) If action, other than the filing of a financing statement, is taken before this act takes effect and the action would have resulted in priority of a security interest over the rights of a person that becomes a lien creditor had the security interest become enforceable before this act takes effect, the action is effective to perfect a security interest that attaches under this act within one (1) year after this act takes effect. An attached security interest becomes unperfected one (1) year after this act takes effect unless the security interest becomes a perfected security interest under this act before the expiration of that period.
(b) The filing of a financing statement before this act takes effect is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under this act.
(c) This act does not render ineffective an effective financing statement that, before this act takes effect, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in former section 28-9-103. However, except as otherwise provided in subsections (d) and (e) of this section and section 28-9-706, the financing statement ceases to be effective at the earlier of:
(1) The time the financing statement would have ceased to be effective under the law of the jurisdiction in which it is filed; or
(2) June 30, 2006.
(d) The filing of a continuation statement after this act takes effect does not continue the effectiveness of the financing statement filed before this act takes effect. However, upon the timely filing of a continuation statement after this act takes effect and in accordance with the law of the jurisdiction governing perfection as provided in part 3, the effectiveness of a financing statement filed in the same office in that jurisdiction before this act takes effect continues for the period provided by the law of that jurisdiction.
(e) Subsection (c)(2) of this section applies to a financing statement that, before this act takes effect, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in former section 28-9-103 only to the extent that part 3 provides that the law of a jurisdiction other than jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.
(f) A financing statement that includes a financing statement filed before this act takes effect and a continuation statement filed after this act takes effect is effective only to the extent that it satisfies the requirements of part 5 for an initial financing statement.
(g) A financing statement filed as a fixture, timber or mineral filing before July 1, 2001 (except for a record of mortgage which is effective as a financing statement filed as a fixture filing) shall cease to be effective after June 30, 2006. The effectiveness of such a financing statement may be continued by filing a continuation statement between January 1, 2006, and June 30, 2006, inclusive. The new five (5) year effective period for such a financing statement, as provided in section 28-9-515, shall commence on the date of filing such continuation statement.
[28-9-705, added 2001, ch. 208, sec. 2, p. 798; am. 2002, ch. 107, sec. 6, p. 303.]
(a) The filing of an initial financing statement in the office specified in section 28-9-501 continues the effectiveness of a financing statement filed before this act takes effect if:
(1) The filing of an initial financing statement in that office would be effective to perfect a security interest under this act;
(2) The preeffective-date financing statement was filed in an office in another state or another office in this state; and
(3) The initial financing statement satisfies subsection (c) of this section.
(b) The filing of an initial financing statement under subsection (a) of this section continues the effectiveness of the preeffective-date financing statement:
(1) If the initial financing statement is filed before this act takes effect, for the period provided in former section 28-9-403 with respect to a financing statement; and
(2) If the initial financing statement is filed after this act takes effect, for the period provided in section 28-9-515 with respect to an initial financing statement.
(c) To be effective for purposes of subsection (a) of this section, an initial financing statement must:
(1) Satisfy the requirements of part 5 for an initial financing statement;
(2) Identify the preeffective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and
(3) Indicate that the preeffective-date financing statement remains effective.
[28-9-706, added 2001, ch. 208, sec. 2, p. 799.]
A person may file an initial financing statement or a continuation statement under this part if:
(a) In this section, "preeffective-date financing statement" means a financing statement filed before July 1, 2001.
(b) After July 1, 2001, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in, a preeffective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in part 3. However, the effectiveness of a preeffective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.
(c) Except as otherwise provided in subsection (d) of this section, if the law of this state governs perfection of a security interest, the information in a preeffective-date financing statement may be amended only if:
(1) The preeffective-date financing statement and an amendment are filed in the office specified in section 28-9-501;
(2) An amendment is filed in the office specified in section 28-9-501, concurrently with, or after the filing in that office of, an initial financing statement that satisfies the provisions of subsection (c) of section 28-9-706; or
(3) An initial financing statement that provides the information as amended and satisfies the provisions of subsection (c) of section 28-9-706, is filed in the office specified in section 28-9-501.
(d) If the law of this state governs perfection of a security interest, the effectiveness of a preeffective-date financing statement may be continued only pursuant to the provisions of subsections (d) and (f) of section 28-9-705, or section 28-9-706.
(e) Whether or not the law of this state governs perfection of a security interest, the effectiveness of a preeffective-date financing statement filed in this state may be terminated by filing a termination statement in the office in which the preeffective-date financing statement is filed, unless an initial financing statement that satisfies the provisions of subsection (c) of section 28-9-706, has been filed in the office specified by the law of the jurisdiction governing perfection as provided in part 3 as the office in which to file a financing statement.
[28-9-707, added 2001, ch. 208, sec. 2, p. 799; am. 2004, ch. 304, sec. 2, p. 854.]
A person may file an initial financing statement or a continuation statement under this part if:
(1) The secured party of record authorizes the filing; and
(2) The filing is necessary under this part:
(A) To continue the effectiveness of a financing statement filed before this act takes effect; or
(B) To perfect or continue the perfection of a security interest.
[28-9-708, added 2001, ch. 208, sec. 2, p. 799.]
(a) This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before this act takes effect, former chapter 9, title 28, determines priority.
(b) For purposes of section 28-9-322(a), the priority of a security interest that becomes enforceable under section 28-9-203 of this act dates from the time this act takes effect if the security interest is perfected under this act by the filing of a financing statement before this act takes effect which would not have been effective to perfect the security interest under former chapter 9, title 28. This subsection does not apply to conflicting security interests, each of which is perfected by the filing of such a financing statement.
[28-9-709, added 2001, ch. 208, sec. 2, p. 800.]
[28-9-801, added 2012, ch. 145, sec. 20, p. 410.]
(a) Except as otherwise provided in this part, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act takes effect.
(b) This act does not affect an action, case, or proceeding commenced before this act takes effect.
[28-9-802, added 2012, ch. 145, sec. 20, p. 410.]
(a) A security interest that is a perfected security interest immediately before this act takes effect is a perfected security interest under this chapter as amended by this act if, when this act takes effect, the applicable requirements for attachment and perfection under this chapter as amended by this act are satisfied without further action.
(b) Except as otherwise provided in section 28-9-805, Idaho Code, if, immediately before this act takes effect, a security interest is a perfected security interest, but the applicable requirements for perfection under this chapter as amended by this act are not satisfied when this act takes effect, the security interest remains perfected thereafter only if the applicable requirements for perfection under this chapter as amended by this act are satisfied within one (1) year after this act takes effect.
[28-9-803, added 2012, ch. 145, sec. 20, p. 410.]
A security interest that is an unperfected security interest immediately before this act takes effect becomes a perfected security interest:
(1) Without further action, when this act takes effect if the applicable requirements for perfection under this chapter as amended by this act are satisfied before or at that time; or
(2) When the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.
[28-9-804, added 2012, ch. 145, sec. 20, p. 410.]
(a) The filing of a financing statement before this act takes effect is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under this chapter as amended by this act.
(b) This act does not render ineffective an effective financing statement that, before this act takes effect, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in this chapter as it existed before amendment. However, except as otherwise provided in subsections (c) and (d) of this section and section 28-9-806, Idaho Code, the financing statement ceases to be effective:
(1) If the financing statement is filed in this state, at the time the financing statement would have ceased to be effective had this act not taken effect; or
(2) If the financing statement is filed in another jurisdiction, at the earlier of:
(A) the time the financing statement would have ceased to be effective under the law of that jurisdiction; or
(B) June 30, 2018.
(c) The filing of a continuation statement after this act takes effect does not continue the effectiveness of the financing statement filed before this act takes effect. However, upon the timely filing of a continuation statement after this act takes effect and in accordance with the law of the jurisdiction governing perfection as provided in this chapter as amended by this act, the effectiveness of a financing statement filed in the same office in that jurisdiction before this act takes effect continues for the period provided by the law of that jurisdiction.
(d) Subsection (b)(2)(B) of this section applies to a financing statement that, before this act takes effect, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in this chapter as it existed before amendment, only to the extent that this chapter as amended by this act provides that the law of a jurisdiction other than the jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.
(e) A financing statement that includes a financing statement filed before this act takes effect and a continuation statement filed after this act takes effect is effective only to the extent that it satisfies the requirements of part 5 of this chapter as amended by this act for an initial financing statement. A financing statement that indicates that the debtor is a decedent’s estate indicates that the collateral is being administered by a personal representative within the meaning of section 28-9-503(a)(2), Idaho Code, as amended by this act. A financing statement that indicates that the debtor is a trust or is a trustee acting with respect to property held in trust indicates that the collateral is held in a trust within the meaning of section 28-9-503(a)(3), Idaho Code, as amended by this act.
[28-9-805, added 2012, ch. 145, sec. 20, p. 410.]
(a) The filing of an initial financing statement in the office specified in section 28-9-501, Idaho Code, continues the effectiveness of a financing statement filed before this act takes effect if:
(1) The filing of an initial financing statement in that office would be effective to perfect a security interest under this chapter as amended by this act;
(2) The pre-effective-date financing statement was filed in an office in another state; and
(3) The initial financing statement satisfies subsection (c) of this section.
(b) The filing of an initial financing statement under subsection (a) of this section continues the effectiveness of the pre-effective-date financing statement:
(1) If the initial financing statement is filed before this act takes effect, for the period provided in unamended section 28-9-515, Idaho Code, with respect to an initial financing statement; and
(2) If the initial financing statement is filed after this act takes effect, for the period provided in section 28-9-515, Idaho Code, as amended by this act with respect to an initial financing statement.
(c) To be effective for purposes of subsection (a) of this section, an initial financing statement must:
(1) Satisfy the requirements of part 5 of this chapter as amended by this act for an initial financing statement;
(2) Identify the pre-effective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and
(3) Indicate that the pre-effective-date financing statement remains effective.
[28-9-806, added 2012, ch. 145, sec. 20, p. 411.]
(a) In this section, "pre-effective-date financing statement" means a financing statement filed before this act takes effect.
(b) After this act takes effect, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in a pre-effective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in this chapter as amended by this act. However, the effectiveness of a pre-effective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.
(c) Except as otherwise provided in subsection (d) of this section, if the law of this state governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after this act takes effect only if:
(1) The pre-effective-date financing statement and an amendment are filed in the office specified in section 28-9-501, Idaho Code;
(2) An amendment is filed in the office specified in section 28-9-501, Idaho Code, concurrently with, or after the filing in that office of, an initial financing statement that satisfies section 28-9-806(c), Idaho Code; or
(3) An initial financing statement that provides the information as amended and satisfies section 28-9-806(c), Idaho Code, is filed in the office specified in section 28-9-501, Idaho Code.
(d) If the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under section 28-9-805(c) and (e) or 28-9-806, Idaho Code.
(e) Whether or not the law of this state governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed in this state may be terminated after this act takes effect by filing a termination statement in the office in which the pre-effective-date financing statement is filed, unless an initial financing statement that satisfies section 28-9-806(c), Idaho Code, has been filed in the office specified by the law of the jurisdiction governing perfection as provided in this chapter as amended by this act as the office in which to file a financing statement.
[28-9-807, added 2012, ch. 145, sec. 20, p. 412.]
A person may file an initial financing statement or a continuation statement under this part if:
(1) The secured party of record authorizes the filing; and
(2) The filing is necessary under this part:
(A) to continue the effectiveness of a financing statement filed before this act takes effect; or
(B) to perfect or continue the perfection of a security interest.
[28-9-808, added 2012, ch. 145, sec. 20, p. 412.]
This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before this act takes effect, this chapter as it existed before amendment determines priority.
[28-9-809, added 2012, ch. 145, sec. 20, p. 412.]
(1) Except as provided in subsection (2) of this section, this act shall become effective at midnight on December 31, 1967.
(2) Section 28-9-408 of this act shall become effective at 8:00 a.m. on December 26, 1967.
(3) Except as provided in subsection (2) above and in section 28-9-408, this act applies to transactions entered into and events occurring after midnight on December 31, 1967.
[28-10-101, added 1967, ch. 161, sec. 10-101, p. 351.]
(1) The following acts and parts of acts and all other acts and parts of acts inconsistent herewith are hereby repealed:
(a) (i) Chapter 15 of title 26, Idaho Code, as amended;
(ii) Chapters 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 (as amended), 11, 12, 13, 14, 15, 16 and 17 of title 27, Idaho Code;
(iii) Chapter 4 of title 30, Idaho Code;
(iv) Chapter 11 of title 45, Idaho Code, as amended, except section 45-1102;
(v) Chapter 12 of title 45, Idaho Code;
(vi) Chapter 14 of title 45, Idaho Code;
(vii) Chapter 6 of title 62, Idaho Code;
(viii) Chapters 1, 2, 3, 4, 5 and 6 of title 64, Idaho Code;
(ix) Chapter 7 of title 64, Idaho Code;
(x) Chapter 8 of title 64, Idaho Code, as amended;
(xi) Chapter 9 of title 64, Idaho Code, as amended;
(xii) Chapter 10 of title 64, Idaho Code; and
(xiii) Chapter 1 of title 69, Idaho Code, as amended.
(b) Sections 9-505(4), 18-3705, 26-1003, 26-1005, 26-1006, 26-1008, 26-1013, 26-1015, 26-1016 and 45-1301, Idaho Code.
(2) Transactions validly entered into before the effective date specified in section 28-10-101 and the rights, duties and interests flowing therefrom remain valid thereafter and may be terminated, completed, consummated or enforced as required or permitted by any statute or other law amended or repealed by this act as though such repeal or amendment had not occurred.
[28-10-102, added 1967, ch. 161, sec. 10-102, p. 351.]
Except as provided in the following section, all acts and parts of acts inconsistent with this act are hereby repealed.
[28-10-103, added 1967, ch. 161, sec. 10-103, p. 351.]
As used in this chapter, unless the context requires otherwise, the following definitions apply:
(1) "Art dealer" means a person engaged in the business of selling works of fine art, other than a person exclusively engaged in the business of selling goods at public auction.
(2) "Artist" means a person who creates a work of fine art or, if the person is deceased, the person’s heir, devisee, or personal representative.
(3) "Consignment" means that no title to, estate in or right to possession of fine art superior to that of the consignor vests in the consignee, notwithstanding the consignee’s power or authority to transfer and convey to a third person all of the right, title and interest of the consignor in and to the fine art.
(4) "Fine art" means a painting, sculpture, drawing, work of graphic art, including an etching, lithograph, signed limited edition offset print, silk screen, or a work of graphic art of like nature; a work of calligraphy, photographs, original works in ceramics, wood, metals, glass, plastic, wax, stone or leather or a work in mixed media, including a collage, assemblage, or any combination of the art media mentioned in this subsection.
(5) "Person" means an individual, partnership, corporation, association, or other group, however organized.
[28-11-101, added 1987, ch. 127, sec. 1, p. 257.]
Notwithstanding any custom, practice or usage of the trade to the contrary, whenever an artist delivers or causes to be delivered a work of fine art of the artist’s own creation to an art dealer in this state for the purpose of exhibition and sale on a commission, fee, or other basis of compensation, the delivery to and acceptance of the work of fine art by the art dealer constitutes a consignment, unless the delivery to the art dealer is pursuant to an outright sale for which the artist receives upon delivery or has received prior to delivery full compensation for the work of fine art.
[28-11-102, added 1987, ch. 127, sec. 1, p. 258.]
A consignment of a work of fine art results in the following:
(1) The art dealer, after delivery of the work of fine art, is an agent of the artist for the purpose of sale or exhibition of the consigned work of fine art within the state of Idaho. This relationship shall be defined in writing and renewed at least every three (3) years by the art dealer and the artist. It is the responsibility of the artist to identify clearly the work of art by securely attaching identifying marking to or clearly signing the work of art.
(2) The work of fine art constitutes property held in trust by the consignee for the benefit of the consignor and is not subject to claim by a creditor of the consignee.
(3) The consignee is responsible for the loss of or damage to the work of fine art while in the possession of or on the premises of the consignee.
(4) The proceeds from the sale of the work of fine art constitute funds held in trust by the consignee for the benefit of the consignor. The proceeds shall first be applied to pay any balance due to the consignor, unless the consignor expressly agrees otherwise in writing.
[28-11-103, added 1987, ch. 127, sec. 1, p. 258.]
A work of fine art received as a consignment remains trust property, notwithstanding the subsequent purchase thereof by the consignee directly or indirectly for the consignee’s own account until the price is paid in full to the consignor. If the work is resold to a bona fide purchaser before the consignor has been paid in full, the proceeds of the resale received by the consignee constitute funds held in trust for the benefit of the consignor to the extent necessary to pay any balance due to the consignor and the trusteeship continues until the fiduciary obligation of the consignee with respect to the transaction is discharged in full.
[28-11-104, added 1987, ch. 127, sec. 1, p. 258.]
(1) Any provision of a contract or agreement by which the consignor waives any provision of this part of this chapter is void.
(2) This part of this chapter is not subject to the provisions of chapters 1 through 10, title 28, Idaho Code.
[28-11-105, added 1987, ch. 127, sec. 1, p. 259.]
This part of this chapter does not apply to a written contract executed prior to July 1, 1987, unless:
(1) The parties agree that this part of this chapter will apply; or
(2) The contract is extended or renewed after July 1, 1987.
[28-11-106, added 1987, ch. 127, sec. 1, p. 259.]
This chapter shall be known and may be cited as "Uniform Commercial Code-Leases."
[28-12-101, added 1993, ch. 287, sec. 1, p. 978.]
This chapter applies to any transaction, regardless of form, that creates a lease.
[28-12-102, added 1993, ch. 287, sec. 1, p. 978.]
(1) In this chapter unless the context otherwise requires:
(a) "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 or leasehold interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an end to the lease contract for default by the other party.
(c) "Commercial unit" means such a unit of goods as by commercial usage is a single whole for purposes of lease and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article, as a machine, or a set of articles, as a suite of furniture or a line of machinery, or a quantity, as a gross or carload, or any other unit treated in use or in the relevant market as a single whole.
(d) "Conforming goods or performance under a lease contract" means goods or performance that is in accordance with the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed twenty-five thousand dollars ($25,000).
(f) "Fault" means wrongful act, omission, breach or default.
(g) "Finance lease" means a lease with respect to which:
(i) The lessor does not select, manufacture, or supply the goods;
(ii) The lessor acquires the goods or the right to possession and use of the goods in connection with the lease; and
(iii) One (1) of the following occurs:
(A) The lessee receives a copy of the contract by which the lessor acquired the goods or the right to possession and use of the goods before signing the lease contract;
(B) The lessee’s approval of the contract by which the lessor acquired the goods or the right to possession and use of the goods is a condition to effectiveness of the lease contract;
(C) The lessee, before signing the lease contract, receives an accurate and complete statement designating the promises and warranties, and any disclaimers of warranties, limitations or modifications of remedies, or liquidated damages, including those of a third party, such as the manufacturer of the goods, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; or
(D) If the lease is not a consumer lease, the lessor, before the lessee signs the lease contract, informs the lessee in writing:
a. Of the identity of the person supplying the goods to the lessor, unless the lessee has selected that person and directed the lessor to acquire the goods or the right to possession and use of the goods from that person;
b. That the lessee is entitled under this chapter to the promises and warranties, including those of any third party, provided to the lessor by the person supplying the goods in connection with or as part of the contract by which the lessor acquired the goods or the right to possession and use of the goods; and
c. That the lessee may communicate with the person supplying the goods to the lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies.
(h) "Goods" means all things that are movable at the time of identification to the lease contract, or are fixtures (section 28-12-309, Idaho Code), but the term does not include money, documents, instruments, accounts, chattel paper, general intangibles, or minerals or the like, including oil and gas, before extraction. The term also includes the unborn young of animals.
(i) "Installment lease contract" means a lease contract that authorizes or requires the delivery of goods in separate lots to be separately accepted, even though the lease contract contains a clause "each delivery is a separate lease" or its equivalent.
(j) "Lease" means a transfer of the right to possession and use of goods for a term in return for consideration, but a sale, including a sale on approval or a sale or return, or retention or creation of a security interest is not a lease. Unless the context clearly indicates otherwise, the term includes a sublease.
(k) "Lease agreement" means the bargain, with respect to the lease, of the lessor and the lessee in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this chapter. Unless the context clearly indicates otherwise, the term includes a sublease agreement.
(l) "Lease contract" means the total legal obligation that results from the lease agreement as affected by this chapter and any other applicable rules of law. Unless the context clearly indicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person who in good faith and without knowledge that the lease to him is in violation of the ownership rights or security interest or leasehold interest of a third party in the goods leases in ordinary course from a person in the business of selling or leasing goods of that kind but does not include a pawnbroker. "Leasing" may be for cash or by exchange of other property or on secured or unsecured credit and includes acquiring goods or documents of title under a preexisting lease contract but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.
(p) "Lessor" means a person who transfers the right to possession and use of goods under a lease. Unless the context clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor’s residual interest" means the lessor’s interest in the goods after expiration, termination or cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods to secure payment of a debt or performance of an obligation, but the term does not include a security interest.
(s) "Lot" means a parcel or a single article that is the subject matter of a separate lease or delivery, whether or not it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant with respect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date certain of one (1) or more sums payable in the future, discounted to the date certain. The discount is determined by the interest rate specified by the parties if the rate was not manifestly unreasonable at the time the transaction was entered into; otherwise, the discount is determined by a commercially reasonable rate that takes into account the facts and circumstances of each case at the time the transaction was entered into.
(v) "Purchase" includes taking by sale, lease, mortgage, security interest, pledge, gift or any other voluntary transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to possession and use of which was acquired by the lessor as a lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys or leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a lessor buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the lease contract otherwise than for default.
(2) Other definitions applying to this chapter and the sections in which they appear are:
| "Accessions." | | section 28-12-310(1), Idaho Code. | | --- | --- | --- | | "Construction mortgage." | | section 28-12-309(1)(d), Idaho Code. | | "Encumbrance." | | section 28-12-309(1)(e), Idaho Code. | | "Fixtures." | | section 28-12-309(1)(a), Idaho Code. | | "Fixture filing." | | section 28-12-309(1)(b), Idaho Code. | | "Purchase money lease." | | section 28-12-309(1)(c), Idaho Code. |
(3) The following definitions in other chapters apply to this chapter:
| "Account." | | section 28-9-102(a)(2), Idaho Code. | | --- | --- | --- | | "Between merchants." | | section 28-2-104(3), Idaho Code. | | "Buyer." | | section 28-2-103(1)(a), Idaho Code. | | "Chattel paper." | | section 28-9-102(a)(11), Idaho Code. | | "Consumer goods." | | section 28-9-102(a)(23), Idaho Code. | | "Document." | | section 28-9-102(a)(30), Idaho Code. | | "Entrusting." | | section 28-2-403(3), Idaho Code. | | "General intangible." | | section 28-9-102(a)(42), Idaho Code. | | "Good faith." | | section 28-1-201(b)(20), Idaho Code. | | "Instrument." | | section 28-9-102(a)(47), Idaho Code. | | "Merchant." | | section 28-2-104(1), Idaho Code. | | "Mortgage." | | section 28-9-102(a)(55), Idaho Code. | | "Pursuant to commitment." | | section 28-9-102(a)(69), Idaho Code. | | "Receipt." | | section 28-2-103(1)(c), Idaho Code. | | "Sale." | | section 28-2-106(1), Idaho Code. | | "Sale on approval." | | section 28-2-326, Idaho Code. | | "Sale or return." | | section 28-2-326, Idaho Code. | | "Seller." | | section 28-2-103(1)(d), Idaho Code. |
(4) In addition, chapter 1, title 28, contains general definitions and principles of construction and interpretation applicable throughout this chapter.
[28-12-103, added 1993, ch. 287, sec. 1, p. 978; am. 2001, ch. 208, sec. 20, p. 816; am. 2004, ch. 42, sec. 15, p. 109; am. 2004, ch. 43, sec. 36, p. 157; am. 2012, ch. 145, sec. 21, p. 412.]
(1) A lease, although subject to this chapter, is also subject to any applicable:
(a) Certificate of title statute of this state; or
(b) Certificate of title statute of another jurisdiction (section 28-12-105); or
(c) Provision of the Idaho credit code.
(2) In case of conflict between this chapter, other than sections 28-12-105, 28-12-304(3), and 28-12-305(3), and a statute or decision referred to in subsection (1) of this section, the statute controls.
(3) Failure to comply with an applicable law has only the effect specified therein.
[28-12-104, added 1993, ch. 287, sec. 1, p. 981.]
Subject to the provisions of sections 28-12-304(3) and 28-12-305(3), with respect to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction, compliance and the effect of compliance or noncompliance with a certificate of title statute are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until the earlier of:
(1) Surrender of the certificate; or
(2) Four (4) months after the goods are removed from that jurisdiction and thereafter until a new certificate of title is issued by another jurisdiction.
[28-12-105, added 1993, ch. 287, sec. 1, p. 981.]
(1) If the law chosen by the parties to a consumer lease is that of a jurisdiction other than a jurisdiction in which the lessee resides at the time the lease agreement becomes enforceable or within thirty (30) days thereafter or in which the goods are to be used, the choice is not enforceable.
(2) If the judicial forum chosen by the parties to a consumer lease is a forum that would not otherwise have jurisdiction over the lessee, the choice is not enforceable.
[28-12-106, added 1993, ch. 287, sec. 1, p. 982.]
Any claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.
[28-12-107, added 1993, ch. 287, sec. 1, p. 982.]
(1) If the court as a matter of law finds a lease contract or any clause of a lease contract to have been unconscionable at the time it was made the court may refuse to enforce the lease contract, or it may enforce the remainder of the lease contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) With respect to a consumer lease, if the court as a matter of law finds that a lease contract, or any clause of a lease contract, has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract, the court may grant appropriate relief.
(3) Before making a finding of unconscionability under subsection (1) or (2) of this section, the court, on its own motion or that of a party, shall afford the parties a reasonable opportunity to present evidence as to the setting, purpose and effect of the lease contract or clause thereof, or of the conduct.
(4) In an action in which the lessee claims unconscionability with respect to a consumer lease:
(a) If the court finds unconscionability under subsection (1) or (2) of this section, the court shall award reasonable attorney’s fees to the lessee.
(b) If the court does not find unconscionability and the lessee claiming unconscionability has brought or maintained an action he knew to be groundless, the court shall award reasonable attorney’s fees to the party against whom the claim is made.
(c) In determining attorney’s fees, the amount of the recovery on behalf of the claimant under subsections (1) and (2) of this section is not controlling.
[28-12-108, added 1993, ch. 287, sec. 1, p. 982.]
(1) A term providing that one (1) 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 must be construed to mean that he has power to do so only if he in good faith believes that the prospect of payment or performance is impaired.
(2) With respect to a consumer lease, the burden of establishing good faith under subsection (1) of this section is on the party who exercised the power; otherwise the burden of establishing lack of good faith is on the party against whom the power has been exercised.
[28-12-109, added 1993, ch. 287, sec. 1, p. 983.]
(1) A lease contract is not enforceable by way of action or defense unless:
(a) The total payments to be made under the lease contract, excluding payments for options to renew or buy, are less than one thousand dollars ($1,000); or
(b) There is a writing, signed by the party against whom enforcement is sought or by that party’s authorized agent, sufficient to indicate that a lease contract has been made between the parties and to describe the goods leased and the lease term.
(2) Any description of leased goods or of the lease term is sufficient and satisfies the provisions of subsection (1)(b) of this section, whether or not it is specific, if it reasonably identifies what is described.
(3) A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the lease contract is not enforceable under the provisions of subsection (1)(b) of this section beyond the lease term and the quantity of goods shown in the writing.
(4) A lease contract that does not satisfy the requirements of subsection (1) of this section, but which is valid in other respects, is enforceable:
(a) If the goods are to be specially manufactured or obtained for the lessee and are not suitable for lease or sale to others in the ordinary course of the lessor’s business, and the lessor, before notice of repudiation is received and under circumstances that reasonably indicate that the goods are for the lessee, has made either a substantial beginning of their manufacture or commitments for their procurement;
(b) If the party against whom enforcement is sought admits in that party’s pleading, testimony or otherwise in court that a lease contract was made, but the lease contract is not enforceable under this provision beyond the quantity of goods admitted; or
(c) With respect to goods that have been received and accepted by the lessee.
(5) The lease term under a lease contract referred to in subsection (4) of this section is:
(a) If there is a writing signed by the party against whom enforcement is sought or by that party’s authorized agent specifying the lease term, the term so specified;
(b) If the party against whom enforcement is sought admits in that party’s pleading, testimony, or otherwise in court a lease term, the term so admitted; or
(c) A reasonable lease term.
[28-12-201, added 1993, ch. 287, sec. 1, p. 983.]
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 or by course of performance; and
(b) 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.
[28-12-202, added 1993, ch. 287, sec. 1, p. 984.]
The affixing of a seal to a writing evidencing a lease contract or an offer to enter into a lease contract does not render the writing a sealed instrument and the law with respect to sealed instruments does not apply to the lease contract or offer.
[28-12-203, added 1993, ch. 287, sec. 1, p. 984.]
(1) A lease contract may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a lease contract.
(2) An agreement sufficient to constitute a lease contract may be found although the moment of its making is undetermined.
(3) Although one (1) or more terms are left open, a lease contract does not fail for indefiniteness if the parties have intended to make a lease contract and there is a reasonably certain basis for giving an appropriate remedy.
[28-12-204, added 1993, ch. 287, sec. 1, p. 984.]
An offer by a merchant to lease goods to or from another person in a signed writing that by its terms gives assurance it will be held open is not revocable, for lack of consideration, during the time stated or, if no time is stated, for a reasonable time, but in no event may the period of irrevocability exceed three (3) months. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
[28-12-205, added 1993, ch. 287, sec. 1, p. 984.]
(1) Unless otherwise unambiguously indicated by the language or circumstances, an offer to make a lease contract must be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.
(2) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
[28-12-206, added 1993, ch. 287, sec. 1, p. 984.]
(1) An agreement modifying a lease contract needs no consideration to be binding.
(2) A signed lease agreement that excludes modification or rescission except by a signed writing may not be otherwise modified or rescinded, but, except as between merchants, such a requirement on a form supplied by a merchant must be separately signed by the other party.
(3) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) of this section, it may operate as a waiver.
(4) A party who has made a waiver affecting an executory portion of a lease contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.
[28-12-208, added 1993, ch. 287, sec. 1, p. 985.]
(1) The benefit of a supplier’s promises to the lessor under the supply contract and of all warranties, whether express or implied, including those of any third party provided in connection with or as part of the supply contract, extends to the lessee to the extent of the lessee’s leasehold interest under a finance lease related to the supply contract, but is subject to the terms of the warranty and of the supply contract and all defenses or claims arising therefrom.
(2) The extension of the benefit of a supplier’s promises and of warranties to the lessee under subsection (1) of this section, does not:
(a) Modify the rights and obligations of the parties to the supply contract, whether arising therefrom or otherwise; or
(b) Impose any duty or liability under the supply contract on the lessee.
(3) Any modification or rescission of the supply contract by the supplier and the lessor is effective between the supplier and the lessee unless, prior to before the modification or rescission, the supplier has received notice that the lessee has entered into a finance lease related to the supply contract. If the modification or rescission is effective between the supplier and the lessee, the lessor is deemed to have assumed, in addition to the obligations of the lessor to the lessee under the lease contract, promises of the supplier to the lessor and warranties that were so modified or rescinded as they existed and were available to the lessee before modification or rescission.
(4) In addition to the extension of the benefit of the supplier’s promises and of warranties to the lessee under subsection (1) of this section, the lessee retains all rights that the lessee may have against the supplier which arise from an agreement between the lessee and the supplier or under other law.
[28-12-209, added 1993, ch. 287, sec. 1, p. 985.]
(1) Express warranties by the lessor are created as follows:
(a) Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description.
(c) Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the lessor use formal words, such as "warrant" or "guarantee," or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor’s opinion or commendation of the goods does not create a warranty.
[28-12-210, added 1993, ch. 287, sec. 1, p. 986.]
(1) There is in a lease contract a warranty that for the lease term no person holds a claim to or interest in the goods that arose from an act or omission of the lessor, other than a claim by way of infringement or the like, which will interfere with the lessee’s enjoyment of its leasehold interest.
(2) Except in a finance lease there is, in a lease contract by a lessor who is a merchant regularly dealing in goods of the kind, a warranty that the goods are delivered free of the rightful claim of any person by way of infringement or the like.
(3) A lessee who furnishes specifications to a lessor or a supplier shall hold the lessor and the supplier harmless against any claim by way of infringement or the like that arises out of compliance with the specifications.
[28-12-211, added 1993, ch. 287, sec. 1, p. 986.]
(1) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind.
(2) Goods to be merchantable must be at least such as:
(a) Pass without objection in the trade under the description in the lease agreement;
(b) In the case of fungible goods, are of fair average quality within the description;
(c) Are fit for the ordinary purposes for which goods of that type are used;
(d) Run, within the variation permitted by the lease agreement, of even kind, quality and quantity within each unit and among all units involved;
(e) Are adequately contained, packaged and labeled as the lease agreement may require; and
(f) Conform to any promises or affirmations of fact made on the container or label.
(3) Other implied warranties may arise from course of dealing or usage of trade.
[28-12-212, added 1993, ch. 287, sec. 1, p. 986.]
Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.
[28-12-213, added 1993, ch. 287, sec. 1, p. 987.]
(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit a warranty must be construed wherever reasonable as consistent with each other; but, subject to the provisions of section 28-12-202 on parol or extrinsic evidence, negation or limitation is inoperative to the extent that the construction is unreasonable.
(2) Subject to the provisions of subsection (3) of this section, to exclude or modify the implied warranty of merchantability or any part of it the language must mention "merchantability", be by a writing, and be conspicuous. Subject to the provisions of subsection (3) of this section, to exclude or modify any implied warranty of fitness the exclusion must be by a writing and be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it is in writing, is conspicuous and states, for example, "There is no warranty that the goods will be fit for a particular purpose".
(3) Notwithstanding the provisions of subsection (2) of this section, but subject to the provisions of subsection (4) of this section:
(a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is," or "with all faults," or by other language that in common understanding calls the lessee’s attention to the exclusion of warranties and makes plain that there is no implied warranty, if in writing and conspicuous;
(b) If the lessee, before entering into the lease contract, has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that an examination ought in the circumstances to have revealed; and
(c) An implied warranty may also be excluded or modified by course of dealing, course of performance, or usage of trade.
(4) To exclude or modify a warranty against interference or against infringement (section 28-12-211) or any part of it, the language must be specific, be by a writing, and be conspicuous, unless the circumstances, including course of performance, course of dealing, or usage of trade, give the lessee reason to know that the goods are being leased subject to a claim or interest of any person.
[28-12-214, added 1993, ch. 287, sec. 1, p. 987.]
Warranties, whether express or implied, must be construed as consistent with each other and as cumulative, but if that construction is unreasonable, the intention of the parties determines which warranty is dominant. In ascertaining that intention the following rules apply:
(1) Exact or technical specifications displace an inconsistent sample or model or general language of description.
(2) A sample from an existing bulk displaces inconsistent general language of description.
(3) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.
[28-12-215, added 1993, ch. 287, sec. 1, p. 988.]
A warranty to or for the benefit of a lessee under this chapter, whether express or implied, extends to any natural person who is in the family or household of the lessee or who is a guest in the lessee’s 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. This section does not displace principles of law and equity that extend a warranty to or for the benefit of a lessee to other persons. The operation of this section may not be excluded, modified or limited, but an exclusion, modification, or limitation of the warranty, including any with respect to rights and remedies, effective against the lessee is also effective against any beneficiary designated under this section.
[28-12-216, added 1993, ch. 287, sec. 1, p. 988.]
Identification of goods as goods to which a lease contract refers may be made at any time and in any manner explicitly agreed to by the parties. In the absence of explicit agreement, identification occurs:
(1) When the lease contract is made, if the lease contract is for a lease of goods that are existing and identified;
(2) When the goods are shipped, marked or otherwise designated by the lessor as goods to which the lease contract refers, if the lease contract is for a lease of goods that are not existing and identified; or
(3) When the young are conceived, if the lease contract is for a lease of unborn young of animals.
[28-12-217, added 1993, ch. 287, sec. 1, p. 988.]
(1) A lessee obtains an insurable interest when existing goods are identified to the lease contract even though the goods identified are nonconforming and the lessee has an option to reject them.
(2) If a lessee has an insurable interest only by reason of the lessor’s identification of the goods, the lessor, until default or insolvency or notification to the lessee that identification is final, may substitute other goods for those identified.
(3) Notwithstanding a lessee’s insurable interest under the provisions of subsections (1) and (2) of this section, the lessor retains an insurable interest until an option to buy has been exercised by the lessee and risk of loss has passed to the lessee.
(4) Nothing in this section impairs any insurable interest recognized under any other statute or rule of law.
(5) The parties by agreement may determine that one (1) or more parties have an obligation to obtain and pay for insurance covering the goods and by agreement may determine the beneficiary of the proceeds of the insurance.
[28-12-218, added 1993, ch. 287, sec. 1, p. 988.]
(1) Except in the case of a finance lease, risk of loss is retained by the lessor and does not pass to the lessee. In the case of a finance lease, risk of loss passes to the lessee.
(2) Subject to the provisions of this chapter on the effect of default on risk of loss (section 28-12-220), if risk of loss is to pass to the lessee and the time of passage is not stated, the following rules apply:
(a) If the lease contract requires or authorizes the goods to be shipped by carrier:
(i) And it does not require delivery at a particular destination, the risk of loss passes to the lessee when the goods are duly delivered to the carrier; but
(ii) If it does require delivery at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the lessee when the goods are there duly so tendered as to enable the lessee to take delivery.
(b) If the goods are held by a bailee to be delivered without being moved, the risk of loss passes to the lessee on acknowledgment by the bailee of the lessee’s right to possession of the goods.
(c) In any case not within the provisions of subparagraph (a) or (b) of this subsection, the risk of loss passes to the lessee on the lessee’s receipt of the goods if the lessor, or, in the case of a finance lease, the supplier, is a merchant; otherwise the risk passes to the lessee on tender of delivery.
[28-12-219, added 1993, ch. 287, sec. 1, p. 989.]
(1) Where risk of loss is to pass to the lessee and the time of passage is not stated:
(a) If a tender or delivery of goods so fails to conform to the lease contract as to give a right of rejection, the risk of their loss remains with the lessor, or, in the case of a finance lease, the supplier, until cure or acceptance.
(b) If the lessee rightfully revokes acceptance, he, to the extent of any deficiency in his effective insurance coverage, may treat the risk of loss as having remained with the lessor from the beginning.
(2) Whether or not risk of loss is to pass to the lessee, if the lessee as to conforming goods already identified to a lease contract repudiates or is otherwise in default under the lease contract, the lessor, or, in the case of a finance lease, the supplier, to the extent of any deficiency in his effective insurance coverage may treat the risk of loss as resting on the lessee for a commercially reasonable time.
[28-12-220, added 1993, ch. 287, sec. 1, p. 989.]
If a lease contract requires goods identified when the lease contract is made, and the goods suffer casualty without fault of the lessee, the lessor or the supplier before delivery, or the goods suffer casualty before risk of loss passes to the lessee pursuant to the lease agreement or section 28-12-219, then:
(1) If the loss is total, the lease contract is avoided; and
(2) If the loss is partial or the goods have so deteriorated as to no longer conform to the lease contract, the lessee may nevertheless demand inspection and at his option either treat the lease contract as avoided or, except in a finance lease that is not a consumer lease, accept the goods with due allowance from the rent payable for the balance of the lease term for the deterioration or the deficiency in quantity but without further right against the lessor.
[28-12-221, added 1993, ch. 287, sec. 1, p. 990.]
Except as otherwise provided in this chapter, a lease contract is effective and enforceable according to its terms between the parties, against purchasers of the goods and against creditors of the parties.
[28-12-301, added 1993, ch. 287, sec. 1, p. 990.]
Except as otherwise provided in this chapter, each provision of this chapter applies whether the lessor or a third party has title to the goods, and whether the lessor, the lessee, or a third party has possession of the goods, notwithstanding any statute or rule of law that possession or the absence of possession is fraudulent.
[28-12-302, added 1993, ch. 287, sec. 1, p. 990.]
(1) As used in this section, "creation of a security interest" includes the sale of a lease contract that is subject to chapter 9, title 28, Idaho Code, secured transactions, by reason of section (2) Except as provided in subsection (3) of this section and section 28-9-407, a provision in a lease agreement which: (i) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor’s residual interest in the goods, or (ii) makes such a transfer an event of default, gives rise to the rights and remedies provided in subsection (4) of this section, but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.
(3) A provision in a lease agreement which: (i) prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor’s due performance of the transferor’s entire obligation, or (ii) makes such a transfer an event of default, is not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract within the purview of subsection (4) of this section.
(4) Subject to the provisions of subsection (3) of this section and section 28-9-407:
(a) If a transfer is made which is made an event of default under a lease agreement, the party to the lease contract not making the transfer, unless that party waives the default or otherwise agrees, has the rights and remedies described in section (b) If paragraph (a) of this subsection is not applicable and if a transfer is made that: (i) is prohibited under a lease agreement or (ii) materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract, unless the party not making the transfer agrees at any time to the transfer in the lease contract or otherwise, then, except as limited by contract, (i) the transferor is liable to the party not making the transfer for damages caused by the transfer to the extent that the damages could not reasonably be prevented by the party not making the transfer and (ii) a court having jurisdiction may grant other appropriate relief, including cancellation of the lease contract or an injunction against the transfer.
[28-12-303, added 1993, ch. 287, sec. 1, p. 990; am. 2001, ch. 208, sec. 21, p. 819.]
(1) Subject to section 28-12-303, a subsequent lessee from a lessor of goods under an existing lease contract obtains, to the extent of the leasehold interest transferred, the leasehold interest in the goods that the lessor had or had power to transfer, and except as provided in subsection (2) of this section and section 28-12-527(4), takes subject to the existing lease contract. A lessor with voidable title has power to transfer a good leasehold interest to a good faith subsequent lessee for value, but only to the extent set forth in the preceding sentence. If goods have been delivered under a transaction of purchase, the lessor has that power even though:
(a) The lessor’s transferor was deceived as to the identity of the lessor;
(b) The delivery was in exchange for a check which is later dishonored;
(c) It was agreed that the transaction was to be a "cash sale"; or
(d) The delivery was procured through fraud punishable as larcenous under the criminal law.
(2) A subsequent lessee in the ordinary course of business from a lessor who is a merchant dealing in goods of that kind to whom the goods were entrusted by the existing lessee of that lessor before the interest of the subsequent lessee became enforceable against that lessor obtains, to the extent of the leasehold interest transferred, all of that lessor’s and the existing lessee’s rights to the goods, and takes free of the existing lease contract.
(3) A subsequent lessee from the lessor of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.
[28-12-304, added 1993, ch. 287, sec. 1, p. 992.]
(1) Subject to the provisions of section 28-12-303, a buyer or sublessee from the lessee of goods under an existing lease contract obtains, to the extent of the interest transferred, the leasehold interest in the goods that the lessee had or had power to transfer, and except as provided in subsection (2) of this section and section 28-12-511(4), takes subject to the existing lease contract. A lessee with a voidable leasehold interest has power to transfer a good leasehold interest to a good faith buyer for value or a good faith sublessee for value, but only to the extent set forth in the preceding sentence. When goods have been delivered under a transaction of lease the lessee has that power even though:
(a) The lessor was deceived as to the identity of the lessee;
(b) The delivery was in exchange for a check which is later dishonored; or
(c) The delivery was procured through fraud punishable as larcenous under the criminal law.
(2) A buyer in the ordinary course of business or a sublessee in the ordinary course of business from a lessee who is a merchant dealing in goods of that kind to whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all of the lessor’s and lessee’s rights to the goods, and takes free of the existing lease contract.
(3) A buyer or sublessee from the lessee of goods that are subject to an existing lease contract and are covered by a certificate of title issued under a statute of this state or of another jurisdiction takes no greater rights than those provided both by this section and by the certificate of title statute.
[28-12-305, added 1993, ch. 287, sec. 1, p. 992.]
If a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a lease contract, a lien upon those goods in the possession of that person given by statute or rule of law for those materials or services takes priority over any interest of the lessor or lessee under the lease contract or this chapter unless the lien is created by statute and the statute provides otherwise or unless the lien is created by rule of law and the rule of law provides otherwise.
[28-12-306, added 1993, ch. 287, sec. 1, p. 993.]
(1) Except as otherwise provided in section 28-12-306, a creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsection (3) of this section and in sections 28-12-306 and 28-12-308, a creditor of a lessor takes subject to the lease contract unless the creditor holds a lien that attached to the goods before the lease contract became enforceable.
(3) Except as otherwise provided in sections 28-9-317, 28-9-321 and 28-9-323, a lessee takes a leasehold interest subject to a security interest held by a creditor of the lessor.
[28-12-307, added 1993, ch. 287, sec. 1, p. 993; am. 2001, ch. 208, sec. 22, p. 821.]
(1) A creditor of a lessor in possession of goods subject to a lease contract may treat the lease contract as void if as against the creditor retention of possession by the lessor is fraudulent under any statute or rule of law, but retention of possession in good faith and current course of trade by the lessor for a commercially reasonable time after the lease contract becomes enforceable is not fraudulent.
(2) Nothing in this chapter impairs the rights of creditors of a lessor if the lease contract (i) becomes enforceable, 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 (ii) is made under circumstances which under any statute or rule of law apart from this chapter would constitute the transaction a fraudulent transfer or voidable preference.
(3) A creditor of a seller may treat a sale or an identification of goods to a contract for sale as void if as against the creditor retention of possession by the seller is fraudulent under any statute or rule of law, but retention of possession of the goods pursuant to a lease contract entered into by the seller as lessee and the buyer as lessor in connection with the sale or identification of the goods is not fraudulent if the buyer bought for value and in good faith.
[28-12-308, added 1993, ch. 287, sec. 1, p. 994.]
(1) In this section:
(a) Goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law;
(b) A "fixture filing" is the filing, in the office where a record of a mortgage on the real estate would be filed or recorded, of a financing statement covering goods that are or are to become fixtures and conforming to the requirements of section 28-9-502(a) and (b);
(c) A lease is a "purchase money lease" unless the lessee has possession or use of the goods or the right to possession or use of the goods before the lease agreement is enforceable;
(d) A mortgage is a "construction mortgage" to the extent it secures an obligation incurred for the construction of an improvement on land including the acquisition cost of the land, if the recorded writing so indicates; and
(e) "Encumbrance" includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests.
(2) Under this chapter a lease may be of goods that are fixtures or may continue in goods that become fixtures, but no lease exists under this chapter of ordinary building materials incorporated into an improvement on land.
(3) The provisions of this chapter do not prevent creation of a lease of fixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has priority over a conflicting interest of an encumbrancer or owner of the real estate if:
(a) The lease is a purchase money lease, the conflicting interest of the encumbrancer or owner arises before the goods become fixtures, the interest of the lessor is perfected by a fixture filing before the goods become fixtures or within ten (10) days thereafter, and the lessee has an interest of record in the real estate or is in possession of the real estate; or
(b) The interest of the lessor is perfected by a fixture filing before the interest of the encumbrancer or owner is of record, the lessor’s interest has priority over any conflicting interest of a predecessor in title of the encumbrancer or owner, and the lessee has an interest of record in the real estate or is in possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not perfected, has priority over the conflicting interest of an encumbrancer or owner of the real estate if:
(a) The fixtures are readily removable factory or office machines, readily removable equipment that is not primarily used or leased for use in the operation of the real estate, or readily removable replacements of domestic appliances that are goods subject to a consumer lease, and before the goods become fixtures the lease contract is enforceable; or
(b) The conflicting interest is a lien on the real estate obtained by legal or equitable proceedings after the lease contract is enforceable; or
(c) The encumbrancer or owner has consented in writing to the lease or has disclaimed an interest in the goods as fixtures; or
(d) The lessee has a right to remove the goods as against the encumbrancer or owner. If the lessee’s right to remove terminates, the priority of the interest of the lessor continues for a reasonable time.
(6) Notwithstanding the provisions of subsection (4)(a) of this section but otherwise subject to the provisions of subsections (4) and (5) of this section, the interest of a lessor of fixtures, including the lessor’s residual interest, is subordinate to the conflicting interest of an encumbrancer of the real estate under a construction mortgage recorded before the goods become fixtures if the goods become fixtures before the completion of the construction. To the extent given to refinance a construction mortgage, the conflicting interest of an encumbrancer of the real estate under a mortgage has this priority to the same extent as the encumbrancer of the real estate under the construction mortgage.
(7) In cases not within the preceding subsections, priority between the interest of a lessor of fixtures, including the lessor’s residual interest, and the conflicting interest of an encumbrancer or owner of the real estate who is not the lessee is determined by the priority rules governing conflicting interests in real estate.
(8) If the interest of a lessor of fixtures, including the lessor’s residual interest, has priority over all conflicting interests of all owners and encumbrancers of the real estate, the lessor or the lessee may: (i) on default, expiration, termination, or cancellation of the lease agreement but subject to the lease agreement and this chapter, or (ii) if necessary to enforce his other rights and remedies of the lessor or lessee under this chapter, remove the goods from the real estate, free and clear of all conflicting interests of all owners and encumbrancers of the real estate, but the lessor or lessee must reimburse any encumbrancer or owner of the real estate who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in value of the real estate caused by the absence of the goods removed or by any necessity of replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.
(9) Even though the lease agreement does not create a security interest, the interest of a lessor of fixtures, including the lessor’s residual interest, is perfected by filing a financing statement as a fixture filing for leased goods that are or are to become fixtures in accordance with the relevant provisions of the chapter on secured transactions (chapter 9, title 28, Idaho Code).
[28-12-309, added 1993, ch. 287, sec. 1, p. 994; am. 2001, ch. 208, sec. 23, p. 821.]
(1) Goods are "accessions" when they are installed in or affixed to other goods.
(2) The interest of a lessor or a lessee under a lease contract entered into before the goods became accessions is superior to all interests in the whole except as stated in subsection (4) of this section.
(3) The interest of a lessor or a lessee under a lease contract entered into at the time or after the goods became accessions is superior to all subsequently acquired interests in the whole except as stated in subsection (4) of this section but is subordinate to interests in the whole existing at the time the lease contract was made unless the holders of such interests in the whole have in writing consented to the lease or disclaimed an interest in the goods as part of the whole.
(4) The interest of a lessor or a lessee under a lease contract described in subsection (2) or (3) of this section is subordinate to the interest of:
(a) A buyer in the ordinary course of business or a lessee in the ordinary course of business of any interest in the whole acquired after the goods became accessions; or
(b) A creditor with a security interest in the whole perfected before the lease contract was made to the extent that the creditor makes subsequent advances without knowledge of the lease contract.
(5) When, under the provisions of subsections (2) or (3) and (4) of this section, a lessor or a lessee of accessions holds an interest that is superior to all interests in the whole, the lessor or the lessee may (i) on default, expiration, termination, or cancellation of the lease contract by the other party but subject to the provisions of the lease contract and this chapter, or (ii) if necessary to enforce his other rights and remedies under this chapter, remove the goods from the whole, free and clear of all interests in the whole, but he must reimburse any holder of an interest in the whole who is not the lessee and who has not otherwise agreed for the cost of repair of any physical injury but not for any diminution in value of the whole caused by the absence of the goods removed or by any necessity for replacing them. A person entitled to reimbursement may refuse permission to remove until the party seeking removal gives adequate security for the performance of this obligation.
[28-12-310, added 1993, ch. 287, sec. 1, p. 996.]
Nothing in this chapter prevents subordination by agreement by any person entitled to priority.
[28-12-311, added 1993, ch. 287, sec. 1, p. 997.]
(1) A lease contract imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired.
(2) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable the insecure party may suspend any performance for which he has not already received the agreed return.
(3) A repudiation of the lease contract occurs if assurance of due performance adequate under the circumstances of the particular case is not provided to the insecure party within a reasonable time, not to exceed thirty (30) days after receipt of a demand by the other party.
(4) Between merchants, the reasonableness of grounds for insecurity and the adequacy of any assurance offered must be determined according to commercial standards.
(5) Acceptance of any nonconforming delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.
[28-12-401, added 1993, ch. 287, sec. 1, p. 997.]
If either party repudiates a lease contract with respect to a performance not yet due under the lease contract, the loss of which performance will substantially impair the value of the lease contract to the other, the aggrieved party may:
(1) For a commercially reasonable time, await retraction of repudiation and performance by the repudiating party;
(2) Make demand pursuant to section 28-12-401 and await assurance of future performance adequate under the circumstances of the particular case; or
(3) Resort to any right or remedy upon default under the lease contract or this chapter, even though the aggrieved party has notified the repudiating party that the aggrieved party would await the repudiating party’s performance and assurance and has urged retraction. In addition, whether or not the aggrieved party is pursuing one of the foregoing remedies, the aggrieved party may suspend performance or, if the aggrieved party is the lessor, proceed in accordance with the provisions of this chapter on the lessor’s right to identify goods to the lease contract notwithstanding default or to salvage unfinished goods (section 28-12-524).
[28-12-402, added 1993, ch. 287, sec. 1, p. 997.]
(1) Until the repudiating party’s next performance is due, the repudiating party can retract the repudiation unless, since the repudiation, the aggrieved party has cancelled the lease contract or materially changed the aggrieved party’s position or otherwise indicated that the aggrieved party considers the repudiation final.
(2) Retraction may be by any method that clearly indicates to the aggrieved party that the repudiating party intends to perform under the lease contract and includes any assurance demanded under section 28-12-401.
(3) Retraction reinstates a repudiating party’s rights under a lease contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation.
[28-12-403, added 1993, ch. 287, sec. 1, p. 997.]
(1) If, without fault of the lessee, the lessor and the supplier, the agreed berthing, loading, or unloading facilities fail or the agreed type of carrier becomes unavailable or the agreed manner of delivery otherwise becomes commercially impracticable, but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted.
(2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation:
(a) The lessor may withhold or stop delivery or cause the supplier to withhold or stop delivery unless the lessee provides a means or manner of payment that is commercially a substantial equivalent; and
(b) If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the lessee’s obligation unless the regulation is discriminatory, oppressive, or predatory.
[28-12-404, added 1993, ch. 287, sec. 1, p. 998.]
Subject to section 28-12-404 on substituted performance, the following rules apply:
(1) Delay in delivery or nondelivery in whole or in part by a lessor or a supplier who complies with the provisions of subsections (2) and (3) of this section is not a default under the lease contract if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the lease contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not the regulation or order later proves to be invalid.
(2) If the causes mentioned in subsection (1) of this section affect only part of the lessor’s or the supplier’s capacity to perform, he shall allocate production and deliveries among his customers but at his option may include regular customers not then under contract for sale or lease as well as his own requirements for further manufacture. He may so allocate in any manner that is fair and reasonable.
(3) The lessor seasonably shall notify the lessee and in the case of a finance lease the supplier seasonably shall notify the lessor and the lessee, if known, that there will be delay or nondelivery and, if allocation is required under the provisions of subsection (2) of this section, of the estimated quota thus made available for the lessee.
[28-12-405, added 1993, ch. 287, sec. 1, p. 998.]
(1) If the lessee receives notification of a material or indefinite delay or an allocation justified under the provisions of section 28-12-405, the lessee may by written notification to the lessor as to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (section 28-12-510):
(a) Terminate the lease contract (section 28-12-505(2)); or
(b) Except in a finance lease that is not a consumer lease, modify the lease contract by accepting the available quota in substitution, with due allowance from the rent payable for the balance of the lease term for the deficiency but without further right against the lessor.
(2) If, after receipt of a notification from the lessor under the provisions of section 28-12-405, the lessee fails so to modify the lease agreement within a reasonable time not exceeding thirty (30) days, the lease contract lapses with respect to any deliveries affected.
[28-12-406, added 1993, ch. 287, sec. 1, p. 998.]
(1) In the case of a finance lease that is not a consumer lease the lessee’s promises under the lease contract become irrevocable and independent upon the lessee’s acceptance of the goods.
(2) A promise that has become irrevocable and independent under the provisions of subsection (1) of this section:
(a) Is effective and enforceable between the parties, and by or against third parties including assignees of the parties; and
(b) Is not subject to cancellation, termination, modification, repudiation, excuse or substitution without the consent of the party to whom the promise runs.
(3) The provisions of this section do not affect the validity under any other law of a covenant in any lease contract making the lessee’s promises irrevocable and independent upon the lessee’s acceptance of the goods.
[28-12-407, added 1993, ch. 287, sec. 1, p. 999.]
(1) Whether the lessor or the lessee is in default under a lease contract is determined by the lease agreement and this chapter.
(2) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement has rights and remedies as provided in this chapter and, except as limited by this chapter, as provided in the lease agreement.
(3) If the lessor or the lessee is in default under the lease contract, the party seeking enforcement may reduce the party’s claim to judgment, or otherwise enforce the lease contract by self-help or any available judicial procedure or nonjudicial procedure, including administrative proceeding, arbitration, or the like, in accordance with the provisions of this chapter.
(4) Except as otherwise provided in section 28-1-305(a) or this chapter or the lease agreement, the rights and remedies referred to in subsections (2) and (3) of this section are cumulative.
(5) If the lease agreement covers both real property and goods, the party seeking enforcement may proceed under this part as to the goods, or under other applicable law as to both the real property and the goods in accordance with that party’s rights and remedies in respect of the real property, in which case the provisions of this part do not apply.
[28-12-501, added 1993, ch. 287, sec. 1, p. 999; am. 2004, ch. 43, sec. 38, p. 160.]
Except as otherwise provided in this chapter or the lease agreement, the lessor or lessee in default under the lease contract is not entitled to notice of default or notice of enforcement from the other party to the lease agreement.
[28-12-502, added 1993, ch. 287, sec. 1, p. 1000.]
(1) Except as otherwise provided in this chapter, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter.
(2) Resort to a remedy provided under this chapter or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, remedy may be had as provided in this chapter.
(3) Consequential damages may be liquidated under section 28-12-504, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. Limitation, alteration, or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation, alteration, or exclusion of damages where the loss is commercial is not prima facie unconscionable.
(4) Rights and remedies on default by the lessor or the lessee with respect to any obligation or promise collateral or ancillary to the lease contract are not impaired by this chapter.
[28-12-503, added 1993, ch. 287, sec. 1, p. 1000.]
(1) Damages payable by either party for default, or any other act or omission, including indemnity for loss or diminution of anticipated tax benefits or loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default or other act or omission.
(2) If the lease agreement provides for liquidation of damages, and such provision does not comply with the provisions of subsection (1) of this section, or such provision is an exclusive or limited remedy that circumstances cause to fail of its essential purpose, remedy may be had as provided in this chapter.
(3) If the lessor justifiably withholds or stops delivery of goods because of the lessee’s default or insolvency (section 28-12-525 or 28-12-526), the lessee is entitled to restitution of any amount by which the sum of his payments exceeds:
(a) The amount to which the lessor is entitled by virtue of terms liquidating the lessor’s damages in accordance with the provisions of subsection (1) of this section; or
(b) In the absence of those terms, twenty percent (20%) of the then present value of the total rent the lessee was obligated to pay for the balance of the lease term, or, in the case of a consumer lease, the lesser of such amount or five hundred dollars ($500).
(4) A lessee’s right to restitution under the provisions of subsection (3) of this section is subject to offset to the extent the lessor establishes:
(a) A right to recover damages under the provisions of this chapter other than the provisions of subsection (1) of this section; and
(b) The amount or value of any benefits received by the lessee directly or indirectly by reason of the lease contract.
[28-12-504, added 1993, ch. 287, sec. 1, p. 1000.]
(1) On cancellation of the lease contract, all obligations that are still executory on both sides are discharged, but any right based on prior default or performance survives, and the cancelling party also retains any remedy for default of the whole lease contract or any unperformed balance.
(2) On termination of the lease contract, all obligations that are still executory on both sides are discharged but any right based on prior default or performance survives.
(3) Unless the contrary intention clearly appears, expressions of "cancellation," "rescission," or the like of the lease contract may not be construed as a renunciation or discharge of any claim in damages for an antecedent default.
(4) Rights and remedies for material misrepresentation or fraud include all rights and remedies available under this chapter for default.
(5) Neither rescission nor a claim for rescission of the lease contract nor rejection or return of the goods may bar or be deemed inconsistent with a claim for damages or other right or remedy.
[28-12-505, added 1993, ch. 287, sec. 1, p. 1001.]
(1) An action for default under a lease contract, including breach of warranty or indemnity, must be commenced within four (4) years after the cause of action accrued. By the original lease contract the parties may reduce the period of limitation to not less than one (1) year.
(2) A cause of action for default accrues when the act or omission on which the default or breach of warranty is based is or should have been discovered by the aggrieved party, or when the default occurs, whichever is later. A cause of action for indemnity accrues when the act or omission on which the claim for indemnity is based is or should have been discovered by the indemnified party, whichever is later.
(3) If an action commenced within the time limited by the provision of subsection (1) of this section is so terminated as to leave available a remedy by another action for the same default or breach of warranty or indemnity, the other action may be commenced after the expiration of the time limited and within six (6) months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.
(4) The provisions of this section do not alter the law on tolling of the statute of limitations nor does it apply to causes of action that have accrued before this chapter becomes effective.
[28-12-506, added 1993, ch. 287, sec. 1, p. 1001.]
(1) Damages based on market rent (section 28-12-519 and 28-12-528.
(2) If evidence of rent for the use of the goods concerned for a lease term identical to the remaining lease term of the original lease agreement and prevailing at the times or places described in this chapter is not readily available, the rent prevailing within any reasonable time before or after the time described or at any other place or for a different lease term which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the difference, including the cost of transporting the goods to or from the other place.
(3) Evidence of a relevant rent prevailing at a time or place or for a lease term other than the one described in this chapter offered by one (1) party is not admissible unless and until he has given the other party notice the court finds sufficient to prevent unfair surprise.
(4) If the prevailing rent or value of any goods regularly leased in any established market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of that market are admissible in evidence. The circumstances of the preparation of the report may be shown to affect its weight but not its admissibility.
[28-12-507, added 1993, ch. 287, sec. 1, p. 1002.]
(1) If a lessor fails to deliver the goods in conformity to the lease contract (section 28-12-509) or repudiates the lease contract (section 28-12-402), or a lessee rightfully rejects the goods (section 28-12-509) or justifiably revokes acceptance of the goods (section 28-12-517), then with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (section 28-12-510), the lessor is in default under the lease contract and the lessee may:
(a) Cancel the lease contract (section 28-12-505(1));
(b) Recover so much of the rent and security as has been paid and is just under the circumstances;
(c) Cover and recover damages as to all goods affected whether or not they have been identified to the lease contract (sections 28-12-518 and 28-12-520), or recover damages for nondelivery (sections 28-12-519 and 28-12-520);
(d) Exercise any other rights or pursue any other remedies provided in the lease contract.
(2) If a lessor fails to deliver the goods in conformity to the lease contract or repudiates the lease contract, the lessee may also:
(a) If the goods have been identified, recover them (section 28-12-522); or
(b) In a proper case, obtain specific performance or replevy the goods (section 28-12-521).
(3) If a lessor is otherwise in default under a lease contract, the lessee may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease, and in section (4) If a lessor has breached a warranty, whether express or implied, the lessee may recover damages (section 28-12-519(4)).
(5) On rightful rejection or justifiable revocation of acceptance, a lessee has a security interest in goods in the lessee’s possession or control for any rent and security that has been paid and any expenses reasonably incurred in their inspection, receipt, transportation, and care and custody and may hold those goods and dispose of them in good faith and in a commercially reasonable manner, subject to section 28-12-527(5).
(6) Subject to the provisions of section 28-12-407, a lessee, on notifying the lessor of the lessee’s intention to do so, may deduct all or any part of the damages resulting from any default under the lease contract from any part of the rent still due under the same lease contract.
[28-12-508, added 1993, ch. 287, sec. 1, p. 1002.]
(1) Subject to the provisions of section 28-12-510 on default in installment lease contracts, if the goods or the tender or delivery fail in any respect to conform to the lease contract, the lessee may reject or accept the goods or accept any commercial unit or units and reject the rest of the goods.
(2) Rejection of goods is ineffective unless it is within a reasonable time after tender or delivery of the goods and the lessee seasonably notifies the lessor.
[28-12-509, added 1993, ch. 287, sec. 1, p. 1003.]
(1) Under an installment lease contract a lessee may reject any delivery that is nonconforming if the nonconformity substantially impairs the value of that delivery and cannot be cured or the nonconformity is a defect in the required documents; but if the nonconformity does not fall within the provisions of subsection (2) of this section and the lessor or the supplier gives adequate assurance of its cure, the lessee must accept that delivery.
(2) Whenever nonconformity or default with respect to one (1) or more deliveries substantially impairs the value of the installment lease contract as a whole there is a default with respect to the whole. But, the aggrieved party reinstates the installment lease contract as a whole if the aggrieved party accepts a nonconforming delivery without seasonably notifying of cancellation or brings an action with respect only to past deliveries or demands performance as to future deliveries.
[28-12-510, added 1993, ch. 287, sec. 1, p. 1003.]
(1) Subject to any security interest of a lessee (section 28-12-508(5)), if a lessor or a supplier has no agent or place of business at the market of rejection, a merchant lessee, after rejection of goods in his possession or control, shall follow any reasonable instructions received from the lessor or the supplier with respect to the goods. In the absence of those instructions, a merchant lessee shall make reasonable efforts to sell, lease, or otherwise dispose of the goods for the lessor’s account if they threaten to decline in value speedily. Instructions are not reasonable if on demand indemnity for expenses is not forthcoming.
(2) If a merchant lessee (see subsection (1) of this section) or any other lessee (section 28-12-512) disposes of goods, he is entitled to reimbursement either from the lessor or the supplier or out of the proceeds for reasonable expenses of caring for and disposing of the goods and, if the expenses include no disposition commission, to such commission as is usual in the trade, or if there is none, to a reasonable sum not exceeding ten percent (10%) of the gross proceeds.
(3) In complying with the provisions of this section or section 28-12-512, the lessee is held only to good faith. Good faith conduct hereunder is neither acceptance or conversion nor the basis of an action for damages.
(4) A purchaser who purchases in good faith from a lessee pursuant to the provisions of this section or section 28-12-512 takes the goods free of any rights of the lessor and the supplier even though the lessee fails to comply with one or more of the requirements of this chapter.
[28-12-511, added 1993, ch. 287, sec. 1, p. 1003.]
(1) Except as otherwise provided with respect to goods that threaten to decline in value speedily (section 28-12-511) and subject to any security interest of a lessee (section 28-12-508(5)):
(a) The lessee, after rejection of goods in the lessee’s possession, shall hold them with reasonable care at the lessor’s or the supplier’s disposition for a reasonable time after the lessee’s seasonable notification of rejection;
(b) If the lessor or the supplier gives no instructions within a reasonable time after notification of rejection, the lessee may store the rejected goods for the lessor’s or the supplier’s account or ship them to the lessor or the supplier or dispose of them for the lessor’s or the supplier’s account with reimbursement in the manner provided in section 28-12-511; but
(c) The lessee has no further obligations with regard to goods rightfully rejected.
(2) Action by the lessee pursuant to the provisions of subsection (1) of this section is not acceptance or conversion.
[28-12-512, added 1993, ch. 287, sec. 1, p. 1004.]
(1) If any tender or delivery by the lessor or the supplier is rejected because nonconforming and the time for performance has not yet expired, the lessor or the supplier may seasonably notify the lessee of the lessor’s or the supplier’s intention to cure and may then make a conforming delivery within the time provided in the lease contract.
(2) If the lessee rejects a nonconforming tender that the lessor or the supplier had reasonable grounds to believe would be acceptable with or without money allowance, the lessor or the supplier may have a further reasonable time to substitute a conforming tender if he seasonably notifies the lessee.
[28-12-513, added 1993, ch. 287, sec. 1, p. 1004.]
(1) In rejecting goods, a lessee’s failure to state a particular defect that is ascertainable by reasonable inspection precludes the lessee from relying on the defect to justify rejection or to establish default:
(a) If, stated seasonably, the lessor or the supplier could have cured it (section 28-12-513); or
(b) Between merchants if the lessor or the supplier after rejection has made a request in writing for a full and final written statement of all defects on which the lessee proposes to rely.
(2) A lessee’s failure to reserve rights when paying rent or other consideration against documents precludes recovery of the payment for defects apparent in the documents.
[28-12-514, added 1993, ch. 287, sec. 1, p. 1005; am. 2004, ch. 42, sec. 16, p. 112.]
(1) Acceptance of goods occurs after the lessee has had a reasonable opportunity to inspect the goods and:
(a) The lessee signifies or acts with respect to the goods in a manner that signifies to the lessor or the supplier that the goods are conforming or that the lessee will take or retain them in spite of their nonconformity; or
(b) The lessee fails to make an effective rejection of the goods (section 28-12-509(2)).
(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.
[28-12-515, added 1993, ch. 287, sec. 1, p. 1005.]
(1) A lessee must pay rent for any goods accepted in accordance with the lease contract, with due allowance for goods rightfully rejected or not delivered.
(2) A lessee’s acceptance of goods precludes rejection of the goods accepted. In the case of a finance lease, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it. In any other case, if made with knowledge of a nonconformity, acceptance cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. Acceptance does not of itself impair any other remedy provided by this chapter or the lease agreement for nonconformity.
(3) If a tender has been accepted:
(a) Within a reasonable time after the lessee discovers or should have discovered any default, the lessee shall notify the lessor and the supplier if any, or be barred from any remedy against the party not notified;
(b) Except in the case of a consumer lease, within a reasonable time after the lessee receives notice of litigation for infringement or the like (section 28-12-211) the lessee shall notify the lessor or be barred from any remedy over for liability established by the litigation; and
(c) The burden is on the lessee to establish any default.
(4) If a lessee is sued for breach of a warranty or other obligation for which a lessor or a supplier is answerable over the following apply:
(a) The lessee may give the lessor or the supplier, or both, written notice of the litigation. If the notice states that the person notified may come in and defend and that if the person notified does not do so that person will be bound in any action against that person by the lessee by any determination of fact common to the two (2) litigations, then unless the person notified after seasonable receipt of the notice does come in and defend that person is so bound.
(b) The lessor or the supplier may demand in writing that the lessee turn over control of the litigation including settlement if the claim is one for infringement or the like (section 28-12-211) or else be barred from any remedy over. If the demand states that the lessor or the supplier agrees to bear all expense and to satisfy any adverse judgment, then unless the lessee after seasonable receipt of the demand does turn over control the lessee is so barred.
(5) The provisions of subsections (3) and (4) of this section apply to any obligation of a lessee to hold the lessor or the supplier harmless against infringement or the like (section 28-12-211).
[28-12-516, added 1993, ch. 287, sec. 1, p. 1005.]
(1) A lessee may revoke acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to the lessee if the lessee has accepted it:
(a) Except in the case of a finance lease, on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
(b) Without discovery of the nonconformity if the lessee’s acceptance was reasonably induced either by the lessor’s assurances or, except in the case of a finance lease, by the difficulty of discovery before acceptance.
(2) Except in the case of a finance lease that is not a consumer lease, a lessee may revoke acceptance of a lot or commercial unit if the lessor defaults under the lease contract and the default substantially impairs the value of that lot or commercial unit to the lessee.
(3) If the lease agreement so provides, the lessee may revoke acceptance of a lot or commercial unit because of other defaults by the lessor.
(4) Revocation of acceptance must occur within a reasonable time after the lessee discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by the nonconformity. Revocation is not effective until the lessee notifies the lessor.
(5) A lessee who so revokes has the same rights and duties with regard to the goods involved as if the lessee had rejected them.
[28-12-517, added 1993, ch. 287, sec. 1, p. 1006.]
(1) After a default by a lessor under the lease contract of the type described in section 28-12-508(1), or, if agreed, after other default by the lessor, the lessee may cover by making any purchase or lease of or contract to purchase or lease goods in substitution for those due from the lessor.
(2) Except as otherwise provided with respect to damages liquidated in the lease agreement (section 28-12-504) or otherwise determined pursuant to agreement of the parties (sections 28-1-302 and 28-12-503), if a lessee’s cover is by a lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessee may recover from the lessor as damages (i) the present value, as of the date of the commencement of the term of the new lease agreement, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement minus the present value as of the same date of the total rent for the then remaining lease term of the original lease agreement, and (ii) any incidental or consequential damages, less expenses saved in consequence of the lessor’s default.
(3) If a lessee’s cover is by lease agreement that for any reason does not qualify for treatment under the provisions of subsection (2) of this section, or is by purchase or otherwise, the lessee may recover from the lessor as if the lessee had elected not to cover and section 28-12-519 governs.
[28-12-518, added 1993, ch. 287, sec. 1, p. 1006; am. 2004, ch. 43, sec. 39, p. 161.]
(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (section 28-12-504) or otherwise determined pursuant to agreement of the parties (sections 28-1-302 and 28-12-503), if a lessee elects not to cover or a lessee elects to cover and the cover is by lease agreement that for any reason does not qualify for treatment under section 28-12-518(2), or is by purchase or otherwise, the measure of damages for nondelivery or repudiation by the lessor or for rejection or revocation of acceptance by the lessee is the present value, as of the date of the default, of the then market rent minus the present value as of the same date of the original rent, computed for the remaining lease term of the original lease agreement, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.
(2) Market rent is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
(3) Except as otherwise agreed, if the lessee has accepted goods and given notification (section 28-12-516(3)), the measure of damages for nonconforming tender or delivery or other default by a lessor is the loss resulting in the ordinary course of events from the lessor’s default as determined in any manner that is reasonable together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default.
(4) Except as otherwise agreed, the measure of damages for breach of warranty is the present value at the time and place of acceptance of the difference between the value of the use of the goods accepted and the value if they had been as warranted for the lease term, unless special circumstances show proximate damages of a different amount, together with incidental and consequential damages, less expenses saved in consequence of the lessor’s default or breach of warranty.
[28-12-519, added 1993, ch. 287, sec. 1, p. 1007; am. 2004, ch. 43, sec. 40, p. 161.]
(1) Incidental damages resulting from a lessor’s default include expenses reasonably incurred in inspection, receipt, transportation, and care and custody of goods rightfully rejected or goods the acceptance of which is justifiably revoked, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the default.
(2) Consequential damages resulting from a lessor’s default include:
(a) Any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
(b) Injury to person or property proximately resulting from any breach of warranty.
[28-12-520, added 1993, ch. 287, sec. 1, p. 1007.]
(1) Specific performance may be decreed if the goods are unique or in other proper circumstances.
(2) A decree for specific performance may include any terms and conditions as to payment of the rent, damages, or other relief that the court deems just.
(3) A lessee has a right of replevin, detinue, sequestration, claim and delivery, or the like for goods identified to the lease contract if after reasonable effort the lessee is unable to effect cover for those goods or the circumstances reasonably indicate that the effort will be unavailing.
[28-12-521, added 1993, ch. 287, sec. 1, p. 1008.]
(1) Subject to the provisions of subsection (2) of this section and even though the goods have not been shipped, a lessee who has paid a part or all of the rent and security for goods identified to a lease contract (section 28-12-217) on making and keeping good a tender of any unpaid portion of the rent and security due under the lease contract may recover the goods identified from the lessor if the lessor becomes insolvent within ten (10) days after receipt of the first installment of rent and security.
(2) A lessee acquires the right to recover goods identified to a lease contract only if they conform to the lease contract.
[28-12-522, added 1993, ch. 287, sec. 1, p. 1008.]
(1) If a lessee wrongfully rejects or revokes acceptance of goods or fails to make a payment when due or repudiates with respect to a part or the whole, then, with respect to any goods involved, and with respect to all of the goods if under an installment lease contract the value of the whole lease contract is substantially impaired (section (a) Cancel the lease contract (section 28-12-505(1));
(b) Proceed respecting goods not identified to the lease contract (section (c) Withhold delivery of the goods and take possession of goods previously delivered (section (d) Stop delivery of the goods by any bailee (section 28-12-526);
(e) Dispose of the goods and recover damages (section 28-12-527), or retain the goods and recover damages (section 28-12-528), or in a proper case recover rent (section 28-12-529);
(f) Exercise any other rights or pursue any other remedies provided in the lease contract.
(2) If a lessor does not fully exercise a right or obtain a remedy to which the lessor is entitled under the provisions of subsection (1) of this section, the lessor may recover the loss resulting in the ordinary course of events from the lessee’s default as determined in any reasonable manner, together with incidental damages, less expenses saved in consequence of the lessee’s default.
(3) If a lessee is otherwise in default under a lease contract, the lessor may exercise the rights and pursue the remedies provided in the lease contract, which may include a right to cancel the lease. In addition, unless otherwise provided in the lease contract:
(a) If the default substantially impairs the value of the lease contract to the lessor, the lessor may exercise the rights and pursue the remedies provided in subsection (1) or (2) of this section; or
(b) If the default does not substantially impair the value of the lease contract to the lessor, the lessor may recover as provided in subsection (2) of this section.
[28-12-523, added 1993, ch. 287, sec. 1, p. 1008.]
(1) After default by the lessee under the lease contract of the type described in section 28-12-523(1) or section 28-12-523(3)(a) or, if agreed, after other default by the lessee, the lessor may:
(a) Identify to the lease contract conforming goods not already identified if at the time the lessor learned of the default they were in the lessor’s or the supplier’s possession or control; and
(b) Dispose of goods (section 28-12-527(1)) that demonstrably have been intended for the particular lease contract even though those goods are unfinished.
(2) If the goods are unfinished, in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization, an aggrieved lessor or the supplier may either complete manufacture and wholly identify the goods to the lease contract or cease manufacture and lease, sell or otherwise dispose of the goods for scrap or salvage value or proceed in any other reasonable manner.
[28-12-524, added 1993, ch. 287, sec. 1, p. 1009.]
(1) If a lessor discovers the lessee to be insolvent, the lessor may refuse to deliver the goods.
(2) After a default by the lessee under the lease contract of the type described in section 28-12-523(1) or 28-12-523(3)(a) or, if agreed, after other default by the lessee, the lessor has the right to take possession of the goods. If the lease contract so provides, the lessor may require the lessee to assemble the goods and make them available to the lessor at a place to be designated by the lessor which is reasonably convenient to both parties. Without removal, the lessor may render unusable any goods employed in trade or business, and may dispose of goods on the lessee’s premises (section 28-12-527).
(3) The lessor may proceed under the provisions of subsection (2) of this section without judicial process if it can be done without breach of the peace or the lessor may proceed by action.
[28-12-525, added 1993, ch. 287, sec. 1, p. 1009.]
(1) A lessor may stop delivery of goods in the possession of a carrier or other bailee if the lessor discovers the lessee to be insolvent and may stop delivery of carload, truckload, planeload or larger shipments of express or freight if the lessee repudiates or fails to make a payment due before delivery, whether for rent, security or otherwise under the lease contract, or for any other reason the lessor has a right to withhold or take possession of the goods.
(2) In pursuing its remedies under the provisions of subsection (1) of this section, the lessor may stop delivery until:
(a) Receipt of the goods by the lessee;
(b) Acknowledgment to the lessee by any bailee of the goods, except a carrier, that the bailee holds the goods for the lessee; or
(c) Such an acknowledgment to the lessee by a carrier via reshipment or as a warehouse.
(3) (a) To stop delivery, a lessor shall so notify as to enable the bailee by reasonable diligence to prevent delivery of the goods.
(b) After notification, the bailee shall hold and deliver the goods according to the directions of the lessor, but the lessor is liable to the bailee for any ensuing charges or damages.
(c) A carrier who has issued a nonnegotiable bill of lading is not obliged to obey a notification to stop received from a person other than the consignor.
[28-12-526, added 1993, ch. 287, sec. 1, p. 1010; am. 2004, ch. 42, sec. 17, p. 113.]
(1) After a default by a lessee under the lease contract of the type described in section 28-12-523(1) or 28-12-523(3)(a) or after the lessor refuses to deliver or takes possession of goods (section 28-12-525 or 28-12-526), or, if agreed, after other default by a lessee, the lessor may dispose of the goods concerned or the undelivered balance thereof by lease, sale or otherwise.
(2) Except as otherwise provided with respect to damages liquidated in the lease agreement (section 28-12-504) or otherwise determined pursuant to agreement of the parties (sections 28-1-302 and 28-12-503), if the disposition is by lease agreement substantially similar to the original lease agreement and the new lease agreement is made in good faith and in a commercially reasonable manner, the lessor may recover from the lessee as damages (i) accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement, (ii) the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement, and (iii) any incidental damages allowed under section 28-12-530, less expenses saved in consequence of the lessee’s default.
(3) If the lessor’s disposition is by lease agreement that for any reason does not qualify for treatment under the provisions of subsection (2) of this section, or is by sale or otherwise, the lessor may recover from the lessee as if the lessor had elected not to dispose of the goods and section 28-12-528 governs.
(4) A subsequent buyer or lessee who buys or leases from the lessor in good faith for value as a result of a disposition under the provisions of this section takes the goods free of the original lease contract and any rights of the original lessee even though the lessor fails to comply with one or more of the requirements of this chapter.
(5) The lessor is not accountable to the lessee for any profit made on any disposition. A lessee who has rightfully rejected or justifiably revoked acceptance shall account to the lessor for any excess over the amount of the lessee’s security interest (section 28-12-508(5)).
[28-12-527, added 1993, ch. 287, sec. 1, p. 1010; am. 2004, ch. 43, sec. 41, p. 162.]
(1) Except as otherwise provided with respect to damages liquidated in the lease agreement (section 28-12-504) or otherwise determined pursuant to agreement of the parties (sections 28-1-302 and 28-12-503), if a lessor elects to retain the goods or a lessor elects to dispose of the goods and the disposition is by lease agreement that for any reason does not qualify for treatment under section 28-12-527(2), or is by sale or otherwise, the lessor may recover from the lessee as damages for a default of the type described in section 28-12-523(1) or 28-12-523(3)(a), or, if agreed, for other default of the lessee, (i) accrued and unpaid rent as of the date of default if the lessee has never taken possession of the goods, or, if the lessee has taken possession of the goods, as of the date the lessor repossesses the goods or an earlier date on which the lessee makes a tender of the goods to the lessor, (ii) the present value as of the date determined under clause (i) of this subsection, of the total rent for the then remaining lease term of the original lease agreement minus the present value as of the same date of the market rent at the place where the goods are located computed for the same lease term, and (iii) any incidental damages allowed under section 28-12-530, less expenses saved in consequence of the lessee’s default.
(2) If the measure of damages provided in subsection (1) of this section is inadequate to put a lessor in as good a position as performance would have, the measure of damages is the present value of the profit, including reasonable overhead, the lessor would have made from full performance by the lessee, together with any incidental damages allowed under section History:
[28-12-528, added 1993, ch. 287, sec. 1, p. 1011; am. 2004, ch. 43, sec. 42, p. 163.]
(1) After default by the lessee under the lease contract of the type described in section 28-12-523(1) or 28-12-523(3)(a) or, if agreed, after other default by the lessee, if the lessor complies with the provisions of subsection (2) of this section, the lessor may recover from the lessee as damages:
(a) For goods accepted by the lessee and not repossessed by or tendered to the lessor, and for conforming goods lost or damaged within a commercially reasonable time after risk of loss passes to the lessee (section 28-12-219), (i) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (ii) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (iii) any incidental damages allowed under section (b) For goods identified to the lease contract if the lessor is unable after reasonable effort to dispose of them at a reasonable price or the circumstances reasonably indicate that effort will be unavailing, (i) accrued and unpaid rent as of the date of entry of judgment in favor of the lessor, (ii) the present value as of the same date of the rent for the then remaining lease term of the lease agreement, and (iii) any incidental damages allowed under section 28-12-530, less expenses saved in consequence of the lessee’s default.
(2) Except as provided in subsection (3) of this section, the lessor shall hold for the lessee for the remaining lease term of the lease agreement any goods that have been identified to the lease contract and are in the lessor’s control.
(3) The lessor may dispose of the goods at any time before collection of the judgment for damages obtained pursuant to the provisions of subsection (1) of this section. If the disposition is before the end of the remaining lease term of the lease agreement, the lessor’s recovery against the lessee for damages is governed by section 28-12-527 or 28-12-528, and the lessor will cause an appropriate credit to be provided against a judgment for damages to the extent that the amount of the judgment exceeds the recovery available pursuant to section 28-12-527 or 28-12-528.
(4) Payment of the judgment for damages obtained pursuant to the provisions of subsection (1) of this section entitles the lessee to the use and possession of the goods not then disposed of for the remaining lease term of and in accordance with the lease agreement.
(5) After default by the lessee under the lease contract of the type described in section 28-12-523(1) or section 28-12-523(3)(a) or, if agreed, after other default by the lessee, a lessor who is held not entitled to rent under this section must nevertheless be awarded damages for nonacceptance under section 28-12-527 or section 28-12-528.
[28-12-529, added 1993, ch. 287, sec. 1, p. 1011.]
Incidental damages to an aggrieved lessor include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the lessee’s default, in connection with return or disposition of the goods, or otherwise resulting from the default.
[28-12-530, added 1993, ch. 287, sec. 1, p. 1012.]
(1) If a third party so deals with goods that have been identified to a lease contract as to cause actionable injury to a party to the lease contract (i) the lessor has a right of action against the third party, and (ii) the lessee also has a right of action against the third party if the lessee:
(a) Has a security interest in the goods;
(b) Has an insurable interest in the goods; or
(c) Bears the risk of loss under the lease contract or has since the injury assumed that risk as against the lessor and the goods have been converted or destroyed.
(2) If at the time of the injury the party plaintiff did not bear the risk of loss as against the other party to the lease contract and there is no arrangement between them for disposition of the recovery, his suit or settlement, subject to his own interest, is as a fiduciary for the other party to the lease contract.
(3) Either party with the consent of the other may sue for the benefit of whom it may concern.
[28-12-531, added 1993, ch. 287, sec. 1, p. 1012.]
In addition to any other recovery permitted in this chapter or other law, the lessor may recover from the lessee an amount that will fully compensate the lessor for any loss of or damage to the lessor’s residual interest in the goods caused by the default of the lessee.
[28-12-532, added 1993, ch. 287, sec. 1, p. 1013.]
A nonnegotiable written contract for the payment of money or personal property may be transferred by indorsement, in like manner with negotiable instruments. Such indorsement transfers all the rights of the assignor under the instrument to the assignee, subject to all equities and defenses existing in favor of the maker at the time of the indorsement.
[(28-21-101) R.S., sec. 3600; reen. R.C. & C.L., sec. 3654; C.S., sec. 6063; I.C.A., sec. 26-1801.]
Every assignor, his heirs, executors or administrators, of every such instrument in writing, is liable to the action of the assignee thereof, his executors, or administrators, if such assignee has used diligence, by the institution and prosecution of a suit against the maker of such instrument, or against his heirs, executors or administrators, for recovery of the money or property due thereon, or damages in lieu thereof; but if the institution of such suit would have been unavailing, or the maker had absconded or left, or was absent from the state when such assigned instrument became due, or absconds within twenty (20) days thereafter, such assignee, his heirs, executors or administrators, may recover against the assignor, or his heirs, executors or administrators, as if due diligence by suit had been used. By "due diligence" shall be understood the institution of suit within sixty (60) days after the maturity of the obligation.
[(28-21-102) R.S., sec. 3601; reen. R.C. & C.L., sec. 3655; C.S., sec. 6064; I.C.A., sec. 26-1802.]
To the extent that the provisions of this chapter may conflict with provisions of the Uniform Commercial Code, the provisions of the Uniform Commercial Code shall control in transactions where applicable.
[(28-21-103) I.C., sec. 27-1803, as added by 1967, ch. 272, sec. 2, p. 745.]
(1) When there is no express contract in writing fixing a different rate of interest, interest is allowed at the rate of twelve cents (12¢) on the hundred by the year on:
Money due by express contract.
Money after the same becomes due.
Money lent.
Money received to the use of another and retained beyond a reasonable time without the owner’s consent, express or implied.
Money due on the settlement of mutual accounts from the date the balance is ascertained.
Money due upon open accounts after three (3) months from the date of the last item.
(2) The legal rate of interest on money due on the judgment of any competent court or tribunal shall be the rate of five percent (5%) plus the base rate in effect at the time of entry of the judgment. The base rate shall be determined on July 1 of each year by the Idaho state treasurer and shall be the weekly average yield on United States treasury securities as adjusted to a constant maturity of one (1) year and rounded up to the nearest one-eighth percent (1/8%). The base rate shall be determined by the Idaho state treasurer utilizing the published interest rates during the second week in June of the year in which such interest is being calculated. The legal rate of interest as announced by the treasurer on July 1 of each year shall operate as the rate applying for the succeeding twelve (12) months to all judgments declared during such succeeding twelve (12) month period. The payment of interest and principal on each judgment shall be calculated according to a three hundred sixty-five (365) day year.
[(28-22-104) 1879, p. 7, sec. 4; R.S., sec. 1263; am. 1897, p. 95, sec. 1; reen. 1899, p. 315, sec. 1; reen. R.C. & C.L., sec. 1537; C.S., sec. 2551; I.C.A., sec. 26-1904; am. 1933, ch. 197, sec. 1, p. 390; am. 1974, ch. 229, sec. 1, p. 1586; am. 1981, ch. 157, sec. 1, p. 269; am. 1987, ch. 278, sec. 7, p. 579; am. 1995, ch. 304, sec. 1, p. 1053; am. 1996, ch. 94, sec. 1, p. 280.]
Whenever a check, as defined in section 28-3-104, Idaho Code, has been dishonored by nonacceptance or nonpayment and has not been paid within fifteen (15) days and after the holder of such check sends such notice of dishonor as provided in section 28-22-106, Idaho Code, to the drawer, then if the check does not provide for the payment of interest, or collection costs and attorney’s fees, the drawer of such check shall also be liable for payment of interest at the rate of twelve percent (12%) per annum from the date of dishonor and cost of collection not to exceed twenty dollars ($20.00) or the face amount of the check, whichever is the lesser; provided however, that if the holder of the dishonored check has the right to collect a set fee under a written agreement or has notified the drawer by a posted notice at the point of sale that the drawer will be required to pay a set collection fee if the check is dishonored, the holder is not required to give the notice of dishonor as provided in section 28-22-106, Idaho Code, and may assess a collection cost of the notice amount regardless of the size of the check, but the set fee may not exceed twenty dollars ($20.00). In addition, in the event of court action on the check, the court, after such notice and the expiration of said fifteen (15) days, shall award reasonable attorney’s fees as part of the damages payable to the holder of the check. No attorney’s fees may be awarded to a collection agency in a proceeding pursuant to section 1-2301A, Idaho Code. The provisions of this section shall not apply to any check which has been dishonored by reason of any justifiable stop payment order.
[28-22-105, added 1994, ch. 185, sec. 1, p. 604; am. 1996, ch. 373, sec. 5, p. 1271; am. 2002, ch. 288, sec. 2, p. 834.]
The notice of dishonor shall be sent either:
(1) By certified mail to the drawer at his last known address, or
(2) By regular mail, supported by an affidavit of service by mailing, to the address printed or written on the check.
(a) The affidavit of service by mailing shall be retained by the payee or holder of the check.
(b) Notice shall be deemed conclusive three (3) days following the date the affidavit is executed.
(c) The affidavit of service shall be substantially in the following form:
STATE OF ) AFFIDAVIT OF SERVICE
) BY MAIL
COUNTY OF )
……………….., being first duly sworn on oath, deposes and states that he/she is of legal age and that on (date)………., …., he/she served the attached Notice of Dishonor, by placing a true and correct copy thereof securely enclosed in an envelope addressed as follows:
…………………………
…………………………
…………………………
…………………………
and deposited the same, with postage prepaid, in the United States mail at ………………….., ………………….
Subscribed and sworn to before me this …. day of …………, …..
(SEAL)
(3) The notice of dishonor shall be substantially in the following form:
NOTICE OF DISHONOR OF CHECK
A check drawn by you and made payable by you to ………. in the amount of ………. has not been accepted for payment by ………., which is the drawee bank designated on your check. This check is dated ………., and it is numbered, No. ………
You are CAUTIONED that unless you pay the amount of this check within fifteen (15) days after the date this letter is postmarked, you may very well have to pay the following additional amounts:
(1) Costs of collecting the amount of the check, including an attorney fee which will be set by the court; and
(2) Interest on the amount of the check which shall accrue at the rate of twelve percent (12%) per annum from the date of dishonor.
You are advised to make your payment to ………. at the following address: ………..
(4) The issuance of a check with an address printed or written on it is a representation by the drawer that the address is the correct address for receipt of mail concerning the check. Failure of the drawer to receive a regular or certified mail notice sent to that address is not a defense to liability under this section provided the drawer has had actual notice for fifteen (15) days that the check has been dishonored.
(5) The check is prima facie evidence of the identity of the drawer if the name, home or work address, and home or work telephone number of the drawer are either recorded by the person receiving the check or printed on the face of the check.
[28-22-106, added 1994, ch. 185, sec. 2, p. 605; am. 2002, ch. 288, sec. 3, p. 835.]
No interest, collection costs and attorney’s fees shall be recovered on any dishonored check under the provisions of section 28-22-105, Idaho Code, where the holder of such check or any agent, employee or assignee of the holder has demanded:
(1) Interest or collection costs in excess of that provided in section 28-22-105, Idaho Code; or
(2) Interest or collection costs prior to the expiration of fifteen (15) days after the mailing of notice of dishonor, as provided in sections 28-22-105 and 28-22-106, Idaho Code; or
(3) Attorney’s fees, either without having such fees set by the court, or prior to the expiration of fifteen (15) days after the mailing of notice of dishonor, as provided in sections 28-22-105 and 28-22-106, Idaho Code.
The provisions of this section shall not prohibit the collection of a set collection fee which does not exceed twenty dollars ($20.00), if the holder has the right to collect a set fee under a written agreement or has notified the drawer at the point of sale that the drawer will be required to pay the set collection fee in the event a check is dishonored.
[28-22-107, added 1994, ch. 185, sec. 3, p. 605; am. 1996, ch. 373, sec. 6, p. 1272; am. 2002, ch. 288, sec. 4, p. 836.]
Whenever any person, firm, or corporation engaged in the business of selling and retailing farm implements or equipment, or repair parts for farm implements or equipment, enters into a written or parol contract, sales agreement or security agreement whereby the retailer agrees with any wholesaler, manufacturer or distributor of farm implements or equipment, machinery, attachments, accessories or repair parts to maintain a stock of parts, complete or whole machines, attachments, or demonstration and rental equipment and thereafter the written or parol contract, sales agreement or security agreement is terminated, canceled or discontinued, then the wholesaler, manufacturer or distributor shall pay to the retailer or credit to the retailer’s account, if the retailer has outstanding any sums owing the wholesaler, manufacturer or distributor, unless the retailer should desire and has a contractual right to keep such merchandise, a sum equal to (a) one hundred percent (100%) of the net cost of all unused, unsold and undamaged complete farm implements or equipment, machinery or attachments in new condition that have been purchased by the retailer from the wholesaler, manufacturer or distributor within the thirty-six (36) months immediately preceding notification by either party of intent to cancel or discontinue the contract plus (b) one hundred percent (100%)of the net cost of all demonstration or rental equipment that has not been retailed to an end user less a reasonable downward adjustment to reflect depreciation relating to such demonstration or rental activity. All such payments shall also include transportation charges paid to deliver such farm implements or equipment, machinery or attachments from the wholesaler, manufacturer or distributor to the retailer. In addition, the wholesaler, manufacturer or distributor shall pay to the retailer a reasonable reimbursement for services performed in connection with the assembly and predelivery inspections of the farm implements or equipment and machinery and attachments subject to repurchase herein. The supplier assumes ownership of farm implements or equipment, machinery or attachments FOB the dealer location.
If a wholesaler, manufacturer or distributor is required to purchase farm implements or equipment and machinery and attachments in accordance with this section, such wholesaler, manufacturer or distributor must repurchase any specific data processing hardware, software, telecommunications equipment and computer communications hardware specifically required by the wholesaler, manufacturer or distributor to meet its minimum requirements and purchased by the retailer in the prior five (5) years and held by the retailer on the date of termination. The purchase price to be paid by the wholesaler, manufacturer or distributor to the retailer for such items is the original net cost to the retailer, less twenty percent (20%) per year.
[28-23-101, added 1975, ch. 97, sec. 1, p. 197; am. 1986, ch. 248, sec. 1, p. 668; am. 2005, ch. 238, sec. 1, p. 730; am. 2011, ch. 270, sec. 2, p. 730; am. 2016, ch. 213, sec. 1, p. 597.]
Whenever any person, firm, or corporation engaged in the business of selling and retailing farm implements or equipment, or repair parts for farm implements or equipment, enters into a written or parol contract, sales agreement or security agreement whereby the retailer agrees with any wholesaler, manufacturer or distributor of farm implements or equipment, machinery, attachments, accessories or repair parts to maintain a stock of parts or complete or whole machines, or attachments, manuals and repair manuals and thereafter the written or parol contract, sales agreement or security agreement is terminated, canceled or discontinued, then the wholesaler, manufacturer or distributor shall pay to the retailer or credit to the retailer’s account, if the retailer has outstanding any sums owing the wholesaler, manufacturer or distributor, unless the retailer should desire and has a contractual right to keep such merchandise, a sum equal to one hundred percent (100%) of the current net prices, including the transportation charges from the retailer to the wholesaler, manufacturer or distributor which have been paid by the retailer, or invoiced to a retailer’s account by the wholesaler, manufacturer or distributor, for manuals and repair manuals, repair parts, including superseded or previously included parts listed in current price lists or catalogs or electronic catalogs in use, or previously used within thirty-six (36) months prior to the latest parts price list issue date by the wholesaler, manufacturer or distributor on the date of cancellation or discontinuance of the contract, which parts had previously been purchased by the retailer from the wholesaler, manufacturer or distributor and are held by the retailer on the date of the cancellation or discontinuance of the contract or thereafter received by the retailer from the wholesaler, manufacturer or distributor.
The wholesaler, manufacturer or distributor shall also pay the retailer or credit to his account a sum equal to five percent (5%) of the current net price of all parts returned for the handling, packing and loading of the parts back to the wholesaler, manufacturer or distributor unless the wholesaler, manufacturer or distributor elects to perform inventorying, packing and loading of the parts themselves.
Upon the payment or allowance of credit to the retailer’s account of the sum required by this section and section 28-23-101, Idaho Code, the title to the farm implements, equipment, machinery, attachments, accessories or repair parts shall pass to the manufacturer, wholesaler or distributor making the payment or allowing the credit and the manufacturer, wholesaler or distributor shall be entitled to the possession of the farm implements, equipment, machinery, attachments, accessories or repair parts. Title to farm implements, equipment, attachments, accessories and repair parts is transferred to the supplier FOB the dealer location. The provisions of this section shall apply to any part return adjustment agreement made between a dealer and a supplier. All payments or allowances of credit due retailers under this section shall be paid or credited by the manufacturer, wholesaler, or distributor within ninety (90) days from the termination date of the dealer agreement. After the ninety (90) days all sums of credits due shall include interest at the rate specified in section 28-22-104(1), Idaho Code. However, this section and section 28-23-101, Idaho Code, shall not in any way affect any security interest which the wholesaler, manufacturer or distributor may have in the inventory of the retailer.
A supplier shall repurchase at one hundred percent (100%) of net dealer cost, manuals and repair manuals purchased in the previous six (6) years and at fifty percent (50%) for manuals and repair manuals purchased in the previous seven (7) through twelve (12) years as required by the supplier and held by the dealer on the date of termination. Manuals and repair manuals must be unique to the supplier’s product line and must be in complete and in readable condition.
A supplier must repurchase, and the dealer must sell to the supplier, specialized repair tools. As applied in this section, "specialized repair tools" is defined as those tools required by the supplier and unique to the diagnosis or repair of the supplier’s products. For specialized repair tools that are in new, unused condition and are applicable to the supplier’s current products, the purchase price is one hundred percent (100%) of the original net cost to the dealer. For all other specialized repair tools, in complete and usable condition, the purchase price is the original net cost to the dealer less twenty percent (20%) per year depreciation, but not less than fifty percent (50%) of the original purchase price.
A supplier must repurchase, and the dealer must sell to the supplier, current signage. As used in this section, "current signage" means the principal outdoor signage required by the supplier that displays the supplier’s current logo or similar exclusive identifier, and that identifies the dealer as representing either the supplier or the supplier’s products, or both. The purchase price shall be the original net cost to the dealer less twenty percent (20%) per year, but may in no case be less than fifty percent (50%) of the original cost to the dealer.
[28-23-102, added 1975, ch. 97, sec. 2, p. 197; am. 1986, ch. 248, sec. 2, p. 669; am. 2005, ch. 238, sec. 2, p. 731; am. 2011, ch. 270, sec. 3, p. 731; am. 2016, ch. 213, sec. 2, p. 598.]
The provisions of this section shall be supplemental to any agreement between the retailer and the manufacturer, wholesaler or distributor covering the return of farm implements, equipment, machinery, attachments or repair parts. The retailer can elect to pursue either his contract remedy or the remedy provided herein, and an election by the retailer to pursue his contract remedy shall not bar his right to the remedy provided herein as to those farm implements, equipment, machinery, attachments or repair parts not affected by the contract remedy. Notwithstanding anything contained herein, the rights of a manufacturer, wholesaler or distributor to charge back to the retailer’s account amounts previously paid or credited as a discount incident to the retailer’s purchase of goods shall not be affected. Further, any repurchase hereunder shall not be subject to the provisions of the bulk sales law.
[28-23-103, added 1975, ch. 97, sec. 3, p. 197; am. 2011, ch. 270, sec. 4, p. 732.]
In the event of the death of the retail dealer or a stockholder in a corporation operating a retail dealership in the business of selling and retailing farm implements, equipment, machinery, attachments or repair parts therefor, at the election of the dealer or corporation, the manufacturer, wholesaler or distributor shall, unless the heir or heirs of the deceased elect to continue to operate the dealership, repurchase the merchandise from the heir or heirs upon the same terms and conditions as are otherwise provided in this chapter. In the event the heir or heirs do not agree to continue to operate the retail dealership, it shall be deemed a cancellation or discontinuance of the contract by the retailer under the provisions of sections 28-23-101 and 28-23-102, Idaho Code.
[28-23-104, added 1975, ch. 97, sec. 4, p. 197; am. 2011, ch. 270, sec. 5, p. 733.]
In the event that any manufacturer, wholesaler or distributor of farm implements, equipment, machinery, attachments, accessories or repair parts, upon the cancellation of a contract by either a retailer or such manufacturer, wholesaler or distributor, fails or refuses to make payment to the dealer or his heir or heirs as required by the provisions of this chapter, or any other violations of the provisions of this chapter, the manufacturer, wholesaler or distributor shall be liable in a civil action to be brought by the retailer or his heir or heirs for (a) one hundred percent (100%) of the net cost of the farm implements, equipment, machinery, attachments and accessories, (b) transportation charges required in section 28-23-102, Idaho Code, which have been paid by the retailer, or invoiced to the retailer’s account, (c) one hundred percent (100%) of the current net price of repair parts, (d) five percent (5%) for handling, packing and loading, if applicable, (e) one hundred percent (100%) of the current net price for manuals and repair manuals, (f) reasonable reimbursement for services performed in connection with assembly and predelivery inspections of the equipment and (g) additionally, any judgment rendered by a court of competent jurisdiction for the plaintiff in a suit filed pursuant to this section may include damages in the amount of two (2) times the compensatory damages found due and owning. A person, firm or corporation which brings an action under this section must commence the action in the county in which the principal place of business of the retailer is located.
[28-23-105, added 1975, ch. 97, sec. 5, p. 197; am. 2005, ch. 238, sec. 3, p. 733; am. 2011, ch. 270, sec. 6, p. 733.]
This act shall not require the repurchase from a retailer of a repair part where the retailer previously has failed to return the repair part to the wholesaler, manufacturer or distributor after being offered a reasonable opportunity to return the repair part at a price not less than one hundred percent (100%) of the net price of the repair part as listed in the then current price list or catalog, and transportation charges required in section 28-23-102, Idaho Code, which have been paid by the retailer, or invoiced to the retailer’s account. This act shall not require the repurchase from a retailer of repair parts the retailer purchased in a set of multiple parts, unless the set is complete and in resalable condition and parts which because of their condition are not resalable without reconditioning.
[28-23-106, added 1975, ch. 97, sec. 6, p. 197; am. 2005, ch. 238, sec. 4, p. 733.]
For the purposes of this chapter, "farm implements" means every vehicle designed or adapted and used exclusively for agricultural operations and only incidentally operated or used upon the highways and all other consumer products supplied by the wholesaler, manufacturer or distributor of farm implements, equipment, machinery, attachments or repair parts to the retailer pursuant to a written or oral contract, sales agreement or security agreement.
[28-23-107, added 1975, ch. 97, sec. 7, p. 197; am. 2011, ch. 270, sec. 7, p. 733.]
All wholesalers, manufacturers or distributors of farm implements, equipment, machinery, attachments, accessories or repair parts shall give the retailer a minimum of ninety (90) days’ notice in writing and obtain consent from the dealer before changing the time and manner of payment of any indebtedness owed by retailer to manufacturer, distributor or wholesaler, and before taking and making any changes in notes or security for any indebtedness, and before releasing or adding additional guarantors, and before granting renewals or extensions of such indebtedness.
[28-23-108, added 1975, ch. 97, sec. 8, p. 197; am. 2005, ch. 238, sec. 5, p. 734; am. 2011, ch. 270, sec. 8, p. 734.]
No party or person signing a security agreement or guaranty agreement with a manufacturer, distributor or wholesaler, shall be required to pledge or encumber its or his personal assets in a value in excess of the amount of the indebtedness secured.
[28-23-109, added 1975, ch. 97, sec. 9, p. 197.]
In the event that any manufacturer, wholesaler or distributor of farm implements, equipment, machinery, attachments and repair parts fails to give notice or obtain consent pursuant to section 28-23-108, Idaho Code, or fails or refuses to comply with section 28-23-109, Idaho Code, the guaranty or security agreement thereby affected will be deemed cancelled and terminated.
[28-23-110, added 1975, ch. 97, sec. 10, p. 197; am. 2011, ch. 270, sec. 9, p. 734.]
This act shall apply to all franchise agreements, security agreements and guaranty agreements dated prior to July 1, 1975, and all franchise agreements, security agreements and guaranty agreements dated on or after July 1, 1975.
[28-23-111, added 1975, ch. 97, sec. 11, p. 197.]
(1) The courts of this state shall have jurisdiction over any legal dispute between a wholesaler, manufacturer or distributor of farm implements or equipment, machinery, repair parts, stock parts and attachments located in or outside this state and an equipment dealer located in this state. The laws of the state of Idaho shall exclusively apply to such disputes.
(2) Venue for a dispute as provided in subsection (1) of this section shall be in the judicial district wherein the dealer’s principal place of business is located.
[28-23-112, added 2011, ch. 270, sec. 10, p. 734.]
The definitions set forth in section 28-24-102, Idaho Code, shall apply to the provisions of this chapter.
[28-23-113, added 2011, ch. 270, sec. 11, p. 734.]
The legislature of this state finds that the retail distribution and sale of agricultural equipment, outdoor power equipment, industrial equipment and construction equipment utilizing independent retail businesses operating under agreements with the manufacturers and distributors thereof, vitally affects the general economy of the state, public interests and public welfare and that it is necessary to regulate the business relations between independent dealers and the equipment manufacturers, wholesalers and distributors.
[28-24-101, added 1990, ch. 267, sec. 1, p. 750; am. 2011, ch. 270, sec. 13, p. 734.]
As used in this chapter:
(1) "Assigned area of responsibility" means the geographic region for which a particular dealer is responsible for the marketing, selling, leasing or servicing of equipment pursuant to a dealer agreement as assigned by the supplier.
(2) "Continuing commercial relationship" means any relationship in which the equipment dealer has been granted the right to sell or service equipment manufactured by supplier.
(3) "Dealer agreement" means a contract or agreement, either expressed or implied, whether oral or written, between a supplier and an equipment dealer, by which the equipment dealer is granted the right to sell, distribute or service the supplier’s equipment, where there is a continuing commercial relationship between the supplier and the equipment dealer.
(4) "Demonstration and/or rental equipment" is equipment that has been used but has not been sold to an end user.
(5) "Equipment" means machines designed for or adapted and used for agriculture, horticulture, livestock and grazing and related industries but not exclusive to agricultural use. Equipment also includes:
(a) "All-terrain vehicles" or "ATVs," including three-wheeled and four-wheeled motorized vehicles, generally characterized by large, low-pressure tires, a seat designed to be straddled by the operator, and handlebars for steering. All-terrain vehicles are intended for off-road use.
(b) "Outdoor power equipment" means equipment powered by a two-cycle or four-cycle gas or diesel engine, or electric motor, which is used to maintain commercial, public or residential lawns and gardens or used in landscape, turf, golf course or plant nursery maintenance.
(c) "Industrial and construction equipment" means equipment used in building and maintaining structures and roads including, but not limited to, loaders, loader backhoes, wheel loaders, crawlers, graders and excavators.
(6) "Equipment dealer," "dealer" or "equipment dealership" means any person, partnership, corporation, association or other form of business enterprise, primarily engaged in the retail sale and/or service of equipment in this state, pursuant to any oral or written agreement for a definite or indefinite period of time in which there is a continuing commercial relationship in the marketing of the equipment or related services. "Equipment dealer," "dealer" or "equipment dealership" does not include an individual, partnership or corporation that:
(a) Is primarily engaged in the retail sale and service of industrial and construction equipment;
(b) Has purchased seventy-five percent (75%) or more of the dealer’s total new product inventory from a single supplier under all agreements with that supplier; and
(c) Has a total annual average sales volume in excess of twenty million dollars ($20,000,000) for the preceding three (3) years with that single supplier for the territory for which the dealer is responsible.
(7) "Good cause" means failure by an equipment dealer to substantially comply with essential and reasonable requirements imposed upon the equipment dealer by the dealer agreement, provided, such requirements are not different from those requirements imposed on other similarly situated equipment dealers in the state either by their terms or in the manner of their enforcement.
(8) "Supplier" means the manufacturer, wholesaler or distributor of the equipment to be sold by the equipment dealer, or any successor in interest to or assignee of the supplier. A successor in interest includes any purchaser of assets or stock, any surviving corporation resulting from merger or liquidation, any receiver or any trustee of the original supplier.
(9) "Used equipment" means equipment that has been sold or retailed to an end user and money has been exchanged between the end user and the equipment dealer.
(10) "Warranty claim" means a claim for payment submitted by an equipment dealer to a supplier for service, parts or complete components, or any or all of the three (3), provided to a customer under a:
(a) Warranty issued by the supplier; or
(b) Recall or modification order issued by the supplier.
[28-24-102, added 1990, ch. 267, sec. 1, p. 751; am. 2005, ch. 238, sec. 6, p. 734; am. 2011, ch. 270, sec. 14, p. 735.]
It shall be a violation of the provisions of this chapter for a supplier to:
(1) Require or attempt to require any equipment dealer to order or accept delivery of any equipment or parts or any equipment with special features or accessories not included in the base list price of such equipment as publicly advertised by the supplier which the equipment dealer has not voluntarily ordered;
(2) Require or attempt to require any equipment dealer to enter into any agreement, whether written or oral, supplementing or amending an existing dealer agreement with such supplier unless such amendment or supplementary agreement is imposed on other similarly situated dealers in the state;
(3) Refuse to deliver in reasonable quantities and within a reasonable time after receipt of the equipment dealer’s order, to any equipment dealer having a dealer agreement for the retail sale of new equipment sold or distributed by such supplier, equipment covered by such dealer agreement specifically advertised or represented by such supplier to be available for immediate delivery. The failure to deliver any such equipment shall not be considered a violation of the provisions of this chapter when deliveries are based on prior retail sales ordering histories, the priority given to the sequence in which the orders are received or manufacturing schedules or if such failure is due to prudent and reasonable restriction on extension of credit by the supplier to the equipment dealer, an act of God, work stoppage or delay due to a strike or labor difficulty, a bona fide shortage of materials, freight embargo or other cause over which the supplier has no control;
(4) Terminate, cancel or fail to renew the dealer agreement of any equipment dealer or substantially change the dealer’s competitive circumstances, attempt to terminate or cancel, or threaten not to renew the dealer agreement or attempt or threaten to substantially change the dealer’s competitive circumstances without good cause. For purposes of this chapter, the fact that a dealer agreement allows an event, act or omission does not control whether such event, act or omission resulted in a substantial change in the dealer’s competitive circumstances. Nothing in this subsection shall be interpreted to apply to a discontinuation of or change in the product line of a supplier;
(5) Condition the renewal, continuation or extension of a dealer agreement on the equipment dealer’s substantial renovation of the equipment dealer’s place of business or on the construction, purchase, acquisition or rental of a new place of business by the equipment dealer, unless:
(a) The supplier has advised the equipment dealer in writing of its demand for such renovation, construction, purchase, acquisition or rental within a reasonable time prior to the effective date of the proposed date of renewal or extension, but in no case less than one (1) year; and
(b) The supplier demonstrates the need for such change in the place of business and the reasonableness of the demand with respect to marketing and servicing the supplier’s products and any significant economic conditions existing at the time in the equipment dealer’s trade area, and the equipment dealer does not make a good faith effort to complete such construction or renovation plans within one (1) year;
(6) Discriminate in the prices charged for equipment of like grade and quality sold by the supplier to similarly situated dealers in this state where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in a line of commerce. The provisions of this subsection do not prevent the use of differentials which make only due allowance for differences in the cost of manufacture, sale or delivery of equipment resulting from the differing methods or quantities in which such equipment is sold or delivered; provided that nothing shall prevent a supplier from offering a lower price in order to meet an equally low price of a competitor, or the services or facilities furnished by a competitor;
(7) Unreasonably withhold consent for an equipment dealer to change the capital structure of the equipment dealership or the means by which it is financed, provided that the equipment dealer meets the reasonable capital requirements of the supplier;
(8) Prevent, by contract or otherwise, any equipment dealer or any officer, member, partner or stockholder of an equipment dealership from selling, assigning, or transferring any interest or portion thereof held by any of them in the equipment dealership to any other person or party; provided, however, that no equipment dealer, officer, partner, member or stockholder shall have the right to sell, transfer, or assign the equipment dealership or the power of management or control thereof without the written consent of the supplier, except that such consent shall not be unreasonably withheld if the buyer, transferee, or assignee meets the reasonable financial, business experience and character standards of the supplier. Should a supplier determine that the designated transferee is not acceptable, the supplier shall provide the equipment dealer with written notice of the supplier’s objections and specific reasons for withholding its consent within thirty (30) calendar days of receipt of notice from the equipment dealer;
(9) Require an equipment dealer to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this chapter;
(10) (a) Unreasonably withhold consent, in the event of the death of the equipment dealer or the principal owner of the equipment dealership, to the transfer of the equipment dealer’s or the principal owner’s interest in the equipment dealership to another individual, if the individual meets the reasonable financial, business experience and character standards of the supplier. A supplier shall have sixty (60) days to consider a request to make a transfer to an individual. If, within that period, the supplier determines that the individual does not meet the reasonable financial, business experience and character standards of the supplier, it shall provide the dealership, heirs to the dealership, or the estate of the dealer with written notice of its objection and the specific reasons for withholding its consent. If the individual reasonably satisfies the supplier’s objections within sixty (60) days after notice thereof, the supplier shall approve the transfer. Nothing in this paragraph shall entitle a qualified individual to continue to operate the dealership without the consent of the supplier;
(b) Notwithstanding the provisions of paragraph (a) of this subsection, in the event that a supplier and equipment dealer have duly executed an agreement concerning succession rights prior to the equipment dealer’s death, and if such agreement has not been revoked, such agreement shall be observed;
(11) Cause the equipment dealer to refrain from participation in the management, investment, acquisition or sale of any other related product or product line of equipment, parts or accessories, from the same or separate locations;
(12) Fail to compensate a dealer for preparation and delivery of equipment that the supplier sells or leases for use within this state and that the dealer prepares for delivery and delivers.
[28-24-103, added 1990, ch. 267, sec. 1, p. 751; am. 2005, ch. 238, sec. 7, p. 735; am. 2018, ch. 224, sec. 1, p. 504.]
(1) A supplier shall provide written notice to the equipment dealer of any proposed termination or nonrenewal of a dealer agreement or substantial change in the dealer’s competitive circumstances. The notice shall state the reason(s) constituting good cause for the action proposed to be taken. Except where good cause is alleged under the provisions of paragraphs (a) through (e) of subsection (2) of this section, such notice shall be provided to the equipment dealer not less than ninety (90) days before the proposed action is to become effective. Except where good cause is alleged under paragraphs (a) through (d) of subsection (2) of this section, the equipment dealer shall be given ninety (90) days within which to cure any claimed deficiency, and the notice shall advise the dealer of his right to cure. If the claimed deficiency is rectified within ninety (90) days, the notice shall be void and the proposed action shall not become effective. Notwithstanding the equipment dealer’s failure to cure the deficiency or deficiencies claimed, where a ninety (90) day notice is required to be given by the supplier, the contractual term of the dealer agreement shall not expire, nor shall the dealer agreement be otherwise terminated or canceled, nor shall the equipment dealer’s competitive circumstances be substantially changed prior to the expiration of at least ninety (90) days following such notice without the written consent of the equipment dealer.
(2) As used in this chapter, "good cause" shall exist but not be limited to the following circumstances when the equipment dealer has:
(a) Transferred a controlling ownership interest in the equipment dealership without the supplier’s consent;
(b) Made a material misrepresentation to the supplier;
(c) Filed a voluntary petition in bankruptcy or has had an involuntary petition in bankruptcy filed against the equipment dealer which has not been discharged within ninety (90) days after the filing; is in default under the provisions of a security agreement in effect with the supplier; or is insolvent or in receivership;
(d) Been convicted of a crime, punishable for a term of imprisonment for one (1) year or more;
(e) Failed to operate in the normal course of business for ten (10) consecutive business days or has terminated said business;
(f) Relocated the equipment dealer’s place of business without the supplier’s consent;
(g) Inadequately represented the supplier over a one (1) year period of time or length of time or a time mutually agreed upon between the supplier and dealer to reflect the ongoing market conditions;
(h) Consistently failed to meet building and housekeeping requirements, or has failed to provide adequate sales, service or parts personnel commensurate with the dealer agreement;
(i) Failed to comply with the applicable licensing laws pertaining to the products and services being represented for and on the supplier’s behalf;
(j) Materially failed to comply with the terms of the dealer agreement.
(3) Notwithstanding the provisions of subsection (2) of this section, before the termination or nonrenewal of a dealer agreement or substantially changing the dealer’s competitive circumstances in each case, based upon a supplier’s claim that the dealer has failed to achieve market penetration at levels consistent with similarly situated dealerships in the state, the supplier shall provide written notice of its intention at least one (1) year in advance.
(a) After issuance of such a notice, the supplier shall provide fair and reasonable efforts to work with the dealer to assist the dealer in gaining the required market penetration including, but not limited to, making available to the dealer an adequate inventory of new equipment and parts, and not withhold programs available to all dealers.
(b) Upon the end of the one (1) year period established in this subsection, the supplier may terminate or elect not to renew the dealer agreement or substantially change the dealer’s competitive circumstances only upon written notice specifying the reasons for determining that the dealer failed to meet reasonable market penetration. The notice must specify that termination or nonrenewal of the dealer agreement or the substantial change in the dealer’s competitive circumstances is effective one hundred eighty (180) days from the date of the notice and that either party may petition the court.
(c) A supplier bears the burden of proving that a retailer’s area of responsibility or trade area does not afford sufficient sales potential to reasonably support the retailer. The supplier’s proof must be in writing.
(4) "Change in competitive circumstances" for purposes of this chapter means an event, act or omission that has a material detrimental effect on a retailer’s ability to compete with another retailer that sells the same brand of farm implements.
[28-24-104, added 1990, ch. 267, sec. 1, p. 753; am. 2005, ch. 238, sec. 8, p. 737; am. 2018, ch. 224, sec. 2, p. 506.]
When a supplier enters into an agreement to establish a new dealer or dealership or to relocate a current dealer or dealership for a particular product line or make of equipment, the supplier must give written notice of such an agreement by certified mail to all existing dealers or dealerships whose assigned area of responsibility is contiguous to the new dealer or dealership location. If no area of responsibility has been assigned then the supplier must give written notice of such an agreement by certified mail to the dealers or dealerships within a seventy-five (75) mile radius of the new dealer location. The supplier must provide in its written notice the following information about the proposed new or relocated dealer or dealership:
(1) The proposed location;
(2) The proposed date for commencement of operation at the new location; and
(3) The identities of all existing dealers or dealerships whose assigned area of responsibility is contiguous to the new dealer or dealership location. If no area of responsibility has been assigned then the supplier must give written notice of such an agreement by certified mail to the dealers or dealerships located within a seventy-five (75) mile radius of the new dealer location.
[28-24-104A, added 2005, ch. 238, sec. 9, p. 739.]
(1) An equipment dealer may submit a warranty claim to a supplier if a warranty defect is identified and documented prior to the expiration of a supplier’s warranty:
(a) While a dealer agreement is in effect; or
(b) After the termination of a dealer agreement if the claim is for work performed while the dealer agreement was in effect.
(2) A supplier shall accept or reject a warranty claim submitted under subsection (1) of this section, within thirty (30) days of the date the supplier received the claim. A warranty claim not rejected within thirty (30) days of the date the supplier received the claim is considered to be accepted by the supplier.
(3) No later than thirty (30) days after the date a warranty claim is accepted or rejected under subsection (2) of this section, the supplier shall:
(a) Pay an accepted warranty claim; or
(b) Send the dealer written notice of the reason the warranty claim was rejected.
(4) A supplier shall compensate the dealer for the warranty claim as follows:
(a) The dealer’s established customer hourly retail labor rate multiplied by the reasonable and customary amount of time required to complete such work by similarly situated dealers, including diagnostic time, and cleanup time, expressed in hours and fractions of an hour;
(b) The dealer’s current net price on repair parts reimbursed at not less than net plus twenty percent (20%) of the cost for warranty service performed on behalf of the supplier to compensate for reasonable costs of doing business; and
(c) Extraordinary freight and handling costs. For purposes of this subsection (4)(c), "extraordinary freight and handling costs" means costs that are above and beyond the normal reimbursement policy of the supplier for warranty repair work;
(d) When the repair work is for safety or mandatory modifications ordered by the supplier, the supplier shall reimburse the dealer for transportation costs incurred by the dealer.
(5) After payment of a warranty claim, a supplier may not charge back, off-set or otherwise attempt to recover from the dealer all or part of the amount of the claim unless:
(a) The warranty claim was submitted in error;
(b) The services for which the warranty claim was made were not properly performed or were unnecessary to comply with the warranty; or
(c) The dealer did not substantiate the warranty claim according to the written requirements of the supplier that were in effect when the equipment was delivered to the dealer by the customer for warranty repairs.
(6) If a supplier denies a warranty claim due to a particular item or part of the claim, the denial shall only affect the items or parts in question and not the complete warranty claim.
(7) A supplier may not pass the cost of covering warranty claims under this chapter on to a dealer through any means including:
(a) Surcharges;
(b) Reduction of discounts; or
(c) Certification standards.
[28-24-104B, added 2005, ch. 238, sec. 9, p. 739; am. 2011, ch. 270, sec. 15, p. 736.]
A supplier may not audit a dealer’s records with respect to any warranty claim submitted more than two (2) years before the date of the audit.
[28-24-104C, added 2005, ch. 238, sec. 9, p. 740.]
Any party to a retailer agreement aggrieved by the conduct of the other party to the agreement under sections 28-23-101 through 28-23-111, Idaho Code, or under part 1, chapter 24, title 28, Idaho Code, may seek arbitration of the issues under sections 7-901 through 7-922, Idaho Code. Unless the parties agree to different arbitration rules, the arbitration shall be conducted in Idaho pursuant to the commercial arbitration rules of the American arbitration association. When the parties agree, the arbitration shall be the parties’ only remedy and the findings and conclusions of the arbitrator or panel of arbitrators shall be binding upon both parties.
(1) The arbitrator or arbitrators may award the prevailing party:
(a) The costs of witness fees and other fees in the case;
(b) Reasonable attorney’s fees; and
(c) Injunctive relief against unlawful termination, cancellation, nonrenewal or change in competitive circumstances.
(2) Any retailer has a civil cause of action in district court in this state against a supplier for damages sustained by the retailer as a consequence of the supplier’s violation of part 1, chapter 24, title 28, Idaho Code, or sections 28-23-101 through 28-23-111, Idaho Code, together with:
(a) The actual costs of the action;
(b) Reasonable attorney’s fees; and
(c) Injunctive relief against unlawful termination, cancellation, nonrenewal or change in competitive circumstances.
(3) No dealer shall be required to waive his rights to judicial recourse by contractual agreements through penalty of loss of trade discounts or changes in the competitive circumstances of the dealer by the supplier deemed to be punitive in nature or effect. The remedies set forth in this section are not exclusive and are in addition to any other remedies permitted by law, unless the parties have mutually agreed to binding arbitration under this section.
[28-24-104D, added 2005, ch. 238, sec. 9, p. 740.]
The obligations of any supplier under this chapter are applied to any successor in interest or assignee of the supplier. A successor in interest includes any purchaser of assets or stock, any surviving corporation resulting from merger or liquidation, and any receiver or any trustee of the original supplier.
[28-24-104E, added 2005, ch. 238, sec. 9, p. 741.]
Monetary damages may be recovered for losses sustained as a consequence of any violation of the provisions of this chapter. Such recovery may also include a requirement that the supplier repurchase at fair market value any data processing hardware, software and specialized repair tools and equipment previously purchased from the supplier or approved vendor of the supplier pursuant to requirements of the supplier. Additionally, any judgment rendered by a court of competent jurisdiction for the plaintiff in a suit filed pursuant to this section may include damages in the amount of two (2) times the compensatory damages found due and owing. Injunctive relief may also be granted against any actual or threatened violation of the provisions of this chapter. In any action brought under this chapter the prevailing party shall be entitled to recover reasonable attorney’s fees and costs. The remedies set forth in this section shall not be deemed exclusive and shall be in addition to any other remedies permitted by law. A person, firm or corporation which brings an action under this section must commence the action in the county in which the principal place of business of the retailer is located.
[28-24-105, added 1990, ch. 267, sec. 1, p. 754; am. 2005, ch. 238, sec. 10, p. 741; am. 2011, ch. 270, sec. 16, p. 737.]
The provisions of this act are hereby declared to be severable and if any provision of this act or the application of such provision to any person or circumstance is declared invalid for any reason, such declaration shall not affect the validity of remaining portions of this act.
[28-24-106, added 1990, ch. 267, sec. 1, p. 755.]
This act shall take effect on July 1, 1990, and shall apply to any dealer agreement then in effect which has no expiration date and which is a continuing agreement and all other dealer agreements entered into or renewed on or after such effective date.
[28-24-107, added 1990, ch. 267, sec. 1, p. 755.]
(1) The courts of this state shall have jurisdiction over any legal dispute between a wholesaler, manufacturer or distributor of farm implements or equipment, machinery, repair parts, stock parts and attachments located in or outside this state and an equipment dealer located in this state. The laws of the state of Idaho shall exclusively apply to such disputes.
(2) Venue for a dispute as provided in subsection (1) of this section shall be in the judicial district wherein the dealer’s principal place of business is located.
[28-24-108, added 2011, ch. 270, sec. 17, p. 737.]
This act shall be known and may be cited as the "Idaho Lease-Purchase Agreement Act." The purpose of this act is to protect both consumers and businesses engaged in the lease-purchase of consumer goods against unfair or deceptive acts and practices, to provide certainty and regularity in the conduct of these transactions, and to provide efficient and economical procedures to secure such protection.
[28-36-101, added 1993, ch. 232, sec. 1, p. 807.]
As used in this chapter:
(1) "Advertisement" means a commercial message in any medium that promotes, directly or indirectly, a lease-purchase agreement.
(2) "Consumer" means a natural person who rents personal property under a lease-purchase agreement to be used by the consumer primarily for personal, family or household purposes.
(3) "Consummation" means the time a consumer enters a lease-purchase agreement.
(4) "Lessor" means a person who regularly provides the use of property through lease-purchase agreements and to whom lease payments are initially payable on the face of the lease-purchase agreement.
(5) "Lease-purchase agreement" means an agreement by a lessor and a consumer for the use of personal property by a consumer primarily for personal, family or household purposes, for an initial period of four (4) months or less that is automatically renewable with each payment after the initial period, but does not obligate or require the consumer to continue leasing or using the property beyond the initial period, and that permits the consumer to become the owner of the property.
(6) "Renewal date" means the date specified in the lease-purchase agreement upon which the consumer must either return the personal property to the lessor or renew the lease-purchase agreement.
[28-36-102, added 1993, ch. 232, sec. 1, p. 807.]
(1) Lease-purchase agreements are not governed by the laws relating to:
(a) A home solicitation sale as defined in section 28-43-401, et seq., Idaho Code;
(b) A regulated consumer credit transaction pursuant to section 28-41-101, et seq., Idaho Code; or
(c) A security interest as defined in section 28-1-201, Idaho Code.
(2) This chapter does not apply to the following:
(a) Leases of personal property primarily for business, commercial or agricultural purposes, or those made with governmental agencies or instrumentalities or with organizations;
(b) A lease of a safe deposit box;
(c) A lease or bailment of personal property which is incidental to the lease of real property, and which provides that the consumer has no option to purchase the leased property; or
(d) A lease of an automobile.
[28-36-103, added 1993, ch. 232, sec. 1, p. 808.]
(1) The lessor shall disclose, or cause to be disclosed, to the consumer the information required in this chapter. In a transaction involving more than one (1) lessor, only one (1) lessor need make the disclosures, but all lessors shall be bound by such disclosures.
(2) The disclosures shall be made at or before consummation of the lease-purchase agreement.
(3) The disclosures shall be made clearly and conspicuously in writing and a copy of the lease-purchase agreement provided to the consumer. The disclosures required under section 28-36-105(1), Idaho Code, shall be made on the face of the contract above the line for the consumer’s signature.
(4) If a disclosure becomes inaccurate as the result of any act, occurrence or agreement by the consumer after delivery of the required disclosures, the resulting inaccuracy is not a violation of the provisions of this chapter.
[28-36-104, added 1993, ch. 232, sec. 1, p. 808.]
(1) For each lease-purchase agreement, the lessor shall disclose in the agreement the following items, as applicable:
(a) The total number, total dollar amount and frequency of all payments necessary to acquire ownership of the property;
(b) A statement that the consumer will not own the property until the consumer has made the total payments necessary to acquire ownership;
(c) A statement that the consumer is responsible to the lessor for the fair market value of the property if, and as of the time, it is lost, stolen, damaged or destroyed;
(d) A brief description of the leased property, sufficient to identify the property to the consumer and the lessor, including an identification number, if applicable, and a statement indicating whether the property is new or used, but a statement that indicates new property is used is not a violation of the provisions of this chapter;
(e) The total amount initially payable or required at or before consummation of the agreement or delivery of the property, whichever is later;
(f) A statement that the total of payments necessary to acquire ownership does not include other charges, such as late payment, default, pickup and reinstatement fees, which fees shall be separately disclosed in the agreement;
(g) A statement clearly summarizing the terms of the consumer’s option to purchase, if any, including a statement regarding whether the consumer has the right to exercise an early purchase option and the price, formula or method for determining the price at which the property may be so purchased;
(h) A statement identifying the party responsible for maintaining or servicing the property while it is being leased, together with a description of that responsibility, and a statement that if any part of a manufacturer’s express warranty covers the lease property at the time the consumer acquires ownership of the property, the warranty shall be transferred to the consumer, if allowed by the terms of the warranty;
(i) The consummation date of the agreement and the identities of the lessor and consumer;
(j) A statement that the consumer may terminate the agreement without penalty by voluntarily surrendering or returning the property in good repair upon the renewal date together with any past due rental payments; and
(k) Notice of the right to reinstate an agreement as herein provided.
[28-36-105, added 1993, ch. 232, sec. 1, p. 808.]
A lease-purchase agreement may not contain:
(1) A confession of judgment;
(2) A negotiable instrument;
(3) A claim of a property interest in any goods except those goods delivered by the lessor pursuant to the lease-purchase agreement;
(4) A wage assignment;
(5) A waiver by the consumer of claims or defenses; or
(6) A provision authorizing the lessor or a person acting on the lessor’s behalf to enter upon the consumer’s premises without consent, or to commit any breach of the peace in the repossession of goods.
[28-36-106, added 1993, ch. 232, sec. 1, p. 809.]
(1) A consumer who fails to make a timely rental payment and who fails to voluntarily return or surrender the leased property on or before the renewal date, may reinstate the agreement without losing any rights or options which exist under the agreement, by the payment, within five (5) days after the renewal date, if the consumer pays monthly, or within two (2) days after the renewal date, if the consumer pays more frequently than monthly, of:
(a) All past due rental charges;
(b) If the property has been picked up, the pickup and delivery fees; and
(c) Any applicable reinstatement fee and default fee as set forth in the lease-purchase agreement.
(2) A consumer who voluntarily returned or surrendered the property on or before the renewal date, other than through judicial process, and is current in all payments due under the lease agreement on the renewal date, may reinstate the agreement without losing any rights or options which exist under the agreement:
(a) During a period of not less than twenty-one (21) days after the date of the return of the property if at the time of surrender or voluntary return of the property the consumer had paid less than two-thirds (2/3) of the total of payments necessary to acquire ownership; or
(b) During a period of not less than forty-five (45) days after the date of the return of the property if at the time of surrender or voluntary return of the property the consumer had paid two-thirds (2/3) or more of the total of payments necessary to acquire ownership.
(3) Nothing in this section shall prevent a lessor from attempting to repossess property during the reinstatement period.
(4) Upon reinstatement, the lessor shall provide the consumer with the same property or substitute property of comparable quality and condition.
[28-36-107, added 1993, ch. 232, sec. 1, p. 810.]
The lessor shall provide the consumer a written receipt for each payment made by cash or money order.
[28-36-108, added 1993, ch. 232, sec. 1, p. 810.]
A renegotiation shall occur when an existing lease-purchase agreement is replaced by a new agreement entered into by the same lessor and consumer. A renegotiation shall be considered a new agreement requiring new disclosures. However, the following events shall not be treated as renegotiations and shall not require new disclosures:
(1) The additions or return of property in a multiple-item agreement or the substitution of the lease property, if in either case the average payment allocable to a payment period is not changed by more than twenty-five percent (25%);
(2) A deferral or extension of one (1) or more periodic payments, or portions of a periodic payment;
(3) A reduction in charges in the lease or agreement; or
(4) A lease or agreement modified in a court proceeding.
[28-36-109, added 1993, ch. 232, sec. 1, p. 810.]
(1) If an advertisement for a lease-purchase agreement refers to or states the dollar amount of the rental payment and the right to acquire ownership for any one (1) specific item, then in respect to that item the advertisement shall also clearly and conspicuously state the following items, as applicable:
(a) That the transaction advertised is a lease-purchase agreement;
(b) The total of payments necessary to acquire ownership; and
(c) That the consumer acquires no ownership rights if the total amount necessary to acquire ownership is not paid.
(2) No owner or personnel of any medium in which an advertisement appears or through which it is disseminated shall be liable under this section.
(3) The provisions of subsection (1) of this section shall not apply to an advertisement which does not refer to or state the dollar amount of any payment, or which is published in a telephone directory, or in any similar business directory.
[28-36-110, added 1993, ch. 232, sec. 1, p. 810.]
(1) A lessor whose violation of the provisions of this chapter causes damages to a consumer shall be subject to a judgment by a court of competent jurisdiction for actual damages, if the lessor can show by preponderance of the evidence that the damage was caused by a good faith dispute between the parties; or for actual damages or one thousand dollars ($1,000), whichever is greater, in the event the violation is not a result of a good faith dispute between the parties.
(2) As a condition precedent to bringing any action for the collection of a penalty pursuant to this section, the consumer must give the lessor written notice of the violation or violations alleged twenty (20) days prior to filing such action.
(3) No action under the provisions of this section may be brought in any court of competent jurisdiction more than one (1) year after the date of the consumer’s last payment under the lease-purchase agreement or more than one (1) year after the date of the occurrence of the violation that is the subject of the suit, whichever is later.
[28-36-111, added 1993, ch. 232, sec. 1, p. 811.]
This act shall be known and may be cited as the "Idaho Credit Code."
[28-41-101, added 1983, ch. 119, sec. 3, p. 265.]
(1) This act shall be liberally construed and applied to promote its underlying purposes and policies.
(2) The underlying purposes and policies of this act are:
(a) To simplify, clarify and modernize the law governing installment sales, credit, loans and usury;
(b) To further understanding of the terms of credit transactions and to foster competition among suppliers of credit so that debtors may obtain credit at reasonable cost;
(c) To protect debtors against unfair practices by some suppliers of credit, having due regard for the interests of legitimate and scrupulous creditors;
(d) To permit and encourage the development of fair and economically sound credit practices; and
(e) To conform the regulation of those credit transactions to the policies of the Federal Consumer Credit Protection Act, where applicable.
(3) A reference to a requirement imposed by this act includes reference to a related rule of the administrator adopted pursuant to this act.
[28-41-102, added 1983, ch. 119, sec. 3, p. 265.]
Unless displaced by the particular provisions of this act, the Uniform Commercial Code and the principles of law and equity, including the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause supplement the provisions of this act.
[28-41-103, added 1983, ch. 119, sec. 3, p. 265.]
This act being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided.
[28-41-104, added 1983, ch. 119, sec. 3, p. 265.]
If any provision of this act or the application thereof to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of this act which can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.
[28-41-105, added 1983, ch. 119, sec. 3, p. 265.]
(1) Except as otherwise provided in this act, a debtor may not waive or agree to forgo rights or benefits under this act.
(2) A claim by a debtor against a creditor for an excess charge, other violation of this act, or civil penalty, or a claim against a debtor for default or breach of a duty imposed by this act, if disputed in good faith, may be settled by agreement.
(3) A claim, whether or not disputed, against a debtor may be settled for less value than the amount claimed.
(4) A settlement in which the debtor waives or agrees to forgo rights or benefits under this act is invalid if the court, as a matter of law, finds the settlement to have been unconscionable at the time it was made. The competence of the debtor, any deception or coercion practiced upon him, the nature and extent of the legal advice received by him, and the value of the consideration are relevant to the issue of unconscionability.
(5) Title 41, Idaho Code, shall not apply to an agreement by a creditor or lessor, with or without consideration, to forgive or waive all or any part of a debt or lease obligation following a partial or total loss of the property that is the subject of a loan, credit sale or lease transaction and the forgiveness shall not be considered the transaction of insurance for the purposes of the Idaho credit code.
[28-41-106, added 1983, ch. 119, sec. 3, p. 265; am. 2000, ch. 175, sec. 1, p. 443; am. 2015, ch. 244, sec. 15, p. 1016.]
(1) This act prescribes maximum charges for all creditors, except those excluded under section 28-41-202, Idaho Code, extending credit as a regular business, including regulated credit sales, as defined in section 28-41-301, Idaho Code, and regulated loans, as defined in section 28-41-301, Idaho Code, and displaces existing limitations on the powers of those creditors based on maximum charges, except in insurance matters as prescribed by rule of the department of insurance.
(2) With respect to sellers of goods or services, small loan companies, licensed lenders, finance companies, sales finance companies, industrial banks and loan companies, and commercial banks, this act displaces existing limitations on their powers based solely on amount or duration of credit, except the insurance matters as prescribed by rule of the department of insurance.
(3) Except as provided in subsection (1) of this section, this act does not displace limitations on powers of credit unions, savings banks, savings and loan associations, or other thrift institutions whether organized for the profit of shareholders or as mutual organizations.
(4) Except as provided in subsections (1) and (2) of this section, this act does not displace:
(a) Limitations on powers of supervised financial organizations, as defined in section 28-41-301, Idaho Code, with respect to the amount of a loan to a single borrower, the ratio of the loan to the value of collateral, the duration of a loan secured by an interest in land, or other similar restrictions designed to protect deposits; or
(b) Limitations on powers an organization is authorized to exercise under the laws of this state or the United States.
(5) Notwithstanding the provisions of chapter 1, title 57, Idaho Code, and chapter 27, title 67, Idaho Code, any supervised financial organization which intentionally fails to comply with the provisions of this act shall not be entitled to receive deposits from state or public depositing units.
[28-41-107, added 1983, ch. 119, sec. 3, p. 266; am. 2013, ch. 54, sec. 9, p. 119.]
Parties to a credit transaction or modification thereof that is not a regulated consumer credit transaction, as defined in section 28-41-301, Idaho Code, may agree in a writing signed by them that the transaction is subject to the provisions of this act applying to regulated consumer credit transactions. If the parties so agree, the transaction is a regulated consumer credit transaction for the purposes of this act.
[28-41-108, added 1983, ch. 119, sec. 3, p. 266; am. 2013, ch. 54, sec. 10, p. 120.]
(1) Except as otherwise provided in this section, this act applies to sales and loans made in this state and to modifications, including refinancings, consolidations, and deferrals made in this state, of sales and loans, wherever made. For purposes of this act, a sale, loan or modification of a sale or loan is made in this state if:
(a) A written agreement evidencing the obligation or offer of the consumer is received by the creditor in this state; or
(b) A consumer who is a resident of this state enters into the transaction with a creditor who has solicited or advertised in this state by any means including, but not limited to, mail, brochure, telephone, print, radio, television, internet or any other electronic means.
(2) Notwithstanding subsection (1)(b) of this section, unless made subject to this act by agreement of the parties, a sale, loan or modification of a sale or loan is not made in this state if a resident of this state enters into the transaction while physically present in another state.
(3) The part on limitations on creditors’ remedies, part 1 of the chapter on remedies and penalties, chapter 45, title 28, Idaho Code, applies to actions or other proceedings brought in this state to enforce rights arising from regulated credit sales or regulated loans, or extortionate extensions of credit, wherever made.
(4) If a regulated credit sale or regulated loan or modification thereof, is made in another state to a person who is a resident of this state when the sale, loan or modification is made, the following provisions apply as though the transaction occurred in this state:
(a) A seller, lender or assignee of his rights may not collect charges through actions or other proceedings in excess of those permitted by chapter 42, title 28, Idaho Code, on finance charges and related provisions; and
(b) A seller, lender or assignee of his rights may not enforce rights against the buyer or debtor, with respect to the provisions of agreements which violate the provisions on limitations on agreements and practices, part 3, chapter 43, title 28, Idaho Code.
(5) Except as provided in subsection (3) of this section, a sale, loan or modification thereof made in another state to a person who was not a resident of this state when the sale, loan or modification was made is valid and enforceable according to its terms to the extent that it is valid and enforceable under the laws of the state applicable to the transaction.
(6) For the purposes of this act, the residence of a buyer or debtor is the address given by him as his residence in any writing signed by him in connection with a credit transaction. Until he notifies the creditor of a new or different address, the given address is presumed to be unchanged.
(7) Notwithstanding other provisions of this section:
(a) Except as provided in subsection (3) of this section, this act does not apply if the buyer or debtor is not a resident of this state at the time of a credit transaction and the parties then agree that the law of his residence applies; and
(b) This act applies if the buyer or debtor is a resident of this state at the time of a credit transaction and the parties then agree that the law of this state applies.
(8) Except as provided in subsection (7) of this section, the following agreements by a buyer or debtor are invalid with respect to regulated credit sales, regulated loans or modifications thereof to which this act applies:
(a) That the law of another state shall apply;
(b) That the buyer or debtor consents to the jurisdiction of another state; and
(c) That fixes venue.
(9) Notwithstanding any other provision in this section, any person who, in this state, advertises, offers or solicits to make a loan for a consumer purpose, or arranges a payday loan for a third party lender, is engaging in business in this state for which a license is required under the Idaho credit code, unless exempt pursuant to section 28-46-301, Idaho Code.
[28-41-201, added 1983, ch. 119, sec. 3, p. 267; am. 2002, ch. 301, sec. 1, p. 858; am. 2006, ch. 122, sec. 1, p. 340; am. 2013, ch. 54, sec. 1, p. 108; am. 2014, ch. 97, sec. 10, p. 273.]
This act does not apply to:
(1) Extensions of credit to government or governmental agencies or instrumentalities;
(2) The sale of insurance by an insurer, except as otherwise provided in the chapter on insurance, chapter 44, title 28, Idaho Code;
(3) Transactions under public utility or common carrier tariffs if a subdivision or agency of this state or of the United States regulates the charges for the service involved, the charges for delayed payment, and any discount allowed for early payment; or
(4) The rates and charges and the disclosure of rates and charges of a licensed pawnbroker established in accordance with a statute or ordinance concerning these matters.
[28-41-202, added 1983, ch. 119, sec. 3, p. 268.]
The courts of this state may exercise jurisdiction over any creditor with respect to any conduct of the creditor subject to this act or with respect to any claim arising from a transaction subject to this act.
[28-41-203, added 1983, ch. 119, sec. 3, p. 268.]
This act shall apply only to credit transactions for a consumer purpose, except for the following parts, chapters and sections, which shall apply to credit transactions for any and all purposes:
(1) Part 1, chapter 41, title 28, Idaho Code;
(2) Section 28-41-202, Idaho Code;
(3) Section 28-41-203, Idaho Code;
(4) Section 28-41-204, Idaho Code;
(5) Part 3, chapter 41, title 28, Idaho Code;
(6) Part 2, chapter 42, title 28, Idaho Code;
(7) Section 28-42-308, Idaho Code;
(8) Part 4, chapter 42, title 28, Idaho Code;
(9) Section 28-45-109, Idaho Code; and
(10) Chapter 49, title 28, Idaho Code.
No provisions of this act other than those specified in subsections (1) through (10) of this section shall limit, expand or otherwise affect the powers, rights, duties or obligations of creditors or debtors in credit transactions for a business purpose.
[28-41-204, added 1983, ch. 119, sec. 3, p. 268; am. 1994, ch. 185, sec. 5, p. 606.]
(1) "Actuarial method" means the method, defined by rules adopted by the administrator, of allocating payments made on a debt between principal or amount financed and loan finance charge or credit service charge pursuant to which a payment is applied first to the accumulated loan finance charge or credit service charge and the balance is applied to the unpaid principal or unpaid amount financed.
(2) "Administrator" means the administrator designated in section 28-46-103, Idaho Code.
(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.
(4) "Agricultural purpose" means a purpose related to the production, harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates, plants, propagates, or nurtures the agricultural products. "Agricultural products" includes agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products thereof, including processed and manufactured products, and any and all products raised or produced on farms and any processed or manufactured products thereof.
(5) "Amount financed" means the total of the following items:
(a) In the case of a sale, the cash price of the goods, services, or interest in land, less the amount of any down payment made in cash or in property traded in, and the amount actually paid or to be paid by the seller pursuant to an agreement with the buyer to discharge a security interest in, a lien on, or a debt with respect to property traded in;
(b) In case of a loan, the net amount paid to, receivable by, or paid or payable for the account of the debtor, plus the amount of any discount excluded from the finance charge, paragraph (b)(iii) of subsection (18); and
(c) In the case of a loan, to the extent that payment is, or payments are, deferred and the amount is not otherwise included and is authorized and disclosed to the debtor as required by law, amounts actually paid or to be paid by the creditor for registration, certificate of title, or license fees.
(6) "Billing cycle" means the time interval between periodic billing statement dates.
(7) "Business purpose" means any purpose except a consumer purpose. For purposes of this act, a credit transaction:
(a) Engaged in by a debtor for an agricultural purpose; or
(b) Engaged in by a debtor for an investment purpose; or
(c) Creating a debt secured by a first mortgage or first deed of trust on real property; or
(d) In which the debtor is an organization, rather than a natural person;
is considered to be for a business purpose.
(8) "Card issuer" means a person who issues a credit card.
(9) "Cardholder" means a person to whom a credit card is issued or who has agreed with the card issuer to pay obligations arising from the issuance to or use of the card by another person.
(10) "Cash price" means the price of goods, services, or an interest in land at which the goods, services, or interest in land are offered for sale by the seller to cash buyers in the ordinary course of business, except as the administrator may otherwise prescribe by rule, and may include:
(a) Applicable sales, use, and excise and documentary stamp taxes;
(b) The cash price of accessories or related services such as delivery, installation, servicing, repairs, alterations, and improvements; and
(c) Amounts actually paid or to be paid by the seller for registration, certificate of title, or license fees.
The cash price stated by the seller to the buyer pursuant to the provisions on disclosure, part 2 of chapter 43, title 28, Idaho Code, is presumed to be the cash price.
(11) "Conspicuous" means 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. Whether a term or clause is conspicuous or not is for decision by the court.
(12) "Consumer purpose" means primarily a personal, family or household purpose. For purposes of this act, consumer purpose does not include a credit transaction:
(a) Engaged in by a debtor for an agricultural purpose; or
(b) Engaged in by a debtor for an investment purpose; or
(c) Creating a debt secured by a first mortgage or first deed of trust on real property; or
(d) In which the debtor is an organization, rather than a natural person.
(13) "Credit" means the right granted by a creditor to a debtor to defer payment of debt, to incur debt and defer its payment, or to purchase property or services and defer payment therefor.
(14) "Credit card" means a card or device issued under an arrangement pursuant to which a card issuer gives to a cardholder the privilege of obtaining credit from the card issuer or other person in purchasing or leasing property or services, obtaining loans, or otherwise. A transaction is "pursuant to a credit card" only if credit is obtained according to the terms of the arrangement by transmitting information contained on the card or device orally, in writing, by mechanical or electronic methods, or in any other manner. A transaction is not "pursuant to a credit card" if the card or device is used solely in that transaction to:
(a) Identify the cardholder or evidence his credit-worthiness and credit is not obtained according to the terms of the arrangement;
(b) Obtain a guarantee of payment from the cardholder’s deposit account, whether or not the payment results in a credit extension to the cardholder by the card issuer; or
(c) Effect an immediate transfer of funds from the cardholder’s deposit account by electronic or other means, whether or not the transfer results in a credit extension to the cardholder by the card issuer.
(15) "Creditor" means the person who grants credit in a regulated credit transaction or, except as otherwise provided, an assignee of a creditor’s right to payment, but use of the term does not itself impose on an assignee any obligation of his assignor. In case of credit granted pursuant to a credit card, "creditor" means the card issuer and not another person honoring the credit card.
(16) "Debtor" means the person to whom credit is granted in a regulated credit transaction.
(17) "Earnings" means compensation paid or payable by an employer to an employee, or for his account, for personal services rendered or to be rendered by him, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension, retirement, or disability program.
(18) "Finance charge":
(a) Except as provided in paragraph (b) of this subsection, "finance charge" means the sum of any of the following types of charges payable directly or indirectly by the debtor and imposed directly or indirectly by the creditor as an incident to or as a condition of the extension of credit, as applicable:
(i) Interest or any amount payable under a point, discount, or other system of charges, however denominated;
(ii) Time-price differential, credit service, service, carrying, or other charge, however denominated;
(iii) Premium or other charge for any guarantee or insurance protecting the creditor against the debtor’s default or other credit loss; and
(iv) Charges incurred for investigating the collateral or credit-worthiness of the debtor or for commissions or brokerage for obtaining the credit, irrespective of the person to whom the charges are paid or payable, unless the creditor had no notice of the charges when the credit was granted.
(b) The term does not include:
(i) Charges as a result of default or delinquency if made for actual unanticipated late payment, delinquency, default, or other like occurrence, unless the parties agree that these charges are finance charges; a charge is not made for actual unanticipated late payment, delinquency, default or other like occurrence if imposed on an account that is or may be debited from time to time for purchases or other debts and, under its terms, payment in full or of a specified amount is required when billed, and in the ordinary course of business the debtor is permitted to continue to have purchases or other debts debited to the account after imposition of the charge;
(ii) Deferral charges, section 28-42-302, Idaho Code; or
(iii) A discount, if a creditor purchases or satisfies obligations of a cardholder pursuant to a credit card and the purchase or satisfaction is made at less than the face amount of the obligation.
(19) "Goods" includes goods not in existence at the time the transaction is entered into and merchandise certificates, but excludes money, chattel paper, documents of title, and instruments.
(20) "Insurance premium loan" means a regulated consumer loan that:
(a) Is made for the sole purpose of financing the payment by or on behalf of an insured of the premium on one (1) or more policies or contracts issued by or on behalf of an insurer;
(b) Is secured by an assignment by the insured to the lender of the unearned premium on the policy or contract; and
(c) Contains an authorization to cancel the policy or contract financed.
(21) "Lender," except as otherwise provided, includes an assignee of a lender’s right to payment, but use of the term does not in itself impose on an assignee any obligation of the lender.
(22) "Lender credit card" means a credit card issued by a regulated lender.
(23) (a) "Loan" means, except as provided in paragraph (b) of this subsection:
(i) The creation of debt by the lender’s payment of or agreement to pay money to the debtor or to a third person for the account of the debtor;
(ii) The creation of debt pursuant to a lender credit card in any manner, including a cash advance or the card issuer’s honoring a draft or similar order for the payment of money drawn or accepted by the debtor, paying or agreeing to pay the debtor’s obligation, or purchasing or otherwise acquiring the debtor’s obligation from the obligee or his assignees;
(iii) The creation of debt by a cash advance to a debtor pursuant to a seller credit card;
(iv) The creation of debt by a credit to an account with the lender upon which the debtor is entitled to draw immediately; and
(v) The forbearance of debt arising from a loan.
(b) "Loan" does not include:
(i) A card issuer’s payment or agreement to pay money to a third person for the account of a debtor if the debt of the debtor arises from a sale and results from use of a seller credit card; or
(ii) The forbearance of debt arising from a sale.
(24) "Merchandise certificate" means a writing not redeemable in cash and usable in its face amount in lieu of cash in exchange for goods or services.
(25) "Nationwide mortgage licensing system and registry" or "NMLSR" means a mortgage licensing system developed and maintained by the conference of state bank supervisors and the American association of residential mortgage regulators for the licensing and registration of mortgage brokers, mortgage lenders, mortgage loan originators and other consumer financial service providers.
(26) "Open-end credit" means an arrangement pursuant to which:
(a) A creditor may permit a debtor, from time to time, to purchase on credit from the creditor or pursuant to a credit card, or to obtain loans from the creditor or pursuant to a credit card;
(b) The amounts financed and the finance and other appropriate charges are debited to an account;
(c) The finance charge, if made, is computed on the account periodically; and
(d) Either the debtor has the privilege of paying in full or in installments or the creditor periodically imposes charges computed on the account for delaying payment and permits the debtor to continue to purchase on credit.
(27) "Organization" means a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.
(28) "Payable in installments" means that payment is required or permitted by agreement to be made in:
(a) Two (2) or more periodic payments, excluding a down payment, with respect to a debt arising from a regulated consumer credit sale pursuant to which a finance charge is made;
(b) Four (4) or more periodic payments, excluding a down payment, with respect to a debt arising from a regulated consumer credit sale pursuant to which no finance charge is made; or
(c) Two (2) or more periodic payments with respect to a debt arising from a regulated consumer loan. If any periodic payment other than the down payment under an agreement requiring or permitting two (2) or more periodic payments is more than twice the amount of any other periodic payment, excluding the down payment, the regulated consumer credit sale or regulated consumer loan is "payable in installments."
(29) "Person" includes a natural person or an individual, and an organization.
(30) "Person related to" with respect to an individual means:
(a) The spouse of the individual;
(b) A brother, brother-in-law, sister or sister-in-law of the individual;
(c) An ancestor or lineal descendant of the individual or his spouse; and
(d) Any other relative, by blood or marriage, of the individual or his spouse who shares the same home with the individual.
"Person related to" with respect to an organization means:
(a) A person directly or indirectly controlling, controlled by or under common control with the organization;
(b) An officer or director of the organization or a person performing similar functions with respect to the organization or to a person related to the organization;
(c) The spouse of a person related to the organization; and
(d) A relative by blood or marriage of a person related to the organization who shares the same home with him.
(31) "Precomputed credit transaction" means a credit transaction in which the debt is a sum comprising the amount financed and the amount of the finance charge computed in advance. A disclosure required by the federal consumer credit protection act does not in itself make a finance charge or transaction precomputed.
(32) "Presumed" or "presumption" means that the trier of fact must find the existence of the fact presumed unless and until evidence is introduced which would support a finding of its nonexistence.
(33) "Regulated consumer credit sale" means a regulated credit sale, subsection (36) of this section, and for a consumer purpose, subsection (12) of this section.
(34) "Regulated consumer credit transaction" means a regulated credit transaction, subsection (37) of this section, and for a consumer purpose, subsection (12) of this section.
(35) "Regulated consumer loan" means a regulated loan, subsection (39) of this section, and for a consumer purpose, subsection (12) of this section.
(36) "Regulated credit sale" means a sale of goods, services, or an interest in land in which:
(a) Credit is granted either pursuant to a seller credit card or by a seller who regularly engages as a seller in credit transactions of the same kind; and
(b) The debt is payable in installments or a finance charge is made.
A "regulated credit sale" does not include a sale in which the seller allows the buyer to purchase goods or services pursuant to a lender credit card.
(37) "Regulated credit transaction" means a regulated credit sale or regulated loan or a refinancing or consolidation thereof.
(38) "Regulated lender" means a person authorized to make, or take assignments of, regulated consumer loans, as a regular business, under section 28-46-301, Idaho Code.
(39) "Regulated loan" means a loan made by a creditor regularly engaged in the business of making loans in which the debt is payable in installments or a finance charge is made. A "regulated loan" does not include a sale in which the seller allows the buyer to purchase pursuant to a seller credit card.
(40) "Sale of goods" includes an agreement in the form of a bailment or lease of goods if the bailee or lessee pays or agrees to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the goods involved and it is agreed that the bailee or lessee will become, or for no other or a nominal consideration has the option to become, the owner of the goods upon full compliance with the terms of the agreement.
(41) "Sale of an interest in land" includes a lease in which the lessee has an option to purchase the interest and all or a substantial part of the rental or other payments previously made by him are applied to the purchase price.
(42) "Sale of services" means furnishing or agreeing to furnish services and includes making arrangements to have services furnished by another.
(43) "Seller" includes, except as otherwise provided, an assignee of the seller’s right to payment, but use of the term does not in itself impose on an assignee any obligation of the seller.
(44) "Seller credit card" means either:
(a) A credit card issued primarily for the purpose of giving the cardholder the privilege of using the card to purchase property or services from the card issuer, persons related to the card issuer, or persons licensed or franchised to do business under the card issuer’s business or trade name or designation, or both from any of these persons and from other persons; or
(b) A credit card issued by a person except a regulated lender primarily for the purpose of giving the cardholder the privilege of using the credit card to purchase property or services from at least one hundred (100) persons not related to the card issuer.
(45) "Services" includes:
(a) Work, labor, and other personal services;
(b) Privileges with respect to transportation, hotel and restaurant accommodations, education, entertainment, recreation, physical culture, hospital accommodations, funerals, cemetery accommodations, and the like; and
(c) Insurance provided by a person other than the insurer.
(46) "Supervised financial organization" means a person, except an insurance company or other organization primarily engaged in an insurance business:
(a) Organized, chartered, or holding an authorization certificate under the laws of this state or of the United States that authorizes the person to make loans and to receive deposits, including a savings, share, certificate or deposit account; and
(b) Subject to supervision by an official or agency of this state or of the United States.
[28-41-301, added 1983, ch. 119, sec. 3, p. 269; am. 2006, ch. 122, sec. 2, p. 341; am. 2013, ch. 54, sec. 2, p. 109.]
In this act "Federal Consumer Credit Protection Act" means the consumer credit protection act, Public Law 90-321; 82 Stat. 146, as amended, to and including January 1, 2005, or a subsequent date if so defined by administrative rule, and includes regulations issued pursuant to that act, as amended to and including January 1, 2005, or a subsequent date if so defined by administrative rule.
[28-41-302, added 1983, ch. 119, sec. 3, p. 275; am. 2002, ch. 301, sec. 2, p. 860; am. 2003, ch. 74, sec. 1, p. 246; am. 2004, ch. 98, sec. 1, p. 355; am. 2005, ch. 263, sec. 1, p. 808.]
This chapter shall be known and may be cited as the Idaho Credit Code — Finance Charges and Related Provisions.
[28-42-101, added 1983, ch. 119, sec. 3, p. 275.]
(1) With respect to a loan or credit sale, the rate of finance charge shall be that which is agreed upon between the parties to the transaction. In addition to the finance charge permitted herein, a creditor may contract for and receive any other charge, except to the extent expressly prohibited or limited by this act.
(2) This section does not limit or restrict the manner of calculating the finance charge, whether by way of add-on, discount, single annual percentage rate, or otherwise. If the credit transaction is precomputed:
(a) The finance charge may be calculated on the assumption that all scheduled payments will be made when due; and
(b) The effect of prepayment is governed by the provisions on rebate upon prepayment, section 28-42-307, Idaho Code.
(3) Except as provided in subsection (4) of this section, the term of a credit transaction for purposes of this section commences on the day the credit transaction is made. The administrator may adopt rules with respect to treating as regular minor irregularities in amount or time.
(4) With respect to an insurance premium loan, the term of the loan commences on the earliest inception date of a policy or contract of insurance, payment of the premium on which is financed by the loan.
[28-42-201, added 1983, ch. 119, sec. 3, p. 275; am. 1991, ch. 278, sec. 1, p. 720; am. 1993, ch. 227, sec. 1, p. 798.]
(1) With respect to a precomputed regulated consumer credit transaction, the parties may contract for a delinquency charge on any installment not paid in full within ten (10) days after its due date, as originally scheduled or as deferred, in an amount which is not more than five percent (5%) of the unpaid amount of the installment, or twelve dollars and fifty cents ($12.50), whichever is greater.
(2) With respect to a regulated consumer loan secured by a security interest in real property which is used or expected to be used as the residence of the debtor which is not a precomputed regulated consumer loan, the parties may contract for a delinquency charge on any installment not paid in full within fifteen (15) days after its scheduled due date in an amount not exceeding five percent (5%) of the unpaid amount of the installment, or fifteen dollars ($15.00), whichever is greater.
(3) With respect to all other regulated consumer credit transactions, whether secured or unsecured, and whether such credit transactions are classified as open-end credit or closed-end credit, the parties may contract for a delinquency charge on any installment or scheduled payment not paid in full within ten (10) days after its scheduled due date in an amount not exceeding five percent (5%) of the unpaid amount of the installment or scheduled payment, or fifteen dollars ($15.00), whichever is greater.
(4) A delinquency charge under subsection (1), subsection (2) or subsection (3) of this section may be collected only once on an installment or scheduled payment, however long it remains in default. No delinquency charge may be collected if the installment or scheduled payment has been deferred and a deferral charge, section 28-42-302, Idaho Code, has been paid or incurred. A delinquency charge may be collected at the time it accrues or at any time thereafter.
(5) No delinquency charge may be collected on an installment or payment which is paid in full within ten (10) days after its scheduled due date even though an earlier maturing installment or scheduled payment or a delinquency charge on an earlier installment or scheduled payment may not have been paid in full. For purposes of this subsection, payments are applied first to current installments or scheduled payments and then to delinquent installments or scheduled payments.
(6) If two (2) installments or parts thereof of a precomputed regulated consumer credit transaction are in default for ten (10) days or more, the creditor may elect to convert the credit transaction from a precomputed regulated consumer credit transaction to one in which the finance charge is based on unpaid balances. In this event, he shall make a rebate pursuant to the provisions on rebate upon prepayment, section 28-42-307, Idaho Code, as of the maturity date of the first delinquent installment, and thereafter may make a finance charge as authorized by the provisions on finance charge for regulated consumer credit transactions. The amount of the rebate shall not be reduced by the amount of any permitted minimum charge, section 28-42-307, Idaho Code.
[28-42-301, added 1983, ch. 119, sec. 3, p. 276; am. 1993, ch. 227, sec. 2, p. 798; am. 1996, ch. 134, sec. 1, p. 459; am. 2002, ch. 302, sec. 1, p. 865.]
(1) With respect to a precomputed regulated consumer credit transaction, refinancing, or consolidation, the parties before or after default may agree in writing to a deferral of all or part of one or more unpaid installments, and the creditor may make and collect a charge not exceeding the rate previously stated to the debtor applied to the amount or amounts deferred for the period of deferral calculated without regard to differences in the lengths of months, but proportionally for a part of a month, counting each day as 1/30th of a month. A deferral charge may be collected at the time it is assessed or at any time thereafter.
(2) The parties may agree in writing at the time of a precomputed regulated consumer credit transaction, refinancing, or consolidation that if an installment is not paid within ten (10) days after its due date, the creditor may unilaterally grant a deferral and make charges as provided in this section. No deferral charge may be made for a period after the date that the creditor elects to accelerate the maturity of the agreement.
(3) A delinquency charge made by the creditor on an installment may not be retained if a deferral charge is made pursuant to this section with respect to the period of delinquency.
[28-42-302, added 1983, ch. 119, sec. 3, p. 277.]
With respect to a regulated consumer credit transaction, the creditor may, by agreement with the debtor, refinance the unpaid balance and may contract for and receive a finance charge based on the amount financed resulting from the refinancing. The amount financed resulting from the refinancing comprises, if the transaction was not precomputed, the total of the unpaid balance and accrued charges on the date of refinancing, or, if the transaction was precomputed, the amount which the borrower or buyer would have been required to pay upon prepayment pursuant to the provisions on rebate upon prepayment, section 28-42-307, Idaho Code, on the date of refinancing, except that for the purpose of computing this amount, no minimum charge shall be allowed.
[28-42-303, added 1983, ch. 119, sec. 3, p. 277.]
If a debtor owes an unpaid balance to a creditor with respect to a regulated consumer loan or regulated consumer credit sale, or a refinancing or consolidation thereof, and becomes obligated on another regulated consumer loan or regulated consumer credit sale, or a refinancing or consolidation thereof, with the same lender or seller, the parties may agree to a consolidation resulting in a single schedule of payments pursuant to either of the following subsections:
(1) The parties may agree to refinance the unpaid balance with respect to the previous loan or sale pursuant to the provisions on refinancing, section 28-42-303, Idaho Code, and to consolidate the amount financed resulting from the refinancing by adding it to the amount financed with respect to the subsequent loan or sale. The lender or seller may contract for and receive a finance charge based on the aggregate amount financed resulting from the consolidation.
(2) The parties may agree to consolidate the unpaid balance of a regulated consumer loan or regulated consumer credit sale with the unpaid balance of another regulated consumer loan or regulated consumer credit sale. The parties may agree in writing to refinance the previous unpaid balance pursuant to the provisions on refinancing, section 28-42-303, Idaho Code, and to consolidate the amount financed resulting from the refinancing or the principal resulting from the refinancing by adding to it the amount financed or the principal with respect to the subsequent loan or sale; the aggregate amount resulting from the consolidation shall be deemed principal and the creditor may contract for and receive a finance charge based upon the principal.
[28-42-304, added 1983, ch. 119, sec. 3, p. 277.]
The parties may agree at or within ten (10) days before the time of conversion to add the unpaid balance of a regulated consumer credit transaction not made pursuant to open-end credit to the debtor’s open-end credit account with the creditor. The unpaid balance so added is an amount equal to the amount financed, determined according to the provision on finance charge on refinancing, section 28-42-303, Idaho Code.
[28-42-305, added 1983, ch. 119, sec. 3, p. 278.]
(1) Subject to the provisions on rebate upon prepayment, section 28-42-307, Idaho Code, and subject to the provisions of subsection (2) of this section, the debtor may prepay in full the unpaid balance of a regulated consumer credit transaction at any time without penalty.
(2) With respect to a regulated consumer credit transaction which is primarily secured by a mortgage or deed of trust on real property, the parties may agree upon a prepayment charge to be paid by the debtor to the creditor if the debt is repaid in full and prior to its due date, during the first three (3) years of the contract, which prepayment charge shall not exceed the following:
(a) For closed-end loans, the prepayment charge may not exceed an amount equal to six (6) months interest calculated on the average balance for the prior six (6) months at the rate of interest designated in the contract. If the prepayment occurs prior to the expiration of six (6) months from the date of the contract, the prepayment charge may be calculated in the same manner, except the number of months shall be the number of months the loan has existed;
(b) For open-end loans, the amount of the prepayment charge shall not exceed an amount equal to six (6) months finance charge at the annual percentage rate in effect at the time of prepayment, calculated on the average of the average daily balances on the account for the last six (6) billing periods prior to prepayment. If the account has been open for less than six (6) billing periods, the prepayment charge shall be calculated in the same manner, except the number of billing periods shall be the number of billing periods the account has been open.
(3) No prepayment charge may be charged or collected if the loan is refinanced or consolidated with the same lender.
(4) Disclosure of any prepayment charge authorized by this section shall be made by the creditor to the debtor in such manner and form as may be approved by the director.
[28-42-306, added 1983, ch. 119, sec. 3, p. 278; am. 1996, ch. 244, sec. 1, p. 775.]
(1) Except as provided in subsection (2) of this section, upon prepayment in full of the unpaid balance of a precomputed regulated consumer loan or regulated consumer credit sale, refinancing, or consolidation, an amount not less than the unearned portion of the finance charge calculated according to this section shall be rebated to the debtor. If the rebate otherwise required is less than one dollar ($1.00), no rebate need be made.
(2) Upon prepayment in full of a regulated consumer loan or regulated consumer credit sale, other than one pursuant to open-end credit, a refinancing, or consolidation, whether or not precomputed, the creditor may collect or retain a minimum charge within the limits stated in this subsection if the finance charge earned at the time of prepayment is less than any minimum charge contracted for. The minimum charge may not exceed the amount of finance charge contracted for, or five dollars ($5.00) in a transaction which had a principal of seventy-five dollars ($75.00) or less, or seven dollars and fifty cents ($7.50) in a transaction which had a principal of more than seventy-five dollars ($75.00).
(3) (a) Except as otherwise provided in this section, the unearned finance charge shall be an amount which is a proportion of the precomputed interest at least as great as the sum of the remaining monthly balances of principal and interest combined scheduled to follow the installment date nearest the date of prepayment bears to the sum of all the monthly balances of principal and interest combined originally scheduled by the contract. If such prepayment occurs before the first installment date, an additional refund of 1/30th of the portion of precomputed interest which should be retained in the first installment period shall be made for each day from the date of prepayment in full to the first scheduled installment date. Any prepayment made on or before the 15th day following an installment date shall be deemed to have been made on the preceding installment date.
(b) With respect to a precomputed transaction entered into on or after July 1, 1978, and payable according to its original terms in more than sixty-one (61) installments, the unearned portion of the finance charge is, at the option of the creditor, either:
That portion which is applicable to all fully unexpired computational periods as originally scheduled, or, if deferred, as deferred, which follow the date of prepayment. For this purpose, the applicable charge is the total of that which would have been made for each such period, had the regulated consumer loan or regulated consumer credit sale not been precomputed, by applying to unpaid balances of principal, according to the actuarial method, the rate of finance charge previously stated to the debtor based upon the assumption that all payments were made as originally scheduled, or if deferred, as deferred. The creditor, at his option, may round the stated rate to the nearest one-quarter (1/4) of one percent (1%) if such procedure is not consistently used to obtain a greater yield than would otherwise be permitted; or
The total finance charge minus the earned finance charge. The earned finance charge shall be determined by applying the rate previously stated to the debtor according to the actuarial method to the actual unpaid balances for the actual time the balances were unpaid up to the date of prepayment. If a delinquency or deferral charge was collected, it shall be treated as a payment.
(4) In this section:
(a) "Periodic balance" means the amount scheduled to be outstanding on the last day of a computational period before deducting the payment, if any, scheduled to be made on that date;
(b) "Computational period" means one (1) month if one-half (1/2) or more of the intervals between scheduled payments under the agreement is one (1) month or more, and otherwise means one (1) week;
(c) The "interval" to the due date of the first scheduled installment or the final scheduled payment date is measured from the date of a loan or credit sale, refinancing, or consolidation, and includes either the first or last day of the interval;
(d) If the interval to the due date of the first scheduled installment does not exceed one (1) month by more than fifteen (15) days when the computational period is one (1) month, or eleven (11) days when the computational period is one (1) week, the interval shall be considered as one (1) computational period.
(5) This subsection applies only if the schedule of payments is not regular.
(a) If the computational period is one (1) month and:
If the number of days in the interval to the due date of the first scheduled installment is less than one (1) month by more than five (5) days, or more than one (1) month by more than five (5) days but not more than fifteen (15) days, the unearned finance charge shall be increased by an adjustment for each day by which the interval is less than one (1) month and, at the option of the creditor, may be reduced by an adjustment for each day by which the interval is more than one (1) month; the adjustment for each day shall be 1/30th of that part of the finance charge earned in the computational period prior to the due date of the first scheduled installment assuming that period to be one (1) month; and
If the interval to the final scheduled payment date is a number of computational periods plus an additional number of days less than a full month, the additional number of days shall be considered a computational period only if sixteen (16) days or more. This subparagraph applies whether or not subsection 5(a)1. applies.
(b) Notwithstanding paragraph (a), if the computational period is one (1) month, the number of days in the interval to the due date of the first installment exceeds one (1) month by not more than fifteen (15) days, and the schedule of payments is otherwise regular, the creditor at his option may exclude the extra days and the charge for the extra days in computing the unearned finance charge; but if he does so and a rebate is required before the due date of the first scheduled installment, he shall compute the earned charge for each elapsed day as 1/30th of the amount the earned charge would have been if the first interval had been one (1) month.
(c) If the computational period is one (1) week and:
If the number of days in the interval to the due date of the first scheduled installment is less than five (5) days, or more than nine (9) days but not more than eleven (11) days, the unearned finance charge shall be increased by an adjustment for each day by which the interval is less than seven (7) days and, at the option of the creditor, may be reduced by an adjustment for each day by which the interval is more than seven (7) days; the adjustment for each day shall be 1/7th of that part of the finance charge earned in the computational period prior to the due date of the first scheduled installment assuming that period to be one (1) week; and
If the interval to the final scheduled payment date is a number of computational periods plus an additional number of days less than a full week, the additional number of days shall be considered a computational period only if four (4) days or more. This subparagraph applies whether or not subsection 5(c)1. applies.
(6) If a deferral, section 28-42-302, Idaho Code, has been agreed to, the unearned portion of the finance charge shall be computed with regard to the deferral. If the deferral charge earned is less than the deferral charge paid, the difference shall be added to the unearned portion of the finance charge. If any part of a deferral charge has been earned but has not been paid, that part shall be subtracted from the unearned portion of the finance charge or shall be added to the unpaid balance.
(7) This section does not preclude the collection or retention by the creditor of delinquency charges, section 28-42-301, Idaho Code.
(8) If the maturity is accelerated for any reason and judgment is obtained, the debtor is entitled to the same rebate as if the payment had been made on the date judgment is entered.
(9) Upon prepayment in full of a regulated consumer loan or regulated consumer credit sale by the proceeds of credit insurance, section 28-44-103, Idaho Code, the debtor or his estate is entitled to the same rebate as though the debtor had prepaid the agreement on the date the proceeds of the insurance are paid to the creditor, but no later than ten (10) business days after satisfactory proof of loss is furnished to the creditor.
[28-42-307, added 1983, ch. 119, sec. 3, p. 278.]
With respect to a regulated credit transaction, a dishonored check fee in the amount allowed as a set collection fee under section 28-22-105, Idaho Code, may be charged and collected by a creditor, for the return by a depository institution of a dishonored check, negotiable order of withdrawal, or share draft, offered by a debtor in full or partial repayment of a regulated credit transaction, and, provided that the fee is contracted for between the parties.
[28-42-308, added 1994, ch. 185, sec. 4, p. 606; am. 1997, ch. 73, sec. 1, p. 154.]
The money of account in this state is the dollar, cent and mill, and all public accounts and the proceedings of all courts in relation to money must be kept and expressed in money of the above denomination.
[28-42-401, added 1983, ch. 119, sec. 3, p. 281.]
The above provisions do not in any manner affect any demand expressed in money of another denomination, but such demand in any suit or proceeding affecting the same must be reduced to the above denominations.
[28-42-402, added 1983, ch. 119, sec. 3, p. 281.]
In all judgments rendered by any court for any debt, damages or costs, and in all executions issued thereon, the amount must be computed, as near as may be, in dollars and cents, rejecting small fractions; and no judgment or other proceeding is erroneous for such omission.
[28-42-403, added 1983, ch. 119, sec. 3, p. 281.]
Parties may agree in writing for the payment of compound interest.
[28-42-404, added 1983, ch. 119, sec. 3, p. 281.]
This chapter shall be known and may be cited as the Idaho Credit Code — Regulation of Agreements and Practices.
[28-43-101, added 1983, ch. 119, sec. 3, p. 281.]
A person upon whom the Federal Consumer Credit Protection Act, including regulations promulgated pursuant thereto, imposes duties or obligations, shall make or give to the debtor the disclosures, information, and notices required of him by that act and in all respects comply with that act. This section imposes the duty on a creditor to comply with the terms of the Federal Consumer Credit Protection Act only with respect to those credit transactions to which the Federal Consumer Credit Protection Act by its terms applies.
[28-43-201, added 1983, ch. 119, sec. 3, p. 282.]
A debtor may pay the original creditor until he receives notification of assignment of rights to payment pursuant to a regulated consumer credit transaction 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 debtor, the assignee shall seasonably furnish reasonable proof that the assignment has been made and unless he does so, the debtor may pay the original creditor.
[28-43-202, added 1983, ch. 119, sec. 3, p. 282.]
Whether or not a change is authorized by prior agreement, a creditor may change the terms of an open-end consumer credit account applying to any balance incurred before or after the effective date of the change.
[28-43-203, added 1983, ch. 119, sec. 3, p. 282.]
(1) The creditor shall deliver or mail to the debtor, without request, a written receipt for each payment by coin or currency on an obligation pursuant to a regulated consumer credit transaction. A periodic statement showing a payment received by mail complies with this subsection.
(2) Upon written request of a debtor, the person to whom an obligation is owed pursuant to a regulated consumer credit transaction, except one pursuant to open-end consumer credit, shall provide a written statement of the dates and amounts of payments made within the twelve (12) months preceding the month in which the request is received and the total amount unpaid as of the end of the period covered by the statement. The statement shall be provided without charge once during each year of the term of the obligation. If additional statements are requested, the creditor may make a reasonable charge not in excess of ten dollars ($10.00) for each additional statement.
(3) After a debtor has fulfilled all obligations with respect to a regulated consumer credit transaction, except one pursuant to open-end consumer credit, the person to whom the obligation was owed, upon request of the debtor, shall deliver or mail to the debtor written evidence acknowledging payment in full of all obligations with respect to the transaction.
[28-43-204, added 1983, ch. 119, sec. 3, p. 282.]
An agreement pursuant to which an insurance premium loan is made shall contain the names of the insurance agent or broker negotiating each policy or contract and of the insurer issuing each policy or contract, the number and inception date of, and premium for, each policy or contract, the date on which the term of the loan begins, and a clear and conspicuous notice that each policy or contract may be cancelled if payment is not made in accordance with the agreement. If a policy or contract has not been issued by the time the agreement is signed, the agreement may provide that the insurance agent or broker may insert the appropriate information in the agreement and, if he does so, shall furnish the information promptly in writing to the insured.
[28-43-205, added 1983, ch. 119, sec. 3, p. 283.]
(1) With respect to a regulated consumer credit sale, a seller may take a security interest in the property sold. In addition, a seller may take a security interest in goods upon which services are performed or in which goods sold are installed or to which they are annexed, or in land to which the goods are affixed or which is maintained, repaired or improved as a result of the sale of the goods or services, if in the case of a security interest in land the debt secured is one thousand dollars ($1,000) or more, or, in the case of a security interest in goods, the debt secured is one hundred dollars ($100) or more. Except as provided with respect to cross-collateral, section 28-43-302, Idaho Code, a seller may not otherwise take a security interest in property to secure the debt arising from a regulated consumer credit sale.
(2) A security interest taken in violation of this section is void.
[28-43-301, added 1983, ch. 119, sec. 3, p. 283.]
(1) In addition to contracting for a security interest pursuant to the provisions on security in sales, section 28-43-301, Idaho Code, a seller in a regulated consumer credit sale may secure the debt arising from the sale by contracting for a security interest in other property if, as a result of a prior sale, the seller has an existing security interest in the other property. The seller may also contract for a security interest in the property sold in the subsequent sale as security for the previous debt.
(2) If the seller contracts for a security interest in other property pursuant to this section, the finance charge thereafter on the aggregate unpaid balances so secured may not exceed that permitted if the balances so secured were consolidated pursuant to the provisions on finance charge on consolidation, subsection (2) of section 28-42-304, Idaho Code. The seller has a reasonable time after so contracting in which to make any adjustments required by this section.
[28-43-302, added 1983, ch. 119, sec. 3, p. 283.]
(1) If debts arising from two (2) or more regulated consumer credit sales, except sales pursuant to open-end credit, are secured by cross-collateral, section 28-43-302, Idaho Code, or consolidated into one (1) debt payable on a single schedule of payments, and the debt is secured by security interests taken with respect to one or more of the sales, payments received by the seller after the taking of the cross-collateral or the consolidation are deemed, for the purpose of determining the amount of the debt secured by the various security interests, to have been first applied to the payment of the debts arising from the sales first made. To the extent debts are paid according to this section, security interests in items of property terminate as the debt originally incurred with respect to each item is paid.
(2) Payments received by the seller upon an open-end consumer credit account are deemed, for the purpose of determining the amount of the debt secured by the various security interests, to have been applied first to the payment of finance charges in the order of their entry to the account and then to the payment of debts in the order in which the entries to the account showing the debts were made.
(3) If the debts consolidated arose from two (2) or more sales made on the same day, payments received by the seller are deemed, for the purpose of determining the amount of the debt secured by the various security interests, to have been first applied to the payment of the smallest debt.
[28-43-303, added 1983, ch. 119, sec. 3, p. 283.]
(1) A creditor may not take an assignment of earnings of the debtor for payment or as security for payment of a debt arising out of a regulated consumer credit transaction. An assignment of earnings in violation of this section is unenforceable by the assignee of the earnings and revocable by the debtor. This section does not prohibit a debtor from authorizing deductions from his earnings in favor of his creditor if the authorization is revocable, the debtor is given a complete copy of the writing evidencing the authorization at the time he signs it, and the writing contains on its face a conspicuous notice of the debtor’s right to revoke the authorization.
(2) A sale of unpaid earnings made in consideration of the payment of money to or for the account of the seller of the earnings is deemed to be a loan to him secured by an assignment of earnings.
[28-43-304, added 1983, ch. 119, sec. 3, p. 284.]
A debtor may not authorize any person to confess judgment on a claim arising out of a regulated consumer credit transaction. An authorization in violation of this section is void.
[28-43-305, added 1983, ch. 119, sec. 3, p. 284.]
With respect to a regulated consumer credit sale, the creditor may not take a negotiable instrument other than a check dated not later than ten (10) days after its issuance as evidence of the obligation of the debtor.
[28-43-306, added 1983, ch. 119, sec. 3, p. 284.]
(1) Except as provided in subsection (2) of this section, if any scheduled payment of a regulated consumer credit transaction is more than twice as large as the average of earlier scheduled payments, the debtor has the right to refinance, without penalty, the amount of that payment at the time it is due. The terms of the refinancing shall be no less favorable to the debtor than the terms of the original transaction.
(2) This section does not apply to:
(a) A transaction pursuant to open-end credit;
(b) A transaction to the extent that the payment schedule is adjusted to the seasonal or irregular income or scheduled payments or obligations of the debtor;
(c) A transaction of a class defined by rule of the administrator as not requiring for the protection of the debtor his right to refinance as provided in this section; or
(d) A transaction secured by a second deed of trust or mortgage on a one (1) to four (4) family dwelling occupied by the debtor.
[28-43-307, added 1983, ch. 119, sec. 3, p. 284.]
With respect to a regulated consumer credit sale, the seller may not give or offer to give a rebate or discount or otherwise pay or offer to pay value to the debtor as an inducement for a sale for the debtor giving to the seller the names of prospective buyers, or otherwise aiding the seller in making a sale to another person, if the earning of the rebate, discount, or other value is contingent upon the occurrence of an event after the time the debtor agrees to buy. If a debtor is induced by a violation of this section to enter into a regulated consumer credit sale, the agreement is unenforceable by the seller and the debtor, at his option, may rescind the agreement or retain the property delivered and the benefit of any services performed, without any obligation to pay for them.
[28-43-308, added 1983, ch. 119, sec. 3, p. 285.]
With respect to a regulated consumer loan in which the principal is one thousand dollars ($1,000) or less, a regulated lender may not contract for an interest in land as security. A security interest taken in violation of this section is void.
[28-43-309, added 1983, ch. 119, sec. 3, p. 285.]
Regulated consumer loans, not made pursuant to open-end credit and in which the principal is one thousand dollars ($1,000) or less, shall be scheduled to be payable in substantially equal installments at equal periodic intervals except to the extent that the schedule of payments is adjusted to the seasonal or irregular income of the debtor, and:
(1) Over a period of not more than thirty-seven (37) months if the principal is more than three hundred dollars ($300), or
(2) Over a period of not more than twenty-five (25) months if the principal is three hundred dollars ($300) or less.
[28-43-310, added 1983, ch. 119, sec. 3, p. 285.]
With respect to a regulated consumer loan in which the principal is one thousand dollars ($1,000) or less, the agreement may not provide for the payment by the debtor of attorney’s fees. A provision in violation of this section is unenforceable.
[28-43-311, added 1983, ch. 119, sec. 3, p. 285.]
Except as provided by the provisions on limitations on attorney’s fees as to certain regulated consumer loans, section 28-43-311, Idaho Code, with respect to a regulated consumer credit transaction the agreement may provide for the payment by the debtor of reasonable attorney’s fees after default and referral to an attorney not a salaried employee of the creditor. A provision in violation of this section is unenforceable.
[28-43-312, added 1983, ch. 119, sec. 3, p. 285.]
"Home solicitation sale" means a regulated consumer credit sale of goods or services, in which the seller or a person acting for him personally solicits the sale, and the buyer’s agreement or offer to purchase is given to the seller or a person acting for him, at his residence. It does not include a sale made pursuant to a preexisting open-end credit account with the seller or pursuant to prior negotiations between the parties at a business establishment at a fixed location where goods or services are offered or exhibited for sale, a transaction conducted and consummated entirely by mail or telephone, or a sale which is subject to the provisions of the Federal Consumer Credit Protection Act on the consumer’s right to rescind certain transactions.
[28-43-401, added 1983, ch. 119, sec. 3, p. 286.]
(1) In addition to any right otherwise to revoke an offer, the buyer may cancel a home solicitation sale until midnight of the third business day after the day on which the buyer signs an agreement or offer to purchase which complies with this part 4.
(2) Cancellation occurs when the buyer gives written notice of cancellation to the seller at the address stated in the agreement or offer to purchase.
(3) Notice of cancellation, if given by mail, is given when it is properly addressed with postage prepaid and deposited in a mailbox.
(4) Notice of cancellation given by the buyer need not take a particular form and is sufficient if it indicates by any form of written expression the intention of the buyer not to be bound by the home solicitation sale.
[28-43-402, added 1983, ch. 119, sec. 3, p. 286.]
(1) In a home solicitation sale, the seller shall present to the buyer and obtain his signature to a written agreement or offer to purchase that designates as the date of the transaction the date on which the buyer actually signs, and contains a statement of the buyer’s rights that complies with subsection (2) of this section. A copy of any writing required by this subsection to be signed by the buyer, completed at least as to the date of the transaction and the name and mailing address of the seller, shall be given to the buyer at the time he signs the writing.
(2) The statement shall either:
(a) Comply with any notice of cancellation or similar requirement of any trade regulation rule of the Federal Trade Commission which by its terms applies to the home solicitation sale; or
(b) Appear under the conspicuous caption: "BUYER’S RIGHT TO CANCEL," and read as follows: "If you decide you do not want the goods or services, you may cancel this agreement by mailing a notice to the seller. The notice must say that you do not want the goods or services and must be mailed before midnight of the third business day after you sign this agreement. The notice must be mailed to:
(3) Until the seller has complied with this section, the buyer may cancel the home solicitation sale by notifying the seller in any manner and by any means of his intention to cancel.
[28-43-403, added 1983, ch. 119, sec. 3, p. 286.]
(1) Within ten (10) days after a notice of cancellation has been received by the seller or an offer to purchase has been otherwise revoked, the seller shall tender to the buyer any payments made by the buyer, any note or other evidence of indebtedness, and any goods traded in. A provision permitting the seller to keep all or any part of any goods traded in, payment, note or evidence of indebtedness is in violation of this section and unenforceable.
(2) If the down payment includes goods traded in, the goods shall be tendered in substantially as good condition as when received by the seller. If the seller fails to tender the goods as provided by this section, the buyer may elect to recover an amount equal to the trade-in allowance stated in the agreement.
(3) Until the seller has complied with the obligations imposed by this section, the buyer may retain possession of goods delivered to him by the seller and has a lien on the goods in his possession or control for any recovery to which he is entitled.
[28-43-404, added 1983, ch. 119, sec. 3, p. 287.]
Except as provided by the provisions on retention of goods by the buyer, subsection (3) of section 28-43-404, Idaho Code, and allowing for ordinary wear and tear or consumption of the goods contemplated by the transaction, within a reasonable time after a home solicitation sale has been cancelled or an offer to purchase revoked, the buyer upon demand shall tender to the seller any goods delivered by the seller pursuant to the sale, but he is not obligated to tender at any place other than his residence. If the seller fails to demand possession of goods within a reasonable time after cancellation or revocation, the goods become the property of the buyer without obligation to pay for them. For the purpose of this section, a reasonable time is presumed to be forty (40) days.
[28-43-405, added 1983, ch. 119, sec. 3, p. 287.]
This chapter shall be known and may be cited as Idaho Credit Code – Insurance in Regulated Consumer Credit Transactions.
[28-44-101, added 1983, ch. 119, sec. 3, p. 287.]
(1) Except as provided in subsection (2) of this section, this chapter applies to insurance provided or to be provided in relation to a regulated consumer credit transaction, as defined in section 28-41-301, Idaho Code.
(2) The provision on cancellation by a creditor, section 28-44-304, Idaho Code, applies to loans the primary purpose of which is the financing of insurance. No other provision of this chapter applies to insurance so financed.
(3) This chapter supplements and does not repeal the credit insurance act, chapter 23, title 41, Idaho Code. The provisions of this act concerning administrative controls, liabilities, and penalties do not apply to persons acting as insurers, as defined by title 41, Idaho Code, or rules prescribed by the director of the department of insurance.
[28-44-102, added 1983, ch. 119, sec. 3, p. 287; am. 2013, ch. 54, sec. 11, p. 120.]
(1) In this act, "credit insurance" means insurance, other than insurance on property, by which the satisfaction of debt in whole or in part is a benefit provided, but does not include:
(a) Insurance provided in relation to a credit transaction in which a payment is scheduled more than fifteen (15) years after the extension of credit;
(b) Insurance issued as an isolated transaction on the part of the insurer not related to an agreement or plan for insuring debtors of the creditor; or
(c) Insurance indemnifying the creditor against loss due to the debtor’s default.
(2) "Credit Insurance Act" means chapter 23, title 41, Idaho Code.
[28-44-103, added 1983, ch. 119, sec. 3, p. 288.]
(1) Except as otherwise provided in this chapter and subject to the provision on maximum charges, section 28-42-201, Idaho Code, a creditor may agree to provide insurance, and may contract for and receive a charge for insurance separate from and in addition to other charges. A creditor need not make a separate charge for insurance provided or required by him. This act does not authorize the issuance of any insurance prohibited under any statute, or rule thereunder, governing the business of insurance.
(2) The excess amount of a charge for insurance provided for in agreements in violation of this chapter is an excess charge for the purposes of the provisions of the chapter on remedies and penalties, chapter 45, title 28, Idaho Code, and of the provisions of the chapter on administration, chapter 46, title 28, Idaho Code, as to civil actions by the administrator, section 28-46-113, Idaho Code.
[28-44-104, added 1983, ch. 119, sec. 3, p. 288.]
If a creditor agrees with a debtor to provide insurance:
(1) The insurance shall be evidenced by an individual policy, certificate of insurance, application or notice of proposed insurance, disclosed to debtor pursuant to the provisions of section 41-2308, Idaho Code; or
(2) The creditor shall promptly notify the debtor of any failure or delay in providing the insurance.
[28-44-105, added 1983, ch. 119, sec. 3, p. 288.]
(1) In applying the provisions of this act on unconscionability, sections 28-45-106 and 28-46-111, Idaho Code, to a separate charge for insurance, consideration shall be given, among other factors, to:
(a) Potential benefits to the debtor including the satisfaction of his obligations;
(b) The creditor’s need for the protection provided by the insurance; and
(c) The relation between the amount and terms of credit granted and the insurance benefits provided.
(2) If credit insurance otherwise complies with this chapter and other applicable law, neither the amount nor the term of the insurance nor the amount of a charge therefor is in itself unconscionable.
[28-44-106, added 1983, ch. 119, sec. 3, p. 288.]
(1) Except as provided in subsection (2) of this section, if a creditor contracts for or receives a separate charge for insurance, the amount charged to the debtor for the insurance may not exceed the premium to be charged by the insurer, as computed at the time the charge to the debtor is determined, conforming to any rate filings required by law and made by the insurer with the director of the department of insurance.
(2) A creditor who provides credit insurance in relation to open-end credit, as defined in section 28-41-301, Idaho Code, may calculate the charge to the debtor in each billing cycle by applying the current premium rate to:
(a) The average daily unpaid balance of the debt in the cycle;
(b) The unpaid balance of the debt or a median amount within a specified range of unpaid balances of debt on approximately the same day of the cycle. The day of the cycle need not be the day used in calculating the finance charge, section 28-42-201, Idaho Code, but the specified range shall be the range used for that purpose; or
(c) The unpaid balances of principal calculated according to the actuarial method.
[28-44-107, added 1983, ch. 119, sec. 3, p. 289; am. 2013, ch. 54, sec. 12, p. 121; am. 2014, ch. 97, sec. 11, p. 274.]
(1) Upon prepayment in full of a regulated consumer credit sale or regulated consumer loan by the proceeds of credit insurance, the debtor or his estate is entitled to a refund of any portion of a separate charge for insurance which by reason of prepayment is retained by the creditor or returned to him by the insurer, unless the charge was computed from time to time on the basis of the balances of the debtor’s account.
(2) This chapter does not require a creditor to grant a refund or credit to the debtor if all refunds and credits due to the debtor under this chapter amount to less than five dollars ($5.00), and except as provided in subsection (1) of this section, does not require the creditor to account to the debtor for any portion of a separate charge for insurance because:
(a) The insurance is terminated by performance of the insurer’s obligation;
(b) The creditor pays or accounts for premiums to the insurer in amounts and at times determined by the agreement between them; or
(c) The creditor receives directly or indirectly under any policy of insurance a gain or advantage not prohibited by law, or regulations prescribed by the director of the department of insurance.
(3) Except as provided in subsection (2) of this section, the creditor shall promptly make or cause to be made an appropriate refund or credit to the debtor with respect to any separate charge made to him for insurance if:
(a) The insurance is not provided or is provided for a shorter term than that for which the charge to the debtor for insurance was computed; or
(b) The insurance terminates prior to the end of the term for which it was written because of prepayment in full or otherwise.
(4) A refund or credit required by subsection (3) of this section is appropriate as to amount if it is computed according to a method prescribed or approved by the director of the department of insurance or a formula filed by the insurer with the director of the department of insurance at least thirty (30) days before the debtor’s right to a refund or credit becomes determinable, unless the method or formula is employed after the director of the department of insurance notifies the insurer that he disapproves it.
[28-44-108, added 1983, ch. 119, sec. 3, p. 289; am. 1993, ch. 42, sec. 1, p. 114.]
If a creditor requires insurance, upon notice to the creditor, the debtor, as provided in section 41-2313, Idaho Code, shall have the option of providing the required insurance through an existing policy of insurance owned or controlled by the debtor, or through a policy to be obtained and paid for by the debtor, but the creditor may for reasonable cause, as defined in section 41-1312, Idaho Code, decline the insurance provided by the debtor.
[28-44-109, added 1983, ch. 119, sec. 3, p. 290.]
(1) A creditor may not contract for or receive a separate charge for insurance in connection with a deferral, section 28-42-302, Idaho Code, a refinancing, section 28-42-303, Idaho Code, or a consolidation, section 28-42-304, Idaho Code, unless:
(a) The debtor agrees at or before the time of the deferral, refinancing, or consolidation that the charge may be made;
(b) The debtor is or is to be provided with insurance for an amount or a term, or insurance of a kind, in addition to that to which he would have been entitled had there been no deferral, refinancing, or consolidation;
(c) The debtor receives a refund or credit on account of any unexpired term of existing insurance in the amount that would be required if the insurance were terminated, section 28-44-108, Idaho Code; and
(d) The charge does not exceed the amount permitted by this chapter, section 28-44-107, Idaho Code.
(2) A creditor may not contract for or receive a separate charge for insurance which duplicates insurance with respect to which the creditor has previously contracted for or received a separate charge.
[28-44-110, added 1983, ch. 119, sec. 3, p. 290.]
The director of the department of finance and the director of the department of insurance are authorized and directed to consult and assist one another in maintaining compliance with this chapter. They may jointly pursue investigations, prosecute suits, and take other official action, as may seem to them appropriate, if either of them is otherwise empowered to take the action. If the director is informed of a violation or suspected violation by an insurer of this chapter, or of the insurance laws, rules, and regulations of this state, he shall advise the director of the department of insurance of the circumstances.
[28-44-111, added 1983, ch. 119, sec. 3, p. 290.]
(1) Credit insurance provided by a creditor may be subject to the furnishing of evidence of insurability satisfactory to the insurer. Whether or not such evidence is required, the term of the insurance shall commence no later than when the debtor becomes obligated to the creditor or when the debtor applies for the insurance, whichever is later, except as follows:
(a) If any required evidence of insurability is not furnished until more than thirty (30) days after the term would otherwise commence, the term may commence on the date when the insurer determines the evidence to be satisfactory; or
(b) If the creditor provides insurance not previously provided covering debts previously created, the term may commence on the effective date of the policy.
(2) The originally scheduled term of the insurance shall extend at least until the due date of the last scheduled payment of the debt except as follows:
(a) If the insurance relates to an open-end consumer credit account, the term need only extend until the payment of the debt under the account and may be sooner terminated after at least thirty (30) days notice to the debtor; or
(b) If the debtor is advised in writing that the insurance will be written for a specified shorter time, the term need only extend until the end of the specified time.
(3) The term of the insurance shall not extend more than fifteen (15) days after the originally scheduled due date of the last scheduled payment of the debt unless it is extended without additional cost to the debtor or as an incident to a deferral, refinancing, or consolidation.
[28-44-201, added 1983, ch. 119, sec. 3, p. 291.]
(1) Except as provided in subsection (2) of this section:
(a) In the case of credit insurance providing life coverage on an individual policy basis, the amount of insurance may not initially exceed the debt and, if the debt is payable in installments, may not at any time exceed the greater of the scheduled or actual amount of the debt. The amount of insurance provided under a group life insurance contract shall be subject to the applicable provisions of sections 41-2005 (debtor groups) and 41-2306 (amount of insurance), Idaho Code; or
(b) In the case of any other credit insurance, the total amount of periodic benefits payable may not exceed the total of scheduled unpaid installments of the debt, and the amount of any periodic benefit may not exceed the original amount of debt divided by the number of periodic installments in which it is payable.
(2) If credit insurance is provided in connection with an open-end consumer credit account, the amounts payable as insurance benefits may be reasonably commensurate with the amount of debt as it exists from time to time. If credit insurance is provided in connection with a commitment to grant credit in the future, the amounts payable as insurance benefits may be reasonably commensurate with the total from time to time of the amount of debt and the amount of the commitment. The amount of all group life insurance issued under this subsection shall further be subject to the applicable provisions of sections 41-2005 (debtor groups), 41-2306 (amount of insurance), and 41-2308 (provisions of policies and certificates of insurance–disclosure to debtors), Idaho Code.
[28-44-202, added 1983, ch. 119, sec. 3, p. 291.]
(1) A creditor may not use a form or a schedule of premium rates or charges, the filing of which is required by this section, if the director of the department of insurance has disapproved the form or schedule and has notified the insurer of his disapproval. A creditor may not use a form or schedule unless:
(a) The form or schedule has been on file with the director of the department of insurance for thirty (30) days, or has earlier been approved by him; and
(b) The insurer has complied with this section with respect to the insurance.
(2) Except as provided in subsection (3) of this section, all policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders relating to credit insurance delivered or issued for delivery in this state, and the schedules of premium rates or charges pertaining thereto, shall be filed by the insurer with the director of the department of insurance. Within thirty (30) days after the filing of any form or schedule, he shall disapprove it if the premium rates or charges are unreasonable in relation to the benefits provided under the form, or if the form contains provisions which are unjust, unfair, inequitable, or deceptive, or encourage misrepresentation of the coverage, or are contrary to any provision of the Credit Insurance Act or of any rule or regulation promulgated thereunder.
(3) If a group policy has been delivered in another state, the forms to be filed by the insurer with the director of the department of insurance are the group certificates and notices of proposed insurance. He shall approve them if:
(a) They provide the information that would be required if the group policy were delivered in this state; and
(b) The applicable premium rates or charges do not exceed those established by his rules or regulations.
[28-44-203, added 1983, ch. 119, sec. 3, p. 292.]
(1) A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property unless the creditor qualifies under chapter 9, title 41, Idaho Code, or rule or regulation prescribed by the director of the department of insurance and:
(a) The insurance covers a substantial risk of loss of or damage to property related to the credit transaction;
(b) The amount, terms, and conditions of the insurance are reasonable in relation to the character and value of the property insured or to be insured; and
(c) The term of the insurance is reasonable in relation to the terms of credit.
(2) The term of the insurance is reasonable if it is customary and does not extend substantially beyond a scheduled maturity.
(3) A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property unless the amount financed or principal exclusive of charges for the insurance is five hundred dollars ($500) or more, and the value of the property is five hundred dollars ($500) or more.
[28-44-301, added 1983, ch. 119, sec. 3, p. 292.]
If a creditor contracts for or receives a separate charge for insurance against loss of or damage to property, the risk of loss or damage not willfully caused by the debtor is on the debtor only to the extent of any deficiency in the effective coverage of the insurance, even though the insurance covers only the interest of the creditor.
[28-44-302, added 1983, ch. 119, sec. 3, p. 293.]
A creditor may not contract for or receive a separate charge for insurance against liability unless the insurance covers a substantial risk of liability arising out of the ownership or use of property related to the credit transaction.
[28-44-303, added 1983, ch. 119, sec. 3, p. 293.]
A creditor shall not request cancellation of a policy of property or liability insurance except after the debtor’s default or in accordance with a written authorization by the debtor, and in either case the cancellation does not take effect until written notice is delivered to the debtor or mailed to him at his address as stated by him. The notice shall state that the policy may be cancelled on a date not less than ten (10) days after the notice is delivered or, if the notice is mailed, not less than thirteen (13) days after it is mailed.
[28-44-304, added 1983, ch. 119, sec. 3, p. 293.]
(1) With respect to a premium finance loan, the debtor may give the lender authority to cancel insurance contracts obtained for the debtor pursuant to the premium finance loan agreement.
(2) A lender may not cancel unless he gives the debtor fifteen (15) days’ written notice that cancellation of a specified insurance contract will become effective on a stated date and at a stated time unless the debtor before that date cures his default with respect to the premium finance loan. The debtor may cure his default by paying to the lender the amount of the installment payments due, without acceleration of the unpaid balance of the principal, at the time notice is given, together with the amount of delinquency or deferral charges due at that time.
(3) Upon cancellation the lender shall rebate or refund to the debtor the amount of any unearned loan finance charge. The amount of the rebate shall be equal to the amount of the unearned loan finance charge that would have been rebated or refunded pursuant to section 28-42-307, Idaho Code, if the loan had been prepaid in full at the date of cancellation.
(4) All laws of this state relating to cancellation of insurance contracts must be complied with when cancellation occurs pursuant to this section.
(5) If the insurance contract cancelled provides motor vehicle liability insurance:
(a) The notice of cancellation shall briefly inform the debtor of the consequences under the laws of this state of operating a motor vehicle without liability insurance; and
(b) A copy of the notice of cancellation shall be sent to the Idaho transportation department.
[28-44-401, added 1983, ch. 119, sec. 3, p. 293.]
This chapter shall be known and may be cited as Idaho Credit Code — Remedies and Penalties.
[28-45-101, added 1983, ch. 119, sec. 3, p. 294.]
This part applies to actions or other proceedings to enforce rights arising from regulated consumer credit transactions, to extortionate extensions of credit, section 28-45-109, Idaho Code, and to unconscionability, section 28-45-106, Idaho Code.
[28-45-102, added 1983, ch. 119, sec. 3, p. 294.]
(1) This section applies to a regulated consumer credit sale of goods or services.
(2) If the seller repossesses or voluntarily accepts surrender of goods which were the subject of the sale and in which he has a security interest and the cash price of the goods repossessed or surrendered was one thousand dollars ($1,000) or less, the buyer is not personally liable to the seller for the unpaid balance of the debt arising from the sale of the goods, and the seller is not obligated to resell the collateral.
(3) If the seller repossesses or voluntarily accepts surrender of goods which were not the subject of the sale but in which he has a security interest to secure a debt arising from a sale of goods or services or a combined sale of goods and services and the cash price of the sale was one thousand dollars ($1,000) or less, the buyer is not personally liable to the seller for the unpaid balance of the debt arising from the sale.
(4) For the purpose of determining the unpaid balance of consolidated debts or debts pursuant to open-end consumer credit, the allocation of payments to a debt shall be determined in the same manner as provided for determining the amount of debt secured by various security interests section 28-43-303, Idaho Code.
(5) The buyer may be liable in damages to the seller if the buyer has wrongfully damaged the collateral or if, after default and demand, the buyer has wrongfully failed to make the collateral available to the seller.
(6) If the seller elects to bring an action against the buyer for a debt arising from a regulated consumer credit sale of goods or services, when under this section he would not be entitled to a deficiency judgment if he repossessed the collateral, and obtains judgment:
(a) He may not repossess the collateral; and
(b) The collateral is not subject to levy or sale on execution or similar proceedings pursuant to the judgment.
[28-45-103, added 1983, ch. 119, sec. 3, p. 294.]
(1) For the purposes of this part:
(a) "Disposable earnings" means that part of the earnings of an individual remaining after the deduction from those earnings of amounts required by law to be withheld; and
(b) "Garnishment" means any legal or equitable procedure through which the earnings of an individual are required to be withheld for payment of a debt.
(2) The maximum part of the aggregate disposable earnings of an individual for any work week which is subject to garnishment to enforce payment of a judgment arising from a regulated consumer credit sale or regulated consumer loan may not exceed the lesser of:
(a) Twenty-five percent (25%) of his disposable earnings for that week; or
(b) The amount by which his disposable earnings for that week exceed thirty (30) times the federal minimum hourly wage prescribed by section 6(a)(1) of the Fair Labor Standards Act of 1938, U.S.C. title 29, section 206(a)(1), in effect at the time the earnings are payable.
(c) In the case of earnings for a pay period other than a week, the director of the department of labor shall prescribe by rule a multiple of the federal minimum hourly wage equivalent in effect to that set forth in paragraph (b).
(3) No court may make, execute, or enforce an order or process in violation of this section.
[28-45-104, added 1983, ch. 119, sec. 3, p. 295; am. 1996, ch. 421, sec. 22, p. 1421; am. 2000, ch. 267, sec. 1, p. 754.]
No employer shall discharge an employee for the reason that a creditor of the employee has subjected or attempted to subject unpaid earnings of the employee to garnishment or like proceedings directed to the employer for the purpose of paying a judgment arising from a regulated consumer credit transaction.
[28-45-105, added 1983, ch. 119, sec. 3, p. 295.]
(1) With respect to a regulated consumer credit sale, or regulated consumer loan, if the court as a matter of law finds the agreement or any clause of the agreement to have been unconscionable at the time it was made the court may refuse to enforce the agreement, or it may enforce the remainder of the agreement without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) If it is claimed or appears to the court that the agreement or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its setting, purpose, and effect to aid the court in making the determination.
(3) For the purpose of this section, a charge or practice expressly permitted by this act is not in itself unconscionable.
[28-45-106, added 1983, ch. 119, sec. 3, p. 295.]
An agreement of the parties to a regulated consumer credit transaction with respect to default on the part of the debtor is enforceable only to the extent that:
(1) The debtor fails to make a payment as required by agreement; or
(2) The prospect of payment, performance, or realization of collateral is significantly impaired; the burden of establishing the prospect of significant impairment is on the creditor.
[28-45-107, added 1983, ch. 119, sec. 3, p. 296.]
Upon default by a debtor with respect to a regulated consumer credit transaction, unless the debtor voluntarily surrenders possession of the collateral to the creditor, the creditor may take possession of the collateral without judicial process only if possession can be taken without entry into a dwelling and without the use of force or other breach of the peace.
[28-45-108, added 1983, ch. 119, sec. 3, p. 296.]
If it is the understanding of the creditor and the debtor at the time an extension of credit is made that delay in making repayment or failure to make repayment could result in the use of violence or other criminal means to cause harm to the person, reputation or property of the debtor(s) or of another person, the repayment of the extension of credit is unenforceable through civil judicial processes against the debtor.
[28-45-109, added 1983, ch. 119, sec. 3, p. 296.]
(1) The provisions of this section shall apply to a regulated credit transaction made on or after July 1, 2022, that is secured by a subordinate lien on real property that is improved with a residence consisting of one (1) to four (4) family dwelling units, one (1) of which the owner occupies as the owner’s principal place of residency.
(2) If a senior mortgage or other senior secured interest on the real property is foreclosed and a consumer is in default under the terms of an existing obligation as described in subsection (1) of this section:
(a) Within ninety (90) days after the date of a foreclosure sale, a creditor or assignee of a lien described in subsection (1) of this section must send to the consumer’s last known address written notice to the consumer of the consumer’s liability under the outstanding regulated credit transaction. A notice required under this paragraph must include the following statement:
"Your liability under this account is subject to a statute of limitations, which may bar recovery after a date certain. This notification is not intended to provide legal advice, and you should seek your own legal counsel to determine your rights and obligations."; and
(b) Upon sale or assignment of an account subject to the notice requirement in paragraph (a) of this subsection, a creditor or assignee must send written notice to the consumer, at the consumer’s last known address, notifying the consumer of his obligation under the outstanding regulated credit transaction. A notice delivered under this paragraph must contain the statement required in paragraph (a) of this subsection.
(3) The failure to provide the notification required by subsection (2) of this section shall not invalidate or otherwise alter or impair a creditor’s right to attempt to collect the obligation owed by the consumer.
[28-45-110, added 2022, ch. 168, sec. 1, p. 561.]
(1) If a creditor has violated any provision of this act applying to collection of an excess charge or amount or enforcement of rights, subsection (4) of section 28-41-201, Idaho Code, authority to make regulated consumer loans, section 28-46-301, Idaho Code, restrictions on interests in land as security, section 28-43-309, Idaho Code, limitations on the schedule of payments or loan terms for regulated consumer loans, section 28-43-310, Idaho Code, attorney’s fees, section 28-43-311, Idaho Code, receipts, statements of account, and evidences of payment, section 28-43-204, Idaho Code, form of insurance premium loan agreement, section 28-43-205, Idaho Code, security in sales, section 28-43-301, Idaho Code, no assignments of earnings, section 28-43-304, Idaho Code, certain negotiable instruments prohibited, section 28-43-306, Idaho Code, referral sales, section 28-43-308, Idaho Code, limitations on default charges, section 28-45-301, Idaho Code, assignees subject to claims and defenses, subsection (3) of section 28-45-302, Idaho Code, or assurance of discontinuance, section 28-46-109, Idaho Code, the debtor has a cause of action to recover actual damages and also a right in an action other than a class action, to recover from the person violating this act a penalty in an amount determined by the court not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000). With respect to violations arising from consumer credit sales or consumer loans made pursuant to open-end credit, no action pursuant to this subsection may be brought more than two (2) years after the violations occurred. With respect to violations arising from other regulated consumer credit transactions, no action pursuant to this subsection may be brought more than one (1) year after the scheduled or accelerated maturity of the debt.
(2) A debtor is not obligated to pay a charge in excess of that allowed by this act and has a right of refund of any excess charge paid. A refund may be made by reducing the debtor’s obligation by the amount of the excess charge. If the debtor has paid an amount in excess of the lawful obligation under the agreement, the debtor may recover the excess amount from the person who made the excess charge or from an assignee of that person’s rights who undertakes direct collection of payments from or enforcement of rights against debtors arising from the debt.
(3) If a creditor has contracted for or received a charge in excess of that allowed by this act, or if a debtor is entitled to a refund and a person liable to the debtor refuses to make a refund within a reasonable time after demand, the debtor may recover from the creditor or the person liable in an action other than a class action a penalty in an amount determined by the court not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000). With respect to excess charges arising from consumer credit sales or consumer loans made pursuant to open-end credit, no action pursuant to this subsection may be brought more than two (2) years after the violation or passage of a reasonable time for refund occurs. With respect to excess charges arising from other regulated consumer credit transactions, no action pursuant to this subsection may be brought more than one (1) year after the scheduled or accelerated maturity of the debt. For purposes of this subsection, a reasonable time is presumed to be thirty (30) days.
(4) Except as otherwise provided, a violation of this act does not impair rights on a debt.
(5) If an employer discharges an employee in violation of the provisions prohibiting discharge, section 28-45-105, Idaho Code, the employee within ninety (90) days may bring a civil action for recovery of wages lost as a result of the violation and for an order requiring reinstatement of the employee. Damages recoverable shall not exceed lost wages for six (6) weeks.
(6) A creditor is not liable for a penalty under subsection (1) or (3) of this section if he notifies the debtor of a violation before the creditor receives from the debtor written notice of the violation or the debtor has brought an action under this section, and the creditor corrects the violation within forty-five (45) days after notifying the debtor. If the violation consists of a prohibited agreement, giving the debtor a corrected copy of the writing containing the violation is sufficient notification and correction. If the violation consists of an excess charge, correction shall be made by an adjustment or refund. The administrator and any official or agency of this state having supervisory authority over a supervised financial organization shall give prompt notice to a creditor of any violation discovered pursuant to an examination or investigation of the transactions, business, records, and acts of the creditor, sections 28-46-305, 28-46-105 and 28-46-106, Idaho Code.
(7) A creditor may not be held liable in an action brought under this section for a violation of this act if the creditor shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adapted to avoid the error.
(8) In an action in which it is found that a creditor has violated this act, the court shall award to the debtor the costs of the action and his attorney’s fees. In determining the attorney’s fees, the amount of the recovery on behalf of the debtor is not controlling.
[28-45-201, added 1983, ch. 119, sec. 3, p. 296; am. 2002, ch. 301, sec. 3, p. 860.]
Damages or penalties to which a debtor is entitled pursuant to this part may be set off against the debtor’s obligation, and may be raised as a defense to an action on the obligation without regard to the time limitations prescribed by this part.
[28-45-202, added 1983, ch. 119, sec. 3, p. 298.]
(1) Except as otherwise provided in this section, a creditor who, in violation of the provisions of the Federal Consumer Credit Protection Act other than the provisions concerning advertising of credit terms, fails to disclose information to a person entitled to the information under this act is liable to that person to the same extent to which said creditor is liable to such person under the Federal Consumer Credit Protection Act.
(2) An obligor or debtor has all rights under this act that he has under the Federal Consumer Credit Protection Act concerning a right of rescission as to certain transactions. A creditor or other person has all liabilities and defenses under this section that he had under the Federal Consumer Credit Protection Act.
(3) An action may not be brought under this section more than one (1) year after the date of the occurrence of the violation.
(4) The liability of a creditor under this section is in lieu of and not in addition to his liability under the Federal Consumer Credit Protection Act. An action by a person with respect to a violation may not be maintained pursuant to this section if a final judgment has been rendered for or against that person with respect to the same violation pursuant to the Federal Consumer Credit Protection Act. If a final judgment has been rendered in favor of a person pursuant to this section and thereafter a final judgment with respect to the same violation is rendered in favor of the same person pursuant to the Federal Consumer Credit Protection Act, a creditor liable under both judgments has a cause of action against that person for appropriate relief to the extent necessary to avoid double liability with respect to the same violation.
[28-45-203, added 1983, ch. 119, sec. 3, p. 298.]
Except for reasonable expenses incurred in realizing on a security interest, the agreement with respect to a regulated consumer credit transaction may not provide for any charges as a result of default by the debtor except those authorized by this act. A provision in violation of this section is unenforceable.
[28-45-301, added 1983, ch. 119, sec. 3, p. 298.]
(1) With respect to a regulated consumer credit sale, an assignee of the rights of the seller is subject to all claims and defenses of the debtor against the seller arising from the sale of property or services, notwithstanding that:
(a) There is an agreement to the contrary; or
(b) The assignee is a holder in due course of a negotiable instrument issued in violation of the provisions on prohibition of certain negotiable instruments, section 28-43-306, Idaho Code.
(2) The assignee’s liability under subsection (1) of this section may not exceed the amount owing to the assignee with respect to the sale at the time the assignee has notice of a claim or defense of the buyer. If debts arising from two (2) or more regulated consumer credit sales, other than pursuant to an open-end credit account, are consolidated, payments received after the consolidation are deemed, for the purpose of determining the amount owing the assignee with respect to a sale, to have been first applied to the payment of debts arising from the sales first made; if the debts consolidated arose from sales made on the same day, payments are deemed to have been first applied to the smallest debt. Payments received upon an open-end consumer credit account are deemed, for the purpose of determining the amount owing the assignee with respect to a sale, to have been first applied to the payment of finance charges in the order of their entry to the account and then to the payment of debts in the order in which the entries to the account showing the debts were made.
(3) An agreement may not provide for greater rights for an assignee than this section permits.
[28-45-302, added 1983, ch. 119, sec. 3, p. 299.]
(1) A regulated lender who willfully and knowingly makes charges in excess of those permitted by the chapter on finance charges and related provisions, chapter 42, title 28, Idaho Code, applying to regulated consumer loans is guilty of a misdemeanor and upon conviction may be sentenced to pay a fine not exceeding five hundred dollars ($500) or to imprisonment not exceeding one (1) year, or both.
(2) A person who, in violation of the provisions of this act applying to authority to make regulated consumer loans, section 28-46-301, Idaho Code, willfully and knowingly engages in the business of making regulated consumer loans, or of taking assignments of and undertaking direct collection of payments from and enforcement of rights against debtors arising from regulated consumer loans, is guilty of a misdemeanor and upon conviction may be sentenced to pay a fine not exceeding five hundred dollars ($500), or to imprisonment not exceeding one (1) year, or both.
[28-45-401, added 1983, ch. 119, sec. 3, p. 299; am. 2006, ch. 122, sec. 3, p. 347.]
(1) A person is guilty of a misdemeanor and upon conviction may be sentenced to pay a fine not exceeding five thousand dollars ($5,000), or to imprisonment not exceeding one (1) year, or both, if he willfully and knowingly:
(a) Gives false or inaccurate information or fails to provide information which he is required to disclose under the Federal Consumer Credit Protection Act;
(b) Uses any rate table or chart, the use of which is authorized by the provisions of the Federal Consumer Credit Protection Act, in a manner which consistently understates the annual percentage rate determined according to those provisions; or
(c) Otherwise fails to comply with any requirement of the provisions on disclosure of the Federal Consumer Credit Protection Act.
(2) The criminal liability of a person under this section is in lieu of and not in addition to his criminal liability under the Federal Consumer Credit Protection Act; no prosecution of a person with respect to the same violation may be maintained pursuant to both this section and the Federal Consumer Credit Protection Act.
[28-45-402, added 1983, ch. 119, sec. 3, p. 300.]
This chapter shall be known and may be cited as Idaho Credit Code – Administration.
[28-46-101, added 1983, ch. 119, sec. 3, p. 300.]
This part applies to persons who in this state:
(1) Make or solicit regulated consumer credit transactions, as defined in section 28-41-301, Idaho Code; or
(2) Directly collect payments from or enforce rights against debtors arising from regulated consumer credit transactions, as defined in section 28-41-301, Idaho Code, wherever they are made; or
(3) Are designated in this act as regulated lenders.
[28-46-102, added 1983, ch. 119, sec. 3, p. 300; am. 2013, ch. 54, sec. 13, p. 121.]
"Administrator" means the director of the department of finance of the state of Idaho.
[28-46-103, added 1983, ch. 119, sec. 3, p. 300.]
(1) In addition to other powers granted by this act, the administrator within the limitations provided by law may:
(a) Receive and act on complaints, take action designed to obtain voluntary compliance with this act, or commence proceedings on his own initiative;
(b) Counsel persons and groups on their rights and duties under this act;
(c) Establish programs for the education of debtors with respect to credit practices and problems;
(d) Make studies appropriate to effectuate the purposes and policies of this act and make the results available to the public;
(e) Adopt, amend, and repeal rules to carry out the specific provisions of this act, but not with respect to unconscionable agreements or fraudulent or unconscionable conduct; and
(f) Appoint any necessary attorneys, hearing examiners, clerks, and other employees and agents and fix their compensation, and authorize attorneys appointed under this section to appear for and represent the administrator in court.
(2) In addition to other powers granted by this act, the administrator shall have the power to enforce the Federal Consumer Credit Protection Act, except to the extent otherwise provided by law.
(3) Except for refund of an excess charge, no liability is imposed under this act for an act done or omitted in conformity with a rule, interpretation, or declaratory ruling of the administrator, notwithstanding that after the act or omission, the rule, interpretation, or ruling is amended or repealed or is determined by judicial or other authority to be invalid for any reason.
[28-46-104, added 1983, ch. 119, sec. 3, p. 300.]
(1) With respect to supervised financial organizations, the powers of examination and investigation, sections 28-46-106 and 28-46-305, Idaho Code, and administrative enforcement, section 28-46-108, Idaho Code, shall be exercised by the official or agency to whose supervision the organization is subject. All other powers of the administrator under this act may be exercised by him with respect to a supervised financial organization including nationally chartered financial organizations.
(2) If the administrator receives a complaint or other information concerning noncompliance with this act by a supervised financial organization, he shall inform the official or agency having supervisory authority over the organization concerned. The administrator may request information about supervised financial organizations from the officials or agencies supervising them.
(3) The administrator and any official or agency of this state having supervisory authority over a supervised financial organization are authorized and directed to consult and assist one another in maintaining compliance with this act. They may jointly pursue investigations, prosecute suits, and take other official action, as they deem appropriate, if either of them otherwise is empowered to take the action.
[28-46-105, added 1983, ch. 119, sec. 3, p. 301.]
(1) If the administrator has cause to believe that a person has engaged in conduct or committed an act that is subject to action by the administrator, he may make an investigation to determine whether the person has engaged in the conduct or committed the act. To the extent necessary for this purpose, he may administer oaths or affirmations, and, upon his own motion or upon request of any party, subpoena witnesses, compel their attendance, adduce evidence, and require the production of, or testimony as to, any matter relevant to the investigation, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of relevant facts, or any other matter reasonably calculated to lead to the discovery of admissible evidence.
(2) If the person’s records are located outside this state, the person at his option shall make them available to the administrator at a convenient location within this state or pay the reasonable and necessary expenses for the administrator or his representative to examine them where they are located. The administrator may designate representatives, including comparable officials of the state in which the records are located, to inspect them on his behalf.
(3) Upon application by the administrator showing failure without lawful excuse to obey a subpoena or to give testimony, and upon reasonable notice to all persons affected thereby, the court shall grant an order compelling compliance.
(4) The name or identity of a person whose acts or conduct the administrator investigates pursuant to this section or the facts disclosed in the investigation shall be subject to disclosure according to chapter 1, title 74, Idaho Code, but this subsection does not apply to disclosures in actions or enforcement proceedings pursuant to this act.
[28-46-106, added 1983, ch. 119, sec. 3, p. 301; am. 1990, ch. 213, sec. 24, p. 504; am. 2015, ch. 141, sec. 48, p. 417.]
Except as otherwise provided, the Administrative Procedure Act applies to and governs all administrative action taken by the administrator pursuant to this chapter.
[28-46-107, added 1983, ch. 119, sec. 3, p. 302.]
(1) After notice and hearing the administrator may order a creditor or a person acting in his behalf to cease and desist from violating this act. A respondent aggrieved by an order of the administrator may obtain judicial review of the order and the administrator may obtain an order of the court for enforcement of his order in the district court. The proceeding for review or enforcement is initiated by filing a petition in the court. Copies of the petition shall be served upon all parties of record.
(2) Within thirty (30) days after service of the petition for review upon the administrator, or within any further time the court allows, the administrator shall transmit to the court the original or a certified copy of the entire record upon which the order is based, including any transcript of testimony, which need not be printed. By stipulation of all parties to the review proceeding, the record may be shortened. After hearing, the court may:
(a) Reverse or modify the order if the findings of fact of the administrator are clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record;
(b) Grant temporary relief or restraining order it deems just; and
(c) Enter an order enforcing, modifying and enforcing as modified, or setting aside in whole or in part the order of the administrator, or remanding the case to the administrator for further proceedings.
(3) An objection not urged at the hearing shall not be considered by the court unless the failure to urge the objection is excused for good cause shown. A party may move the court to remand the case to the administrator in the interest of justice for the purpose of adducing additional specified and material evidence and seeking findings thereon upon good cause shown for the failure to adduce this evidence before the administrator.
(4) The jurisdiction of the court shall be exclusive and its final judgment or decree is subject to review by the supreme court in the same manner and form and with the same effect as in appeals from a final judgment or decree. The administrator’s copy of the testimony shall be available at reasonable times to all parties for examination without cost.
(5) A proceeding for review under this section shall be initiated within thirty (30) days after a copy of the order of the administrator is received. If no proceeding is so initiated, the administrator may obtain an order of the court for enforcement of his order upon showing that his order was issued in compliance with this section, that no proceeding for review was initiated within thirty (30) days after a copy of the order was received, and that the respondent is subject to the jurisdiction of the court.
(6) With respect to unconscionable agreements or fraudulent or unconscionable conduct by a regulated lender, the administrator may not issue an order pursuant to this section but may bring a civil action for an injunction, section 28-46-111, Idaho Code, or any other action which the administrator is authorized to bring under this act.
(7) With respect to unconscionable agreements or fraudulent or unconscionable conduct by an unlicensed person who is required to be licensed under section 28-46-301, Idaho Code, the administrator may issue a cease and desist order without prior notice or hearing, and may bring a civil action for an injunction, or any other action which the administrator is authorized to bring under this act.
[28-46-108, added 1983, ch. 119, sec. 3, p. 302; am. 2002, ch. 301, sec. 4, p. 862; am. 2006, ch. 122, sec. 4, p. 348.]
If it is claimed that a person has engaged in conduct which could be subject to an order by the administrator, sections 28-46-108 and 28-46-303, Idaho Code, or by a court, sections 28-46-110, 28-46-111 and 28-46-112, Idaho Code, the administrator may accept an assurance in writing that the person will not engage in the same or similar conduct in the future. The assurance may include any of the following: stipulations for the voluntary payment by the creditor of the costs of investigation or of an amount to be held in escrow as restitution to debtors aggrieved by past or future conduct of the creditor or to cover costs of future investigation, or admissions of past specific acts by the creditor or that those acts violated this act or other statutes. A violation of an assurance of discontinuance is a violation of this act. If a person giving an assurance of discontinuance fails to comply with its terms, the assurance is evidence that prior to the assurance he engaged in the conduct described in the assurance.
[28-46-109, added 1983, ch. 119, sec. 3, p. 303.]
The administrator may bring a civil action to restrain any person from violating this act and for other appropriate relief including, but not limited to, the following: to prevent a person from using or employing practices prohibited by this act, to reform contracts to conform to this act and to rescind contracts into which a creditor has induced a debtor to enter by conduct violating this act, even though a debtor is not a party to the action. An action under this section may be joined with an action under the provisions on civil actions by the administrator, section 28-46-113, Idaho Code.
[28-46-110, added 1983, ch. 119, sec. 3, p. 303.]
(1) The administrator may bring a civil action to restrain a person to whom this part applies from engaging in a course of:
(a) Making or enforcing unconscionable terms or provisions of regulated consumer credit transactions;
(b) Fraudulent or unconscionable conduct in inducing debtors to enter into regulated consumer credit transactions;
(c) Conduct of any of the types specified in paragraph (a) or (b) of this subsection, with respect to transactions that give rise to or that lead persons to believe will give rise to regulated consumer credit transactions; or
(d) Fraudulent or unconscionable conduct in the collection of debts arising from regulated consumer credit transactions.
(2) In an action brought pursuant to this section, the court may grant relief only if it finds:
(a) That the respondent has made unconscionable agreements or has engaged or is likely to engage in a course of fraudulent or unconscionable conduct;
(b) That the respondent’s agreements have caused or are likely to cause, or the conduct of the respondent has caused or is likely to cause, injury to debtors; and
(c) That the respondent has been able to cause or will be able to cause the injury primarily because the transactions involved are consumer credit transactions.
(3) In applying this section, consideration shall be given to each of the following factors, among others:
(a) Belief by the creditor at the time regulated consumer credit transactions are made that there was no reasonable probability of payment in full of the obligation by the debtor;
(b) In the case of regulated consumer credit sales, knowledge by the seller at the time of the sale of the inability of the buyer to receive substantial benefits from the property or services sold;
(c) In the case of regulated consumer credit sales, gross disparity between the price of the property or services sold and the value of the property or services measured by the price at which similar property or services are readily obtainable in credit transactions by like buyers;
(d) The fact that the creditor contracted for or received separate charges for insurance with respect to regulated consumer credit sales or regulated consumer loans with the effect of making the sales or loans, considered as a whole, unconscionable; and
(e) The fact that the respondent has knowingly taken advantage of the inability of the debtor reasonably to protect his interests by reason of physical or mental infirmities, ignorance, illiteracy or inability to understand the language of the agreement, or similar factors.
(4) In an action brought pursuant to this section, a charge or practice expressly permitted by this act is not in itself unconscionable.
[28-46-111, added 1983, ch. 119, sec. 3, p. 304.]
With respect to an action brought to enjoin violations of the act, section 28-46-110, Idaho Code, or unconscionable agreements or fraudulent or unconscionable conduct, section 28-46-111, Idaho Code, the administrator may apply to the court for appropriate temporary relief against a respondent, pending final determination of proceedings. If the court finds after a hearing held upon notice to the respondent that there is reasonable cause to believe that the respondent is engaging in or is likely to engage in conduct sought to be restrained, it may grant any temporary relief or restraining order it deems appropriate.
[28-46-112, added 1983, ch. 119, sec. 3, p. 305.]
(1) After demand, the administrator may bring a civil action against a creditor to recover actual damages sustained and excess charges paid by one (1) or more debtors who have a right to recover explicitly granted by this act. In a civil action under this subsection, penalties may not be recovered by the administrator. The court shall order amounts recovered under this subsection to be paid to each debtor or set off against his obligation. A debtor’s action, except a class action, takes precedence over a prior or subsequent action by the administrator with respect to the claim of that debtor. A debtor’s class action takes precedence over a subsequent action by the administrator with respect to claims common to both actions, but the administrator may intervene. An administrator’s action on behalf of a class of debtors takes precedence over a debtor’s subsequent class action with respect to claims common to both actions. Whenever an action takes precedence over another action under this subsection, the latter action may be stayed to the extent appropriate while the precedent action is pending and dismissed if the precedent action is dismissed with prejudice or results in a final judgment granting or denying the claim asserted in the precedent action. A defense available to a creditor in a civil action brought by a debtor is available to him in a civil action brought under this subsection.
(2) The administrator may bring a civil action against a creditor or a person acting in his behalf to recover a civil penalty of no more than five thousand dollars ($5,000) for repeatedly and intentionally violating this act. A civil penalty pursuant to this subsection may not be imposed for a violation of this act occurring more than two (2) years before the action is brought.
[28-46-113, added 1983, ch. 119, sec. 3, p. 305; am. 2002, ch. 301, sec. 5, p. 863; am. 2006, ch. 122, sec. 5, p. 349.]
The administrator has no right to trial by jury in an action brought by him under this act.
[28-46-114, added 1983, ch. 119, sec. 3, p. 305.]
The grant of powers to the administrator in this chapter does not affect remedies available to debtors under this act or under other principles of law or equity.
[28-46-115, added 1983, ch. 119, sec. 3, p. 306.]
The administrator may bring actions or proceedings in a court in a county in which an act on which the action or proceeding is based occurred or in a county in which the respondent resides or transacts business.
[28-46-116, added 1983, ch. 119, sec. 3, p. 306.]
(1) The administrator shall receive and act on all applications for licenses to make regulated consumer loans under this act. Applications shall be filed in the manner prescribed by the administrator and shall contain such information as the administrator may reasonably require. Unless a person is exempt under federal law or under this section or has first obtained a license from the administrator authorizing him to make regulated consumer loans, he shall not engage in the business of:
(a) Making regulated consumer loans; or
(b) Taking assignments of and undertaking direct collection of payments from or enforcement of rights against debtors arising from regulated consumer loans.
(2) Any "supervised financial organization," as defined in section 28-41-301, Idaho Code, or any person organized, chartered, or holding an authorization certificate under the laws of another state to engage in making loans and receiving deposits, including a savings, share, certificate, or deposit account and who is subject to supervision by an official or agency of the other state, shall be exempt from the licensing requirements of this section.
(3) Mortgage lenders licensed under the Idaho residential mortgage practices act, chapter 31, title 26, Idaho Code, shall be exempt from the licensing requirements of this section as to mortgage lending activities defined in chapter 31, title 26, Idaho Code.
(4) Agencies of the United States and agencies of this state and its political subdivisions shall be exempt from the licensing requirements of this section.
[28-46-301, added 1983, ch. 119, sec. 3, p. 307; am. 1995, ch. 99, sec. 27, p. 324; am. 2006, ch. 122, sec. 7, p. 350; am. 2008, ch. 312, sec. 1, p. 861; am. 2013, ch. 54, sec. 3, p. 114.]
(1) The administrator shall receive and act on all applications for a license to do business as a regulated lender. Applications shall be filed in the manner prescribed by the administrator, shall contain such information as the administrator may reasonably require, shall be updated as necessary to keep the information current, and shall be accompanied by an application fee of three hundred fifty dollars ($350). When an application for licensure is denied or withdrawn, the administrator shall retain all fees paid by the applicant. The administrator may deny an application for a license if the administrator finds that:
(a) The financial responsibility, character, and fitness of the applicant, and of the officers and directors thereof (if the applicant is a corporation) are not such as to warrant belief that the business will be operated honestly and fairly within the purposes of this act;
(b) The applicant does not maintain at least thirty thousand dollars ($30,000) in liquid assets, as determined in accordance with generally accepted accounting principles, available for the purpose of making loans under this chapter;
(c) The applicant has had a license, substantially equivalent to a license under this chapter and issued by any state, denied, revoked or suspended under the law of such state;
(d) The applicant has filed an application for a license which is false or misleading with respect to any material fact;
(e) The application does not contain all of the information required by the administrator; or
(f) The application is not accompanied by an application fee of three hundred fifty dollars ($350).
(2) A licensee under this chapter shall meet the requirements of subsection (1) of this section at all times while licensed pursuant to this chapter. The administrator is empowered to conduct investigations as he may deem necessary, to enable him to determine the existence of the requirements set out in subsection (1) of this section.
(3) Upon written request, the applicant is entitled to a hearing on the question of his qualifications for a license if:
(a) The administrator has notified the applicant in writing that his application has been denied, or objections filed; or
(b) The administrator has not issued a license within sixty (60) days after the application for the license was filed.
If a hearing is held, the applicant and those filing objections shall reimburse, pro rata, the administrator for his reasonable and necessary expenses incurred as a result of the hearing. A request for a hearing may not be made more than fifteen (15) days after the administrator has mailed a writing to the applicant notifying him that the application has been denied and stating in substance the administrator’s finding supporting denial of the application or that objections have been filed and the substance thereof.
(4) The administrator may issue additional licenses to the same licensee upon application by the licensee, in the manner prescribed by the administrator, and payment of the required application fee. A separate license shall be required for each place of business. Each license shall remain in full force and effect unless the licensee does not satisfy the renewal requirements of subsection (8) of this section, or the license is relinquished, suspended or revoked.
(5) No licensee shall change the location of any place of business, or consolidate, or close any locations, without giving the administrator at least fifteen (15) days’ prior written notice.
(6) A licensee shall not engage in the business of making regulated consumer loans at any place of business for which he does not hold a license nor shall he engage in business under any other name than that in the license.
(7) A license application shall be deemed withdrawn and void if an applicant submits an incomplete license application and, after receipt of a written notice of the application deficiency, fails to provide the director with information necessary to complete the application within sixty (60) days of receipt of the deficiency notice. A written deficiency notice shall be deemed received by a license applicant when:
(a) Placed in regular U.S. mail by the director or his agent using an address provided by the applicant on the license application; or
(b) E-mailed to the applicant using an e-mail address provided by the applicant on the license application; or
(c) Posted by the director or his agent on the NMLSR if the license application was submitted through the NMLSR.
(8) On or before May 31 of each year, every licensee under this chapter shall pay a nonrefundable annual license renewal fee of one hundred fifty dollars ($150) per licensed location, and shall file with the administrator a renewal form containing such information as the administrator may require. Notwithstanding the provisions of section 67-5254, Idaho Code, a license issued under this part automatically expires if not timely renewed according to the requirements of this section. Notwithstanding the provisions of section 67-5254, Idaho Code, branch licenses issued under this part also expire upon the expiration, relinquishment or revocation of a license issued under this part to a licensee’s designated home office.
(9) For a period of time not to exceed sixty (60) days following license expiration, the director may reinstate an expired license if he finds that the applicant meets the requirements for licensure under this part and the applicant has submitted to the director:
(a) A complete application for renewal;
(b) The fees required to apply for license renewal unless previously paid for the period for which the license renewal applies; and
(c) A reinstatement fee of two hundred dollars ($200).
[28-46-302, added 1983, ch. 119, sec. 3, p. 307; am. 1984, ch. 47, sec. 14, p. 85; am. 1998, ch. 74, sec. 1, p. 272; am. 1999, ch. 275, sec. 1, p. 689; am. 2006, ch. 122, sec. 8, p. 350; am. 2008, ch. 312, sec. 2, p. 862; am. 2013, ch. 54, sec. 4, p. 115.]
(1) The administrator may issue to a person licensed to make regulated consumer loans an order to show cause why his license should not be revoked or suspended for a period not in excess of six (6) months. The order shall state the place for a hearing and set a time for the hearing that is no less than ten (10) days from the date of the order. After the hearing, the administrator shall revoke or suspend the license if he finds that:
(a) The licensee has repeatedly and willfully violated this act or any rule or order lawfully made pursuant to this act; or
(b) Facts or conditions exist which would clearly have justified the administrator in refusing to grant a license had these facts or conditions existed or been known to exist at the time the application for the license was made.
(2) No revocation or suspension of a license is lawful unless prior to institution of revocation or suspension proceedings by the administrator, notice is given to the licensee of the facts or conduct which warrant the intended action, and the licensee is given an opportunity to show compliance with all lawful requirements for retention of the license.
(3) If the administrator finds that probable cause for revocation of a license exists and that enforcement of this act requires immediate suspension of the license pending investigation, he may, after a hearing upon five (5) days’ written notice, enter an order suspending the license for not more than thirty (30) days.
(4) Whenever the administrator revokes or suspends a license, he shall enter an order to that effect and forthwith notify the licensee of the revocation or suspension. Within five (5) days after the entry of the order, he shall deliver to the licensee a copy of the order and the findings supporting the order.
(5) Any person holding a license to make regulated consumer loans may relinquish the license by notifying the administrator in writing of its relinquishment, but this relinquishment shall not affect his liability for acts previously committed.
(6) No revocation, suspension, or relinquishment of a license shall impair or affect the obligation of any preexisting lawful contract between the licensee and any debtor.
(7) The administrator may reinstate a license, terminate a suspension, or grant a new license to a person whose license has been revoked or suspended if no fact or condition then exists which clearly would have justified the administrator in refusing to grant a license.
[28-46-303, added 1983, ch. 119, sec. 3, p. 308; am. 2006, ch. 122, sec. 9, p. 352.]
(1) Every regulated lender shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the administrator to determine whether the regulated lender is complying with the provisions of this act. The recordkeeping system of a regulated lender shall be sufficient if he makes the required information reasonably available. The records need not be kept in the place of business where regulated consumer loans are made, if the administrator is given free access to the records wherever located. The records pertaining to any loan need not be preserved for more than two (2) years after making the final entry relating to the loan, but in the case of an open-end account, the two (2) years is measured from the date of each entry.
(2) Concurrent with license renewal, on or before May 31 of each year, every licensee shall file with the administrator a composite annual report for the prior calendar year in the form prescribed by the administrator relating to all regulated consumer loans made by him. Information contained in annual reports shall be subject to disclosure according to chapter 1, title 74, Idaho Code, and may be published only in composite form.
[28-46-304, added 1983, ch. 119, sec. 3, p. 309; am. 1990, ch. 213, sec. 25, p. 504; am. 2006, ch. 122, sec. 10, p. 352; am. 2015, ch. 141, sec. 49, p. 417.]
(1) The administrator may examine periodically at intervals he deems appropriate, the loans and business records of every regulated lender. In addition, for the purpose of discovering violations of this act or securing information lawfully required, the administrator may at any time investigate the loans, business, and records of any regulated lender. For these purposes, he shall have free and reasonable access to the offices, places of business, and records of the lender. The administrator, for purposes of examination of licensees herein, shall be paid the cost of examination by the licensee, within thirty (30) days of demand for payment. The administrator shall, on July 1 of each year, fix such per diem examination cost.
(2) If the regulated lender’s records are located outside this state, the regulated lender, at his option, shall make them available to the administrator at a convenient location within this state, or pay the reasonable and necessary expenses for the administrator or his representative to examine them at the place where they are maintained. The administrator may designate representatives, including comparable officials of the state in which the records are located, to inspect them on his behalf.
(3) For the purposes of this section, the administrator may administer oaths or affirmations, and upon his own motion or upon request of any party, may subpoena witnesses, compel their attendance, adduce evidence, and require the production of any matter which is relevant to the investigation, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of relevant facts, or any other matter reasonably calculated to lead to the discovery of admissible evidence.
(4) Upon failure without lawful excuse to obey a subpoena or to give testimony and upon reasonable notice to all persons affected thereby, the administrator may apply to the district court for an order compelling compliance.
[28-46-305, added 1983, ch. 119, sec. 3, p. 309; am. 2006, ch. 122, sec. 11, p. 353.]
Except as otherwise provided, the state Administrative Procedure Act, chapter 52, title 67, Idaho Code, applies to and governs all administrative action taken by the administrator pursuant to this part.
[28-46-306, added 1983, ch. 119, sec. 3, p. 310.]
(1) As used in this act, unless the context otherwise requires, "payday loan" means a transaction pursuant to a written agreement between a creditor and the maker of a check whereby the creditor:
(a) Accepts a check from the maker;
(b) Agrees to hold the check for a period of time prior to negotiation, deposit or presentment; and
(c) Pays to the maker of the check the amount of the check, less the fee permitted by this chapter.
(2) Payday loans are regulated consumer credit transactions, and all provisions of the Idaho credit code relating to regulated loans apply to payday loans and to persons engaged in the business of payday loans except for part 3, chapter 46, title 28, Idaho Code.
(3) As used in this part, "check" refers to a check or the electronic equivalent of a check, including an authorization given by a borrower to a creditor to withdraw an agreed upon amount from any account held by the borrower.
(4) As used in this part, unless the context otherwise requires, "licensee" means a person licensed under this part and all persons required to be licensed under this part.
[28-46-401, added 2003, ch. 182, sec. 1, p. 491; am. 2014, ch. 270, sec. 1, p. 674.]
(1) No person shall engage in the business of payday loans, offer or make a payday loan, or arrange a payday loan for a third party lender in a payday loan transaction without having first obtained a license under this chapter. A separate license shall be required for each location from which such business is conducted.
(2) Any "supervised financial organization," as defined in section 28-41-301, Idaho Code, or any person organized, chartered, or holding an authorization certificate under the laws of another state to engage in making loans and receiving deposits, including a savings, share, certificate, or deposit account and who is subject to supervision by an official or agency of the other state, shall be exempt from the licensing requirements of this section.
(3) A payday loan made in this state in violation of the licensing requirement of this section is void, uncollectible and unenforceable. For any such payday loan the debtor is not obligated to pay the principal or any fee associated with such payday loan. If a debtor has paid any part of the principal or fee, the debtor has a right to recover the payment from the person violating the provisions of this section or from an assignee of that person’s rights who undertakes direct collection of payments or enforcement of rights arising from the debt. In the event the administrator initiates an administrative or civil action against a person who has violated the provisions of this section, the administrator shall be entitled to recover the principal and fees received by such person in a payday loan transaction made in violation of the provisions of this section.
(4) If the administrator finds that a person subject to this part has violated, is violating, or that there is reasonable cause to believe that a person is about to violate the provisions of this part, or any rule promulgated under this act and pertinent to this part, the administrator may, in his discretion, order the person to cease and desist from the violations.
[28-46-402, added 2003, ch. 182, sec. 1, p. 491; am. 2006, ch. 122, sec. 12, p. 354; am. 2009, ch. 175, sec. 1, p. 555; am. 2013, ch. 54, sec. 14, p. 121.]
(1) To qualify for a license, an applicant shall satisfy the following requirements:
(a) The applicant shall have liquid assets of at least thirty thousand dollars ($30,000) determined in accordance with generally accepted accounting principles, provided that applicants seeking to engage in the business of payday loans at more than one (1) location in the state shall have liquid assets of at least an additional five thousand dollars ($5,000) for each additional location in the state up to a maximum of seventy-five thousand dollars ($75,000) for all locations in the state; and
(b) The financial responsibility, financial condition, business experience, character and general fitness of the applicant shall reasonably warrant the administrator’s belief that the applicant’s business will be conducted lawfully and fairly. In determining whether this qualification has been met, and for the purpose of investigating compliance with this act, the administrator may review:
(i) The relevant business records and the capital adequacy of the applicant;
(ii) The competence, experience, integrity and financial ability of any applicant, and if the applicant is an entity, of any person who is a member, partner, director, senior officer or twenty-five percent (25%) or more equity owner of the applicant; and
(iii) Any record of conviction, on the part of the applicant, or any person referred to in subparagraph (ii) of this paragraph, of any criminal activity; any fraud or other act of personal dishonesty; any act, omission or practice which constitutes a breach of a fiduciary duty; or any suspension, revocation, removal or administrative action by any agency or department of the United States or any state, from participation in the conduct of any business.
(2) The requirements set forth in subsection (1) of this section are continuing in nature. A licensee shall meet the requirements of this section at all times while licensed pursuant to this part 4.
[28-46-403, added 2003, ch. 182, sec. 1, p. 491; am. 2006, ch. 122, sec. 13, p. 354.]
(1) Each application for a license shall be in writing and under oath to the administrator, in a form prescribed by the administrator, and shall include at least the following:
(a) The legal name, residence and business address of the applicant and, if the applicant is an entity, of every member, partner, director, senior officer or twenty-five percent (25%) or more equity owner of the applicant;
(b) The location at which the principal place of business of the applicant is located; and
(c) Other data and information the administrator may require with respect to the applicant, and if the applicant is an entity, such data and information of its members, partners, directors, senior officers, or twenty-five percent (25%) or more equity owners of the applicant.
(2) Each application for a license shall be accompanied by an application fee in the amount of three hundred fifty dollars ($350). Such fee shall not be subject to refund.
(3) The fee set forth in subsection (2) of this section shall be required for each location for which an application is submitted.
(4) Within sixty (60) days of the filing of an application in a form prescribed by the administrator, accompanied by the fee required in subsection (2) of this section, the administrator shall investigate to ascertain whether the qualifications prescribed by subsection (1) of section 28-46-403, Idaho Code, have been satisfied. If the administrator finds that the qualifications have been satisfied and approves the documents, the administrator shall issue to the applicant a license to engage in the payday loan business.
(5) Notwithstanding the provisions of section 67-5254, Idaho Code, a license issued pursuant to this part automatically expires if not timely renewed according to the requirements of subsection (7) of this section, or the license is relinquished, suspended or revoked pursuant to this act. Notwithstanding the provisions of section 67-5254, Idaho Code, branch licenses issued under this part also expire upon the expiration, relinquishment or revocation of a license issued under this part to a licensee’s designated home office.
(6) A license application shall be deemed withdrawn and void if an applicant submits an incomplete license application and, after receipt of a written notice of the application deficiency, fails to provide the director with information necessary to complete the application within sixty (60) days of receipt of the deficiency notice. A written deficiency notice shall be deemed received by a license applicant when:
(a) Placed in regular U.S. mail by the director or his agent using an address provided by the applicant on the license application; or
(b) E-mailed to the applicant using an e-mail address provided by the applicant on the license application; or
(c) Posted by the director or his agent on the NMLSR if the license application was submitted through the NMLSR.
(7) On or before May 31 of each year, every licensee under this part 4 shall pay a nonrefundable annual license renewal fee of one hundred fifty dollars ($150) per licensed location, and shall file with the administrator a renewal form containing such information as the administrator may require.
(8) For a period of time not to exceed sixty (60) days following license expiration, the director may reinstate an expired license if he finds that the applicant meets the requirements for licensure under this part and the applicant has submitted to the director:
(a) A complete application for renewal;
(b) The fees required to apply for license renewal unless previously paid for the period for which the license renewal applies; and
(c) A reinstatement fee of two hundred dollars ($200).
[28-46-404, added 2003, ch. 182, sec. 1, p. 492; am. 2006, ch. 122, sec. 14, p. 355; am. 2013, ch. 54, sec. 5, p. 116.]
(1) If the administrator determines that an applicant is not qualified to receive a license, the administrator shall notify the applicant in writing that the application has been denied, and shall state the basis for denial.
(2) If the administrator denies an application, or if the administrator fails to act on an application within sixty (60) days after the filing of a properly completed application, the applicant may make written demand to the administrator for a hearing on the question of whether the license should be granted. Written demand for a hearing may not be made more than fifteen (15) days after the administrator has mailed a writing to the applicant notifying him that the application has been denied and stating the basis for denial. In the event of a hearing, the administrator shall reconsider the application and, after the hearing, issue a written order granting or denying the application.
[28-46-405, added 2003, ch. 182, sec. 1, p. 492.]
(1) Other than the transfer of a license to a new location as set forth in subsection (3) of this section, a license issued pursuant to this chapter is not transferable or assignable.
(2) The prior written approval of the administrator is required for the continued operation of a payday loan business whenever a change in control of a licensee is proposed. Control in the case of an entity means direct or indirect ownership, or the right to vote or otherwise control, twenty-five percent (25%) or more of the governance interests of the entity, or the ability of any person to elect a majority of the directors. The administrator may require information deemed necessary to determine whether a new application is required. Costs incurred by the administrator in investigating a change of control request shall be paid by the licensee requesting such approval.
(3) A licensee shall notify the administrator in writing at least fifteen (15) days before any proposed changes in the licensee’s business location or name.
[28-46-406, added 2003, ch. 182, sec. 1, p. 493.]
(1) The administrator may, after notice and hearing, suspend or revoke any license if the administrator finds that the licensee:
(a) Has knowingly or through the lack of due care failed to pay any fee imposed by the administrator under the authority of this act;
(b) Has committed any fraud, engaged in any dishonest activities or made any misrepresentations;
(c) Has violated any provision of this act or any rule or order lawfully made pursuant to this act or has violated any other law in the course of the licensee’s dealing as a licensee;
(d) Has made a materially false statement in the application for the license or failed to give a true reply to a question in the application; or
(e) Has demonstrated incompetence or untrustworthiness to act as a licensee.
(2) If the reason for revocation or suspension of a licensee’s license at any one (1) location is of general application to all locations operated by a licensee, the administrator may revoke or suspend all licenses issued to a licensee.
[28-46-407, added 2003, ch. 182, sec. 1, p. 493; am. 2006, ch. 122, sec. 15, p. 355.]
Within fifteen (15) days of the occurrence of any of the events listed below, a licensee shall file a written report with the administrator describing such events and their expected impact on the activities of the licensee in the state:
(1) The filing for bankruptcy or reorganization by the licensee;
(2) The institution of revocation or suspension proceedings against the licensee by any state or governmental authority;
(3) Any felony indictment of the licensee and, if the licensee is an entity, of any of its members, partners, directors, senior officers or twenty-five percent (25%) or more equity owners;
(4) Any felony conviction of the licensee and, if the licensee is an entity, of any of its members, partners, directors, senior officers or twenty-five percent (25%) or more equity owners; and
(5) Such other events as the administrator may determine and identify by rule.
[28-46-408, added 2003, ch. 182, sec. 1, p. 493.]
(1) Every licensee shall maintain records in conformity with generally accepted accounting principles and practices in a manner that will enable the administrator to determine whether the licensee is complying with the provisions of this act. The recordkeeping system of a licensee shall be sufficient if he makes the required information reasonably available. The records need not be kept in the place of business where payday loans are made if the administrator is given free access to the records wherever located. The records pertaining to any loan need not be preserved for more than two (2) years after the due date of the loan.
(2) On or before May 31 of each year, every licensee shall file with the administrator a composite annual report for the prior calendar year in the form prescribed by the administrator relating to all payday loans made by him. Information contained in annual reports shall be subject to disclosure according to chapter 1, title 74, Idaho Code, and may be published only in composite form.
[28-46-409, added 2003, ch. 182, sec. 1, p. 494; am. 2015, ch. 141, sec. 50, p. 417.]
(1) The administrator shall examine periodically, at intervals he deems appropriate, the loans and business records of every payday lender. In addition, for the purpose of discovering violations of this act or securing information lawfully required, the administrator may at any time investigate the loans, business and records of any payday lender. For these purposes, the administrator shall have free and reasonable access to the offices, places of business, and records of the lender. The administrator, for purposes of examination of licensees herein, shall be paid the cost of examination by the licensee within thirty (30) days of demand for payment. The administrator shall, on July 1 of each year, fix such per diem examination cost.
(2) If the lender’s records are located outside this state, the lender, at his option, shall make them available to the administrator at a convenient location within this state or pay the reasonable and necessary expenses for the administrator or his representative to examine them at the place where they are maintained. The administrator may designate representatives, including comparable officials of the state in which the records are located, to inspect them on his behalf.
(3) For the purposes of this section, the administrator may administer oaths or affirmations and, upon his own motion or upon request of any party, may subpoena witnesses, compel the attendance of witnesses, adduce evidence and require the production of any matter which is relevant to the investigation, including the existence, description, nature, custody, condition and location of any books, documents or other tangible items and the identity and location of persons having knowledge of relevant facts, or any other matter reasonably calculated to lead to the discovery of admissible evidence.
(4) Upon failure without lawful excuse to obey a subpoena or to give testimony, and upon reasonable notice to all persons affected thereby, the administrator may apply to the district court for an order compelling compliance.
[28-46-410, added 2003, ch. 182, sec. 1, p. 494.]
Except as otherwise provided, the Idaho administrative procedure act, as set forth in chapter 52, title 67, Idaho Code, applies to and governs all administrative action taken by the administrator pursuant to this act.
[28-46-411, added 2003, ch. 182, sec. 1, p. 495.]
(1) Each payday loan must be documented in a written agreement signed by the borrower. The loan agreement must include the name of the licensee, the loan date, the principal amount of the loan, and a statement of the total amount of fees charged as a condition of making the loan, expressed both as a dollar amount and as an annual percentage rate (APR).
(2) The maximum principal amount of any payday loan is one thousand dollars ($1000).
(3) A licensee may charge a fee for each payday loan. Such fee shall be deemed fully earned as of the date of the transaction and shall not be deemed interest for any purpose of law. No other fee or charges may be charged or collected for the payday loan except as specifically set forth in this act.
(4) Each licensee shall conspicuously post in each licensed location a notice of the fees, expressed as a dollar amount per one hundred dollars ($100), charged for payday loans.
(5) (a) A payday loan may be made pursuant to a transaction whereby the licensee:
(i) Accepts a check from a borrower who is the maker of the check; and
(ii) Agrees not to negotiate, deposit or present the check for an agreed upon period of time and pays to the maker the amount of the check, less the fees permitted by this act.
(b) In such a transaction, the licensee may accept only one (1) postdated check for each loan as security for the loan. Before the licensee may negotiate or present a check for payment, the check shall be endorsed with the actual name under which the licensee is doing business. The borrower shall have the right to redeem the check from the licensee at any time prior to the presentment or deposit of the check by making payment to the licensee of the full amount of the check in cash or immediately available funds.
(6) The amount advanced to the borrower by the licensee in a payday loan may be paid to the borrower in the form of cash, the licensee’s business check, a money order, an electronic funds transfer to the borrower’s account, or other reasonable electronic payment mechanism, provided however, that no additional fee may be charged to the borrower by a licensee to access the proceeds of the payday loan.
(7) A payday loan may be repaid by the borrower in cash, by negotiation of the borrower’s check in a transaction pursuant to subsection (5) of this section or, with the agreement of the licensee, a debit card, a cashier’s check, an electronic funds transfer from the borrower’s bank account, or any other reasonable electronic payment mechanism to which the parties may agree.
(8) A payday lender shall not make more than two (2) electronic representments of a borrower’s check to a depository institution.
[28-46-412, added 2003, ch. 182, sec. 1, p. 495; am. 2014, ch. 270, sec. 2, p. 675.]
(1) No licensee or person related to a licensee by common control may have outstanding at any time to a single borrower a loan or loans with an aggregate principal balance exceeding one thousand dollars ($1,000), plus allowable fees.
(2) A payday lender shall not make a payday loan that exceeds twenty-five percent (25%) of the gross monthly income of the borrower when the loan is made.
(3) A payday lender shall obtain income information from a borrower consistent with subsection (4) of this section not less than once every twelve (12) months.
(4) A payday lender shall not be in violation of subsection (2) of this section if the borrower presents evidence of his gross monthly income to the payday lender or represents to the payday lender in writing that the payday loan does not exceed twenty-five percent (25%) of the borrower’s gross monthly income when the loan is made.
(5) No payday loan shall be repaid by the proceeds of another payday loan made by the same licensee or a person related to the licensee by common control.
(6) If the borrower’s check is returned unpaid to the licensee from a payor financial institution, the licensee shall have the right to collect charges authorized by section 28-22-105, Idaho Code, provided such charges are disclosed in the loan agreement. A licensee may not charge treble damages. If the borrower’s obligation is assigned to any third party for collection, the provisions of this section shall apply to such third party collector.
(7) A licensee, or person required to be licensed pursuant to this part, shall not threaten a borrower with criminal action as a result of any payment deficit.
(8) No licensee, or person required to be licensed pursuant to this part, shall engage in unfair or deceptive acts, practices or advertising in the conduct of a payday loan business.
(9) A licensee may renew a payday loan no more than three (3) consecutive times, after which the payday loan shall be repaid in full by the borrower. A borrower may enter into a new loan transaction with the licensee at any time after a prior loan to the borrower is completed. A loan secured by a borrower’s check is completed when the check is presented or deposited by the licensee or redeemed by the borrower pursuant to section 28-46-412(5), Idaho Code.
(10) Other than a borrower’s check in a transaction pursuant to section 28-46-412(5), Idaho Code, a licensee shall not accept any property, title to property, or other evidence of ownership as collateral for a payday loan.
(11) A licensee may conduct other business at a location where it engages in payday lending unless it carries on such other business for the purpose of evading or violating the provisions of this act.
(12) A borrower may rescind the payday loan at no cost at any time prior to the close of business on the next business day following the day on which the payday loan was made by paying the principal amount of the loan to the licensee in cash or other immediately available funds.
[28-46-413, added 2003, ch. 182, sec. 1, p. 496; am. 2013, ch. 54, sec. 6, p. 117; am. 2014, ch. 270, sec. 3, p. 675.]
A payday lender shall allow the borrower, upon request, to enter into an extended payment plan that meets the requirements of this section once during any consecutive twelve (12) month period, subject to the following provisions:
(1) A payday lender is not required to enter into an extended payment plan with a borrower more than one (1) time during any consecutive twelve (12) month period.
(2) An extended payment plan shall be in writing and must be executed not later than the day the payday loan is due. The plan shall provide a payment schedule that allows at least four (4) equal payments over a time period of not less than sixty (60) days and shall include the disclosures required under section 28-46-415, Idaho Code.
(3) A borrower’s obligations under an extended payment plan shall be not greater than the amount owed under the terms of the original payday loan.
(4) A payday lender shall not charge interest or additional fees as part of an extended payment plan, except as permitted in section 28-46-413(6), Idaho Code. If a borrower defaults under the extended payment plan, the payday lender may terminate the extended payment plan and accelerate the requirement to pay the amount owed.
(5) A payday lender shall not initiate collection activities against a borrower for a payday loan that is subject to an extended payment plan so long as the borrower is in compliance with the terms of the extended payment plan.
[28-46-414, added 2014, ch. 270, sec. 4, p. 676.]
Before disbursing funds pursuant to a payday loan, a payday lender shall provide written notice in not less than twelve (12) point bold type and in all capitalized letters to the borrower stating the following:
"1. Payday loans are intended to address short-term, not long-term, financial needs.
You will be required to pay additional fees if the payday loan is renewed rather than paid in full when due.
You have the right to rescind the payday loan at no cost no later than the end of the next business day following the day on which the payday loan is made.
Payday loans may contain high-cost features, and borrowers should consider alternative lower-cost loans.
If you believe that the lender has violated the law, you may file a written complaint with the Idaho Department of Finance. Filing a complaint does not limit nor impair any rights you may have against the lender.
You have a one-time right during any consecutive twelve (12) month period to convert a payday loan into an extended payment plan."
[28-46-415, added 2014, ch. 270, sec. 5, p. 677.]
This part shall be known and may be cited as the "Title Loan Act."
[28-46-501, added 2006, ch. 323, sec. 1, p. 1023.]
As used in this part, unless the context otherwise requires:
(1) "Title lender" means a regulated lender authorized pursuant to this part to make title loans.
(2) "Title loan" means a loan for a consumer purpose that is secured by a nonpurchase money security interest in titled personal property and that is scheduled to be repaid in either a single installment or in multiple installments that are not fully amortized. Title loans are regulated consumer loans and, except as otherwise provided in this part, all provisions of the Idaho credit code relating to regulated consumer loans apply to title loans and to persons engaged in the business of making title loans.
(3) "Title loan agreement" means a written agreement whereby a title lender agrees to make a title loan to a debtor, and the debtor agrees to give the title lender a security interest in unencumbered titled personal property owned by the debtor. Except as otherwise provided in this part, all provisions of chapter 9, title 28, Idaho Code, apply to title loans and to persons engaged in the business of making title loans.
(4) "Titled personal property" means any motor vehicle, the ownership of which is evidenced and delineated by a state issued certificate of title, but does not include a motor home, mobile home or manufactured home.
[28-46-502, added 2006, ch. 323, sec. 1, p. 1024.]
(1) No person shall engage in the business of making title loans without having first obtained a license from the administrator pursuant to this chapter authorizing the person to make regulated consumer loans.
(2) Any title loan made without first having obtained a license is void, in which case the person making the loan forfeits the right to collect any moneys, including principal, interest, and any other fee paid by the debtor in connection with the title loan agreement. The person making the title loan shall release its security interest in the titled personal property used as security for the title loan and shall return to the debtor:
(a) The certificate of title for such titled personal property;
(b) Such titled personal property if the person making the loan took possession of such property;
(c) The fair market value of such titled personal property if the person making the loan took possession of such property and is not able to return such property; and
(d) All principal, interest, and any other fees paid by the debtor.
[28-46-503, added 2006, ch. 323, sec. 1, p. 1024.]
(1) Every title lender shall keep a numbered record of each and every title loan agreement executed by the title lender and debtor. Such record, as well as the title loan agreement, shall include the following information:
(a) The make, model and year of the titled personal property;
(b) The vehicle identification number, or other comparable identification number, along with the license plate number, if applicable, of the titled personal property;
(c) The name, residential address and date of birth of the debtor;
(d) The date the title loan agreement is executed by the title lender and the debtor; and
(e) The maturity date of the title loan agreement.
(2) The following information shall also be printed on the title loan agreement:
(a) The name and physical address of the title loan office;
(b) In not less than twelve (12) point bold type, the name and address of the administrator as well as a telephone number to which consumers may address complaints;
(c) The following statement in not less than twelve (12) point bold type and in all capitalized letters:
"(1) This loan is not intended to meet long-term financial needs.
(2) You should use this loan only to meet short-term cash needs.
(3) You will be required to pay additional interest and fees if you renew this loan rather than pay the debt in full when due.
(4) This loan may be a higher interest loan. You should consider what other lower cost loans may be available to you.
(5) You are placing at risk your continued ownership of the titled personal property you are using as security for this loan.
(6) If you default under this loan the title lender may take possession of the titled personal property used as security for this loan and sell the property in the manner provided by law.
(7) If you enter into a title loan agreement, you have a legal right of rescission. This means you may cancel your contract at no cost to you by returning the money you borrowed by the next business day after the date of your loan.
(8) If you believe that the title lender has violated the provisions of the Idaho Title Loan Act, you have the right to file a written complaint with the Idaho Department of Finance and the Department will investigate your complaint."
(d) The statement that "The debtor represents and warrants, to the best of the debtor’s knowledge, that the titled personal property is not stolen and has no liens or encumbrances against it, the debtor has the right to enter into this transaction and will not apply for a duplicate certificate of title while the title loan agreement is in effect."
(3) The debtor shall sign the title loan agreement and shall be provided with a copy of such agreement. The title loan agreement shall also be signed by the title lender or the title lender’s employee or agent. If the debtor has been issued a social security number, the title lender shall keep on file the social security number of the debtor.
[28-46-504, added 2006, ch. 323, sec. 1, p. 1024.]
(1) Notwithstanding the provisions of section 28-46-103, Idaho Code, or any other law to the contrary, in accordance with the Idaho administrative procedure act, chapter 52, title 67, Idaho Code, the administrator may promulgate rules requiring each title lender to issue a standardized consumer notification and disclosure form in compliance with federal truth-in-lending laws prior to entering into any title loan agreement. The required style, content and method of executing the form may be prescribed by the rule and shall be designed to ensure that the debtor, prior to entering into such agreement, receives and acknowledges an accurate and complete notification and disclosure of the itemized and total amounts of all interest, fees, charges and other costs that will or potentially could be imposed as a result of such agreement.
(2) A title lender shall conspicuously post in each licensed location the statements listed in section 28-46-504(2)(c), Idaho Code.
[28-46-505, added 2006, ch. 323, sec. 1, p. 1025.]
(1) Title loan agreements shall not exceed thirty (30) days in length. However, such agreements may provide for renewals, which may occur automatically, unless one (1) of the following has occurred:
(a) The debtor has paid all principal and finance charges due in accordance with the title loan agreement;
(b) The debtor has surrendered possession, title and all other interest in and to the titled personal property to the title lender; or
(c) The title lender has notified the debtor in writing that the title loan agreement is not to be renewed.
(2) A debtor has the right to cancel the debtor’s obligation to make payments under a title loan agreement until the close of the next business day after the day when the debtor signs a title loan agreement if the debtor returns the original check or cash to the location where the loan was originated. For the purpose of this section, "business day" means any day that the title loan office is open for business.
(3) Notwithstanding any provision of this part 5 to the contrary, beginning with the third renewal or continuation and at each successive renewal or continuation thereafter, the debtor shall be required to make a payment of at least ten percent (10%) of the principal amount of the original title loan in addition to any finance charges that are due. Finance charges due at each successive renewal or continuation shall be calculated on the outstanding principal balance. Principal payments in excess of the ten percent (10%) required principal reduction shall be credited to the outstanding principal on the day received. If at the maturity of any renewal requiring a principal reduction, the debtor has not made previous principal reductions adequate to satisfy the current required principal reduction, and the debtor cannot repay at least ten percent (10%) of the original principal balance and any outstanding finance charges, the title lender may, but shall not be obligated to, defer any required principal payment until a future date. No further finance charges may accrue on any such principal amount thus deferred.
(4) Within fourteen (14) days after a title loan is automatically renewed, the title lender shall provide the debtor written notice of the renewal either by personal delivery to the debtor or by deposit in the regular mail to the debtor’s residential address listed in the title loan agreement. For the purpose of this section, a renewal is any extension of a title loan for an additional period without any change in the terms of the title loan other than extension of the maturity date and a reduction in principal.
[28-46-506, added 2006, ch. 323, sec. 1, p. 1026.]
(1) Before exercising any of its rights upon a default by a debtor under a title loan agreement, the title lender shall mail a "Notice to Cure Default" to the debtor at the debtor’s last address shown in the title lender’s file, notifying the debtor that the debtor has ten (10) days from the date of the notice in which to cure the default.
(2) If the debtor does not cure the default within the ten (10) days, the title lender may proceed to exercise its rights under chapter 9, title 28, Idaho Code. There shall be no further finance charges assessed to the debtor after the title lender has obtained possession of the titled personal property.
(3) Upon voluntary surrender of the titled personal property used as security for a title loan, the title lender shall have no obligation to send any "Notice to Cure Default" to the debtor.
(4) Title lenders may assess and collect reasonable expenses of collection and enforcement as authorized by chapter 9, title 28, Idaho Code.
[28-46-507, added 2006, ch. 323, sec. 1, p. 1026.]
No title lender licensee under this part or person required under this part to have such license shall:
(1) Enter into a title loan agreement with a person less than eighteen (18) years of age, or with anyone who appears to be intoxicated;
(2) Make any agreement giving the title lender any recourse against the debtor other than the title lender’s right to take possession of the titled personal property and certificate of title upon the debtor’s default, and to sell or otherwise dispose of the titled personal property in accordance with the provisions of chapter 9, title 28, Idaho Code, except where the debtor prevented repossession of the vehicle, damaged or committed or permitted waste on the vehicle or committed fraud;
(3) Enter into a title loan agreement in which the amount of money loaned, when combined with the outstanding balance of other outstanding title loan agreements the debtor has with the same lender secured by any single titled personal property, exceeds the retail value of the titled personal property as determined by common motor vehicle appraisal guides;
(4) Accept any waiver, in writing or otherwise, of any right or protection accorded a debtor under this chapter;
(5) Fail to exercise reasonable care to protect from loss or damage the certificate of title in the physical possession of the title lender;
(6) Purchase titled personal property used as security for a title loan made by the title lender;
(7) Enter into a title loan agreement unless the debtor presents a clear title to titled personal property at the time that the loan is made. If the title lender files a lien against such titled personal property without possession of a clear title to such property, the resulting lien shall be void;
(8) Capitalize or add any accrued interest or fee to the original principal of the title loan agreement during any renewal of the agreement;
(9) Require a debtor to provide any additional guaranty as a condition to entering into a title loan agreement;
(10) Use any device or agreement, including agreements with affiliated title lenders, with the intent to obtain greater charges than otherwise would be authorized by this part; or
(11) Violate the provisions of this part or any rule promulgated pursuant thereto.
[28-46-508, added 2006, ch. 323, sec. 1, p. 1027; am. 2013, ch. 54, sec. 7, p. 118.]
The provisions of this part shall not apply to any person licensed or chartered under the laws of any state or of the United States as a bank, savings and loan association, credit union, insurance company, or industrial loan company. The terms "bank," "savings and loan association," "credit union," "insurance company" and "industrial loan company" shall include employees and agents of such organizations as well as wholly-owned subsidiaries of such organizations, provided that the subsidiary is regularly examined by the chartering state or federal agency for consumer compliance purposes.
[28-46-509, added 2006, ch. 323, sec. 1, p. 1027.]
(1) All political subdivisions of this state shall be prohibited from enacting and enforcing ordinances, resolutions and regulations pertaining to the financial or lending activities of persons who:
(a) Are subject to the jurisdiction of the department of finance of the state of Idaho, including activities subject to this chapter;
(b) Are subject to the jurisdiction or regulatory supervision of the board of governors of the federal reserve system, the office of the comptroller of the currency, the national credit union administration, the federal deposit insurance corporation, the federal trade commission or the United States department of housing and urban development; or
(c) Originate, purchase, sell, assign, securitize or service property interests or obligations created by financial transactions or loans made, executed or originated by persons referred to in subsection (1)(a) or (1)(b) of this section or assist or facilitate such transactions.
(2) The requirements of this section shall apply to all ordinances, resolutions and regulations pertaining to financial or lending activities, including any ordinances, resolutions or regulations disqualifying persons from doing business with a political subdivision based upon financial or lending activities or imposing reporting requirements or any other obligations upon persons regarding financial or lending activities.
[28-49-101, added 2002, ch. 301, sec. 8, p. 864; am. 2014, ch. 97, sec. 12, p. 274.]
The legislature of the state of Idaho hereby declares and states that it does not want any of the provisions of Title V, Part A – Mortgage Usury Laws, Mortgages, Section 501(a)(1) of the Depository Institutions Deregulation and Monetary Control Act of 1980 (Public Law 96-221; 94 Stat. 132), to apply with respect to loans, mortgages, credit sales, and advances made in this state, and that the provisions of Title V, Part A – Mortgage Usury Laws, Mortgages, Section 501(a)(1) of the Depository Institutions Deregulation and Monetary Control Act of 1980 (Public Law 96-221; 94 Stat. 132), shall not apply with respect to loans, mortgages, credit sales, and advances made in this state.
[28-49-105, added 1983, ch. 119, sec. 3, p. 311.]
No provision of this act shall be construed to amend or repeal any of the provisions of chapter 22, title 26, Idaho Code, as the same is now enacted or as it may be hereafter amended, reenacted or substituted.
[28-49-107, added 1983, ch. 119, sec. 3, p. 312.]
This act may be cited as the "Uniform Electronic Transactions Act."
[28-50-101, added 2000, ch. 286, sec. 1, p. 960.]
In this chapter:
(1) "Agreement" means the bargain of the parties in fact, as found in their language or inferred from other circumstances and from rules, regulations, and procedures given the effect of agreements under laws otherwise applicable to a particular transaction.
(2) "Automated transaction" means a transaction conducted or performed, in whole or in part, by electronic means or electronic records, in which the acts or records of one (1) or both parties are not reviewed by an individual in the ordinary course in forming a contract, performing under an existing contract, or fulfilling an obligation required by the transaction.
(3) "Computer program" means a set of statements or instructions to be used directly or indirectly in an information processing system in order to bring about a certain result.
(4) "Contract" means the total legal obligation resulting from the parties’ agreement as affected by this chapter and other applicable law.
(5) "Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities.
(6) "Electronic agent" means a computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual.
(7) "Electronic record" means a record created, generated, sent, communicated, received or stored by electronic means.
(8) "Electronic signature" means an electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.
(9) "Governmental agency" means an executive, legislative, or judicial agency, department, board, commission, authority, institution, or instrumentality of the federal government or of a state or of a county, municipality or other political subdivision of a state.
(10) "Information" means data, text, images, sounds, codes, computer programs, software, databases or the like, but shall not include the electronic transfer of funds to or from the state.
(11) "Information processing system" means an electronic system for creating, generating, sending, receiving, storing, displaying or processing information.
(12) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, governmental agency, public corporation, or any other legal or commercial entity.
(13) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(14) "Security procedure" means a procedure employed for the purpose of verifying that an electronic signature, record, or performance is that of a specific person or for detecting changes or errors in the information in an electronic record. The term includes a procedure that requires the use of algorithms or other codes, identifying words or numbers, encryption, or callback or other acknowledgment procedures.
(15) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band, or Alaskan native village, which is recognized by federal law or formally acknowledged by a state.
(16) "Transaction" means an action or set of actions occurring between two (2) or more persons relating to the conduct of business, commercial or governmental affairs.
[28-50-102, added 2000, ch. 286, sec. 1, p. 960.]
(a) Except as otherwise provided in subsection (b) of this section, this chapter applies to electronic records and electronic signatures relating to a transaction.
(b) This chapter does not apply to a transaction to the extent it is governed by:
(1) A law governing the creation and execution of wills, codicils or testamentary trusts; and
(2) The uniform commercial code, other than section 28-1-306, Idaho Code, chapter 2, title 28, Idaho Code (uniform commercial code — sales), and chapter 12, title 28, Idaho Code (uniform commercial code — leases).
(c) This chapter applies to an electronic record or electronic signature otherwise excluded from the application of this chapter under subsection (b) of this section to the extent it is governed by a law other than those specified in subsection (b) of this section.
(d) A transaction subject to this chapter is also subject to other applicable substantive law.
[28-50-103, added 2000, ch. 286, sec. 1, p. 961; am. 2004, ch. 43, sec. 43, p. 163.]
This chapter applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored on or after the initial effective date of this chapter.
[28-50-104, added 2000, ch. 286, sec. 1, p. 962.]
(a) This chapter does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form.
(b) This chapter applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.
(c) A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. The right granted by this subsection may not be waived by agreement.
(d) Except as otherwise provided in this chapter, the effect of any of its provisions may be varied by agreement. The presence in certain provisions of this chapter of the words "unless otherwise agreed," or words of similar import, does not imply that the effect of other provisions may not be varied by agreement.
(e) Whether an electronic record or electronic signature has legal consequences is determined by this chapter and other applicable law.
[28-50-105, added 2000, ch. 286, sec. 1, p. 962.]
This chapter must be construed and applied:
(1) To facilitate electronic transactions consistent with other applicable law;
(2) To be consistent with reasonable practices concerning electronic transactions and with the continued expansion of those practices; and
(3) To effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.
[28-50-106, added 2000, ch. 286, sec. 1, p. 962.]
(a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
(c) If a law requires a record to be in writing, an electronic record satisfies the law.
(d) If a law requires a signature, an electronic signature satisfies the law.
(e) If a law requires any notice or other record to be sent by certified mail, the record may, with the express consent of the recipient, be transmitted electronically.
[28-50-107, added 2000, ch. 286, sec. 1, p. 962; am. 2003, ch. 155, sec. 1, p. 442.]
(a) If parties have agreed to conduct a transaction by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, the requirement is satisfied if the information is provided, sent or delivered, as the case may be, in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record.
(b) If a law other than this chapter requires a record: (i) to be posted or displayed in a certain manner; (ii) to be sent, communicated, or transmitted by a specified method; or (iii) to contain information that is formatted in a certain manner, the following rules apply:
(1) The record must be posted or displayed in the manner specified in the other law.
(2) Except as otherwise provided in subsection (d)(2) of this section, the record must be sent, communicated or transmitted by the method specified in the other law.
(3) The record must contain the information formatted in the manner specified in the other law.
(c) If a sender inhibits the ability of a recipient to store or print an electronic record, the electronic record is not enforceable against the recipient.
(d) The requirements of this section may not be varied by agreement, but:
(1) To the extent a law other than this chapter requires information to be provided, sent, or delivered in writing but permits that requirement to be varied by agreement, the requirement under subsection (a) of this section that the information be in the form of an electronic record capable of retention may also be varied by agreement; and
(2) A requirement under a law other than this chapter to send, communicate or transmit a record by regular United States mail, may be varied by agreement to the extent permitted by the other law.
[28-50-108, added 2000, ch. 286, sec. 1, p. 963.]
(a) An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.
(b) The effect of an electronic record or electronic signature attributed to a person under subsection (a) of this section is determined from the context and surrounding circumstances at the time of its creation, execution or adoption, including the parties’ agreement, if any, and otherwise as provided by law.
[28-50-109, added 2000, ch. 286, sec. 1, p. 963.]
If a change or error in an electronic record occurs in a transmission between parties to a transaction, the following rules apply:
(1) If the parties have agreed to use a security procedure to detect changes or errors and one (1) party has conformed to the procedure, but the other party has not, and the nonconforming party would have detected the change or error had that party also conformed, the conforming party may avoid the effect of the changed or erroneous electronic record.
(2) In an automated transaction involving an individual, the individual may avoid the effect of an electronic record that resulted from an error made by the individual in dealing with the electronic agent of another person if the electronic agent did not provide an opportunity for the prevention or correction of the error and, at the time the individual learns of the error, the individual:
(A) Promptly notifies the other person of the error and that the individual did not intend to be bound by the electronic record received by the other person;
(B) Takes reasonable steps, including steps that conform to the other person’s reasonable instructions, to return to the other person or, if instructed by the other person, to destroy the consideration received, if any, as a result of the erroneous electronic record; and
(C) Has not used or received any benefit or value from the consideration, if any, received from the other person.
(3) If neither subsection (1) nor (2) of this section apply, the change or error has the effect provided by other law, including the law of mistake, and the parties’ contract, if any.
(4) Subsections (2) and (3) of this section may not be varied by agreement.
[28-50-110, added 2000, ch. 286, sec. 1, p. 963.]
If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record.
[28-50-111, added 2000, ch. 286, sec. 1, p. 964.]
(a) If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which:
(1) Accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and
(2) Remains accessible for later reference.
(b) A requirement to retain a record in accordance with subsection (a) of this section does not apply to any information, the sole purpose of which is to enable the record to be sent, communicated, or received.
(c) A person may satisfy subsection (a) of this section by using the services of another person if the requirements of that subsection are satisfied.
(d) If a law requires a record to be presented or retained in its original form, or provides consequences if the record is not presented or retained in its original form, that law is satisfied by an electronic record retained in accordance with subsection (a) of this section.
(e) If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with subsection (a) of this section.
(f) A record retained as an electronic record in accordance with subsection (a) of this section satisfies a law requiring a person to retain a record for evidentiary, audit, or like purposes, unless a law enacted after the initial effective date of this chapter specifically prohibits the use of an electronic record for the specified purpose.
(g) This section does not preclude a governmental agency of this state from specifying additional requirements for the retention of a record subject to the agency’s jurisdiction.
[28-50-112, added 2000, ch. 286, sec. 1, p. 964.]
In a proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.
[28-50-113, added 2000, ch. 286, sec. 1, p. 965.]
In an automated transaction, the following rules apply:
(1) A contract may be formed by the interaction of electronic agents of the parties, even if no individual was aware of or reviewed the electronic agents’ actions or the resulting terms and agreements.
(2) A contract may be formed by the interaction of an electronic agent and an individual, acting on the individual’s own behalf or for another person, including by an interaction in which the individual performs actions that the individual is free to refuse to perform and which the individual knows or has reason to know will cause the electronic agent to complete the transaction or performance.
(3) The terms of the contract are determined by the substantive law applicable to it.
[28-50-114, added 2000, ch. 286, sec. 1, p. 965.]
(a) Unless otherwise agreed between the sender and the recipient, an electronic record is sent when it:
(1) Is addressed properly or otherwise directed properly to an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record;
(2) Is in a form capable of being processed by that system; and
(3) Enters an information processing system outside the control of the sender or of a person that sent the electronic record on behalf of the sender or enters a region of the information processing system designated or used by the recipient which is under the control of the recipient.
(b) Unless otherwise agreed between a sender and the recipient, an electronic record is received when:
(1) It enters an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record; and
(2) It is in a form capable of being processed by that system.
(c) Subsection (b) of this section applies even if the place the information processing system is located is different from the place the electronic record is deemed to be received under subsection (d) of this section.
(d) Unless otherwise expressly provided in the electronic record or agreed between the sender and the recipient, an electronic record is deemed to be sent from the sender’s place of business and to be received at the recipient’s place of business. For purposes of this subsection, the following rules apply:
(1) If the sender or recipient has more than one (1) place of business, the place of business of that person is the place having the closest relationship to the underlying transaction.
(2) If the sender or the recipient does not have a place of business, the place of business is the sender’s or recipient’s residence, as the case may be.
(e) An electronic record is received under subsection (b) of this section even if no individual is aware of its receipt.
(f) Receipt of an electronic acknowledgment from an information processing system described in subsection (b) of this section establishes that a record was received but, by itself, does not establish that the content sent corresponds to the content received.
(g) If a person is aware that an electronic record purportedly sent under subsection (a) of this section, or purportedly received under subsection (b) of this section, was not actually sent or received, the legal effect of the sending or receipt is determined by other applicable law. Except to the extent permitted by the other law, the requirements of this subsection may not be varied by agreement.
[28-50-115, added 2000, ch. 286, sec. 1, p. 965.]
(a) In this section, "transferable record" means an electronic record that:
(1) Would be a note under chapter 3, title 28, Idaho Code (uniform commercial code — negotiable instruments) or a document under chapter 7, title 28, Idaho Code (uniform commercial code — documents of title) if the electronic record were in writing; and
(2) The issuer of the electronic record expressly has agreed is a transferable record.
(b) A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred.
(c) A system satisfies subsection (b) of this section, and a person is deemed to have control of a transferable record, if the transferable record is created, stored and assigned in such a manner that:
(1) A single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5) and (6) of this subsection, unalterable;
(2) The authoritative copy identifies the person asserting control as:
(A) The person to which the transferable record was issued; or
(B) If the authoritative copy indicates that the transferable record has been transferred, the person to which the transferable record was most recently transferred;
(3) The authoritative copy is communicated to and maintained by the person asserting control or its designated custodian;
(4) Copies or revisions that add or change an identified assignee of the authoritative copy can be made only with the consent of the person asserting control;
(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and
(6) Any revision of the authoritative copy is readily identifiable as authorized or unauthorized.
(d) Except as otherwise agreed, a person having control of a transferable record is the holder, as defined in section 28-1-201(b)(21), Idaho Code, of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under chapters 1 through 12, title 28, Idaho Code (uniform commercial code), including, if the applicable statutory requirements under section 28-3-302(1), 28-7-501 or 28-9-330, Idaho Code, are satisfied, the rights and defenses of a holder in due course, a holder to which a negotiable document of title has been duly negotiated, or a purchaser, respectively. Delivery, possession and indorsement are not required to obtain or exercise any of the rights under this subsection.
(e) Except as otherwise agreed, an obligor under a transferable record has the same rights and defenses as an equivalent obligor under equivalent records or writings under chapters 1 through 12, title 28, Idaho Code (uniform commercial code).
(f) If requested by a person against which enforcement is sought, the person seeking to enforce the transferable record shall provide reasonable proof that the person is in control of the transferable record. Proof may include access to the authoritative copy of the transferable record and related business records sufficient to review the terms of the transferable record and to establish the identity of the person having control of the transferable record.
[28-50-116, added 2000, ch. 286, sec. 1, p. 966; am. 2001, ch. 208, sec. 24, p. 823; am. 2004, ch. 42, sec. 35, p. 134; am. 2004, ch. 43, sec. 44, p. 164.]
Each governmental agency of this state shall determine whether, and the extent to which, it will create and retain electronic records and convert written records to electronic records.
[28-50-117, added 2000, ch. 286, sec. 1, p. 967.]
(a) Except as otherwise provided in section 28-50-112(f), Idaho Code, each governmental agency of this state shall determine whether, and the extent to which, it will send and accept electronic records and electronic signatures to and from other persons and otherwise create, generate, communicate, store, process, use and rely upon electronic records and electronic signatures.
(b) To the extent that a governmental agency uses electronic records and electronic signatures under subsection (a) of this section, the governmental agency, giving due consideration to security, may specify:
(1) The manner and format in which the electronic records must be created, generated, sent, communicated, received and stored and the systems established for those purposes;
(2) If electronic records must be signed by electronic means, the type of electronic signature required, the manner and format in which the electronic signature must be affixed to the electronic record, and the identity of, or criteria that must be met by, any third party used by a person filing a document to facilitate the process;
(3) Control processes and procedures as appropriate to ensure adequate preservation, disposition, integrity, security, confidentiality and auditability of electronic records; and
(4) Any other required attributes for electronic records which are specified for corresponding nonelectronic records or reasonably necessary under the circumstances.
(c) Except as otherwise provided in section 28-50-112(f), Idaho Code, this chapter does not require a governmental agency of this state to use or permit the use of electronic records or electronic signatures.
[28-50-118, added 2000, ch. 286, sec. 1, p. 967.]
The governmental agency of this state which adopts standards pursuant to section 28-50-118, Idaho Code, may encourage and promote consistency and interoperability with similar requirements adopted by other governmental agencies of this and other states and the federal government and nongovernmental persons interacting with governmental agencies of this state. If appropriate, those standards may specify differing levels of standards from which governmental agencies of this state may choose in implementing the most appropriate standard for a particular application.
[28-50-119, added 2000, ch. 286, sec. 1, p. 968.]
If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
[28-50-120, added 2000, ch. 286, sec. 1, p. 968.]
(1) As used in this section, the term:
(a) "Cardholder" means a person or organization named on the face of a payment card to whom or for whose benefit the payment card is issued.
(b) "Merchant" means a person or organization who receives from a cardholder a payment card, or information from a payment card, as the instrument for obtaining, purchasing, or receiving goods, services, money, or anything else of value from the person or organization.
(c) "Payment card" means a credit card, charge card, debit card, or any other card that is issued to a cardholder and that allows the cardholder to obtain, purchase, or receive goods, services, money, or anything else of value from a merchant.
(2) A merchant who accepts a payment card for the transaction of business may not print more than the last five (5) digits of the payment card’s account number or print the payment card’s expiration date on a receipt provided to the cardholder. This subsection does not apply to a transaction in which the sole means of recording the payment card’s account number or expiration date is by handwriting or by an imprint or copy of the payment card. Effective January 1, 2004, this section applies to all receipts that are electronically printed using a cash register or other machine or device that is first used on or after July 1, 2003. Effective January 1, 2005, this section applies to all receipts that are electronically printed, including those printed using a cash register or other machine or device that is first used before July 1, 2003.
(3) A merchant who violates this section shall be subject to a civil penalty of not more than two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for a second or subsequent violation. An action to recover the civil penalty may be brought by a prosecuting attorney. If the prosecuting attorney does not file an action for such a civil penalty within sixty (60) days from the date the violation is reported by the cardholder whose payment card number was printed on a receipt in violation of this section, the cardholder may file such action. Venue for an action under this section shall be in the county in which the transaction occurred or the county in which the cardholder resides or the county in which the merchant has its principal place of business in this state.
The penalties provided in this section are in addition to any other remedy at law or equity available to a cardholder.
Any civil penalty imposed pursuant to this section shall be deposited in the state general fund. Attorney’s fees shall be paid solely to the party successfully bringing the action.
[28-51-103, added 2003, ch. 134, sec. 2, p. 391.]
For purposes of sections 28-51-104 through 28-51-107, Idaho Code:
(1) "Agency" means any "public agency" as defined in section 74-101, Idaho Code.
(2) "Breach of the security of the system" means the illegal acquisition of unencrypted computerized data that materially compromises the security, confidentiality, or integrity of personal information for one (1) or more persons maintained by an agency, individual or a commercial entity. Good faith acquisition of personal information by an employee or agent of an agency, individual or a commercial entity for the purposes of the agency, individual or the commercial entity is not a breach of the security of the system, provided that the personal information is not used or subject to further unauthorized disclosure.
(3) "Commercial entity" includes corporation, business trust, estate, trust, partnership, limited partnership, limited liability partnership, limited liability company, association, organization, joint venture and any other legal entity, whether for profit or not-for-profit.
(4) "Notice" means:
(a) Written notice to the most recent address the agency, individual or commercial entity has in its records;
(b) Telephonic notice;
(c) Electronic notice, if the notice provided is consistent with the provisions regarding electronic records and signatures set forth in 15 U.S.C. section 7001; or
(d) Substitute notice, if the agency, individual or the commercial entity required to provide notice demonstrates that the cost of providing notice will exceed twenty-five thousand dollars ($25,000), or that the number of Idaho residents to be notified exceeds fifty thousand (50,000), or that the agency, individual or the commercial entity does not have sufficient contact information to provide notice. Substitute notice consists of all of the following:
(i) E-mail notice if the agency, individual or the commercial entity has e-mail addresses for the affected Idaho residents; and
(ii) Conspicuous posting of the notice on the website page of the agency, individual or the commercial entity if the agency, individual or the commercial entity maintains one; and
(iii) Notice to major statewide media.
(5) "Personal information" means an Idaho resident’s first name or first initial and last name in combination with any one (1) or more of the following data elements that relate to the resident, when either the name or the data elements are not encrypted:
(a) Social security number;
(b) Driver’s license number or Idaho identification card number; or
(c) Account number, or credit or debit card number, in combination with any required security code, access code, or password that would permit access to a resident’s financial account.
The term "personal information" does not include publicly available information that is lawfully made available to the general public from federal, state, or local government records or widely distributed media.
(6) "Primary regulator" of a commercial entity or individual licensed or chartered by the United States is that commercial entity’s or individual’s primary federal regulator, the primary regulator of a commercial entity or individual licensed by the department of finance is the department of finance, the primary regulator of a commercial entity or individual licensed by the department of insurance is the department of insurance and, for all agencies and all other commercial entities or individuals, the primary regulator is the attorney general.
[28-51-104, added 2006, ch. 258, sec. 1, p. 796; am. 2015, ch. 141, sec. 51, p. 418.]
(1) A city, county or state agency, individual or a commercial entity that conducts business in Idaho and that owns or licenses computerized data that includes personal information about a resident of Idaho shall, when it becomes aware of a breach of the security of the system, conduct in good faith a reasonable and prompt investigation to determine the likelihood that personal information has been or will be misused. If the investigation determines that the misuse of information about an Idaho resident has occurred or is reasonably likely to occur, the agency, individual or the commercial entity shall give notice as soon as possible to the affected Idaho resident. Notice must be made in the most expedient time possible and without unreasonable delay, consistent with the legitimate needs of law enforcement and consistent with any measures necessary to determine the scope of the breach, to identify the individuals affected, and to restore the reasonable integrity of the computerized data system.
When an agency becomes aware of a breach of the security of the system, it shall, within twenty-four (24) hours of such discovery, notify the office of the Idaho attorney general. Nothing contained in this section relieves a state agency’s responsibility to report a security breach to the office of the chief information officer within the department of administration, pursuant to the Idaho technology authority policies.
Any governmental employee who intentionally discloses personal information not subject to disclosure otherwise allowed by law is guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than two thousand dollars ($2,000), or by imprisonment in the county jail for a period of not more than one (1) year, or both.
(2) An agency, individual or a commercial entity that maintains computerized data that includes personal information that the agency, individual or the commercial entity does not own or license shall give notice to and cooperate with the owner or licensee of the information of any breach of the security of the system immediately following discovery of a breach if misuse of personal information about an Idaho resident occurred or is reasonably likely to occur. Cooperation includes sharing with the owner or licensee information relevant to the breach.
(3) Notice required by this section may be delayed if a law enforcement agency advises the agency, individual or commercial entity that the notice will impede a criminal investigation. Notice required by this section must be made in good faith, without unreasonable delay and as soon as possible after the law enforcement agency advises the agency, individual or commercial entity that notification will no longer impede the investigation.
[28-51-105, added 2006, ch. 258, sec. 1, p. 797; am. 2014, ch. 97, sec. 13, p. 275.]
(1) An agency, individual or a commercial entity that maintains its own notice procedures as part of an information security policy for the treatment of personal information, and whose procedures are otherwise consistent with the timing requirements of section 28-51-105, Idaho Code, is deemed to be in compliance with the notice requirements of section 28-51-105, Idaho Code, if the agency, individual or the commercial entity notifies affected Idaho residents in accordance with its policies in the event of a breach of security of the system.
(2) An individual or a commercial entity that is regulated by state or federal law and that maintains procedures for a breach of the security of the system pursuant to the laws, rules, regulations, guidances, or guidelines established by its primary or functional state or federal regulator is deemed to be in compliance with section 28-51-105, Idaho Code, if the individual or the commercial entity complies with the maintained procedures when a breach of the security of the system occurs.
[28-51-106, added 2006, ch. 258, sec. 1, p. 798.]
In any case in which an agency’s, commercial entity’s or individual’s primary regulator has reason to believe that an agency, individual or commercial entity subject to that primary regulator’s jurisdiction under section 28-51-104(6), Idaho Code, has violated section 28-51-105, Idaho Code, by failing to give notice in accordance with that section, the primary regulator may bring a civil action to enforce compliance with that section and enjoin that agency, individual or commercial entity from further violations. Any agency, individual or commercial entity that intentionally fails to give notice in accordance with section 28-51-105, Idaho Code, shall be subject to a fine of not more than twenty-five thousand dollars ($25,000) per breach of the security of the system.
[28-51-107, added 2006, ch. 258, sec. 1, p. 798.]
This chapter shall be known and cited as the "Credit Report Protection Act."
[28-52-101, added 2008, ch. 177, sec. 2, p. 523.]
In this chapter:
(1) "Consumer" means a natural person.
(2) "Consumer reporting agency" means a person who, for fees, dues or on a cooperative basis, regularly engages in whole or in part in the practice of assembling or evaluating information concerning a consumer’s credit or other information for the purpose of furnishing a credit report to another person.
(3) "Credit report" means a consumer report, as defined in 15 U.S.C. section 1681a, that is used or collected, in whole or in part, for the purpose of serving as a factor in establishing a consumer’s eligibility for credit for personal, family or household purposes.
(4) "Personal information" means personally identifiable financial information provided by a consumer to another person, resulting from any transaction with the consumer or any service performed for the consumer or otherwise obtained by another person. Personal information does not include publicly available information, as that term is defined by regulations prescribed under 15 U.S.C. section 6804, or any list, description or other grouping of consumers, and publicly available information pertaining to consumers that is derived without using any nonpublic personal information. Notwithstanding the foregoing, "personal information" includes any list, description or other grouping of consumers, and publicly available information pertaining to the consumers, that is derived using any nonpublic personal information other than publicly available information.
(5) "Proper identification" has the same meaning as in 15 U.S.C. section 1681h(a)(1) and includes:
(a) The consumer’s full name, including first, middle and last names and any suffix;
(b) Any name the consumer previously used;
(c) The consumer’s current and recent full addresses, including street address, any apartment number, city, state and zip code;
(d) The consumer’s social security number; and
(e) The consumer’s date of birth.
(6) "Security freeze" means a prohibition, consistent with section 28-52-103, Idaho Code, on a consumer reporting agency’s furnishing of a consumer’s credit report to a third party intending to use the credit report to determine the consumer’s eligibility for credit.
[28-52-102, added 2008, ch. 177, sec. 2, p. 523.]
(1) A consumer may place a security freeze on the consumer’s credit report by:
(a) Making a request to a consumer reporting agency in writing by regular or certified mail at an address designated by the consumer reporting agency to receive the request;
(b) Providing proper identification; and
(c) Paying the fee required by the consumer reporting agency in accordance with section 28-52-106, Idaho Code.
(2) Upon receiving a request from a consumer under subsection (1) of this section, the consumer reporting agency shall:
(a) Place a security freeze on the consumer’s credit report within three (3) business days after receiving the consumer’s request; and
(b) Within five (5) business days after placing the security freeze, send a written confirmation of the security freeze to the consumer and provide the consumer with a unique personal identification number or password to be used by the consumer when providing authorizations for removal or temporary lifts of the security freeze under section 28-52-104, Idaho Code.
(3) If a security freeze is in place, a consumer reporting agency may not release a consumer’s credit report, or information from the credit report, to a third party that intends to use the information to determine a consumer’s eligibility for credit without prior authorization from the consumer.
(4) Notwithstanding subsection (3) of this section, a consumer reporting agency may communicate to a third party requesting a consumer’s credit report that a security freeze is in effect on the consumer’s credit report. If a third party requesting a consumer’s credit report in connection with the consumer’s application for credit is notified of the existence of a security freeze under this section, the third party may treat the consumer’s application as incomplete.
(5) A consumer reporting agency shall require proper identification of the consumer requesting to place, remove or temporarily remove a security freeze.
(6) A consumer reporting agency shall develop a contact method to receive and process a consumer’s request to permanently remove or temporarily lift a security freeze. The contact method may include: a postal address; an electronic contact method chosen by the consumer reporting agency, which may include the use of fax, internet or other electronic means; or the use of telephone in a manner that is consistent with any federal requirements placed on the consumer reporting agency. By no later than September 1, 2008, a consumer reporting agency shall develop a secure electronic means for a consumer to request the temporary lift of a security freeze.
(7) A security freeze placed under this section may be removed only in accordance with section 28-52-104, Idaho Code.
[28-52-103, added 2008, ch. 177, sec. 2, p. 523.]
(1) A consumer reporting agency may remove a security freeze from a consumer’s credit report only if the consumer reporting agency receives the consumer’s request through a contact method established and required in accordance with subsection (6) of section 28-52-103, Idaho Code, and the consumer reporting agency receives the consumer’s proper identification and other information sufficient to identify the consumer, including the consumer’s personal identification number or password; or the consumer makes a material misrepresentation of fact in connection with the placement of the security freeze and the consumer reporting agency notifies the consumer in writing before removing the security freeze.
(2) A consumer reporting agency shall temporarily lift a security freeze upon receipt of the consumer’s request through the contact method established by the consumer reporting agency in accordance with subsection (6) of section 28-52-103, Idaho Code, along with:
(a) The consumer’s proper identification and other information sufficient to identify the consumer;
(b) The consumer’s personal identification number or password;
(c) The proper information regarding the third party who is to receive the credit report or the time period for which the credit report is to be available to users of the credit report; and
(d) A fee, if applicable.
(3) A consumer reporting agency shall remove or temporarily lift a security freeze from a consumer’s credit report as follows:
(a) Except as provided in paragraph (b) of this subsection regarding temporary lifts, within three (3) business days after the business day on which the consumer’s written request to remove or temporarily lift the security freeze is received by the consumer reporting agency using a contact method chosen by the consumer reporting agency in accordance with subsection (6) of section 28-52-103, Idaho Code; and
(b) On and after September 1, 2008, within fifteen (15) minutes after the consumer’s request to temporarily lift the security freeze is received by the consumer reporting agency through the electronic contact method chosen by the consumer reporting agency in accordance with subsection (6) of section 28-52-103, Idaho Code, if such request is received between 6:00 a.m. and 9:30 p.m. mountain time.
(4) A consumer reporting agency need not remove or temporarily lift a security freeze within the time specified in subsection (3) of this section if the consumer fails to meet the requirements of subsection (1) or (2) of this section, as applicable, or the consumer reporting agency’s ability to remove the security freeze within such time is prevented by:
(a) An act of God, including fire, earthquake, hurricane, storm or similar natural disaster or phenomenon;
(b) Unauthorized or illegal acts by a third party, including terrorism, sabotage, riot, vandalism, labor strikes or disputes disrupting operations, or similar occurrence;
(c) Operation interruption, including electrical failure, unanticipated delay in equipment or replacement part delivery, computer hardware or software failures inhibiting response time, or similar disruption;
(d) Governmental action, including emergency order or regulation, judicial or law enforcement action or similar directive;
(e) Regularly scheduled maintenance, during other than normal business hours, of, or updates to, the consumer reporting agency’s systems;
(f) Commercially reasonable maintenance of, or repair to, the consumer reporting agency’s systems that is unexpected or unscheduled; or
(g) Receipt of a removal request outside of normal business hours.
[28-52-104, added 2008, ch. 177, sec. 2, p. 524.]
(1) Notwithstanding subsection (1) of section 28-52-103, Idaho Code, a consumer reporting agency may furnish a consumer’s credit report to a third party if the purpose of the credit report is to:
(a) Use the credit report for purposes permitted under 15 U.S.C. section 1681b(c);
(b) Review the consumer’s account with the third party, including for account maintenance or monitoring credit line increases or other upgrades or enhancements;
(c) Collect on a financial obligation owed by the consumer to the third party requesting the credit report; or
(d) Review the consumer’s account with another person, or collect on a financial obligation owed by the consumer to another person and the credit report request is for purposes permitted under 15 U.S.C. section 1681b(c) or the third party requesting the credit report is a subsidiary, affiliate, agent, assignee or prospective assignee of the person holding the consumer’s account or to whom the consumer owes a financial obligation.
(2) The consumer’s request for a security freeze does not prohibit the consumer reporting agency from disclosing the consumer’s credit report for other than credit related purposes consistent with the definition of credit report in section 28-52-102, Idaho Code. The following list identifies the types of credit report disclosures by consumer reporting agencies to third parties that are not prohibited by a security freeze:
(a) The third party does not use the credit report for the purpose of serving as a factor in establishing a consumer’s eligibility for credit;
(b) The third party is acting under a court order, warrant or subpoena requiring release of the credit report;
(c) The third party is a child support agency, or its agent or assignee acting under part D, title IV, of the social security act or a similar state law;
(d) The third party is the federal department of health and human services or a similar state agency, or its agent or assignee, investigating medicare or medicaid fraud;
(e) The purpose of the credit report is to investigate or collect delinquent taxes, assessments or unpaid court orders and the third party is the federal internal revenue service; a state taxing authority; the division of motor vehicles of the Idaho transportation department; a county, municipality or other taxing district; a federal, state or local law enforcement agency; or the agent or assignee listed in subsection (1) or (2) of this section;
(f) The third party is using the information solely for criminal record information, tenant screening, employment screening, fraud prevention or detection, or personal loss history information;
(g) The third party is a person or entity regulated under title 41, Idaho Code;
(h) The third party is administering a credit file monitoring service to which the consumer has subscribed; or
(i) The third party requests the credit report for the sole purpose of providing the consumer with a copy of the consumer’s credit report or credit score upon the consumer’s request.
(3) Section 28-52-103, Idaho Code, does not apply to:
(a) A consumer reporting agency, the sole purpose of which is to resell credit information by assembling and merging information contained in the database of another consumer reporting agency and that does not maintain a permanent database of credit information from which a consumer’s credit report is produced;
(b) A check services or fraud prevention services company that issues reports on incidents of fraud or authorizations for the purpose of approving or processing negotiable instruments, electronic fund transfers or similar methods of payment; or
(c) A deposit account information service company that issues reports concerning account closures based on fraud, substantial overdrafts, automated teller machine abuse or similar information concerning a consumer to a requesting financial institution for the purpose of evaluating a consumer’s request to create a deposit account.
(4) Nothing in this chapter prohibits a person from obtaining, aggregating or using information lawfully obtained from public records in a manner that does not otherwise violate the provisions of this chapter.
[28-52-105, added 2008, ch. 177, sec. 2, p. 525.]
(1) Except as provided in subsection (2) of this section, a consumer reporting agency may not charge an administrative fee to a consumer for the first placement of a security freeze during a twelve (12) month period, and for the first temporary lift of a security freeze during a twelve (12) month period. A consumer reporting agency may charge an administrative fee, not to exceed six dollars ($6.00), to a consumer for the second or subsequent placement of a security freeze during a twelve (12) month period, and six dollars ($6.00) for the second or subsequent temporary lift of a security freeze during a twelve (12) month period.
(2) A consumer reporting agency may not charge a fee under section 28-52-103(1)(c), Idaho Code, to a consumer who has been the victim of identity theft and who has submitted to the consumer reporting agency a valid police report, an investigative report or complaint that the consumer has filed with a law enforcement agency.
(3) A consumer may be charged a reasonable fee, not to exceed ten dollars ($10.00), if the consumer fails to retain the original personal identification number, password or other device provided by the consumer reporting agency and if the consumer asks the consumer reporting agency to reissue the same or a new personal identification number, password or other device.
[28-52-106, added 2008, ch. 177, sec. 2, p. 527; am. 2018, ch. 163, sec. 1, p. 322.]
(1) If a credit report is subject to a security freeze, a consumer reporting agency shall notify the consumer who is the subject of the credit report within thirty (30) days if the consumer reporting agency changes the consumer’s name, date of birth, social security number or address.
(2) Notwithstanding subsection (1) of this section, a consumer reporting agency may make technical modifications to information in a credit report that is subject to a security freeze without providing notification to the consumer. Technical modifications include the addition or subtraction of abbreviations to names and addresses and transpositions or corrections of incorrect numbering or spelling.
(3) When providing notice of a change of address under subsection (1) of this section, the consumer reporting agency shall provide notice to the consumer at both the new address and the former address.
[28-52-107, added 2008, ch. 177, sec. 2, p. 527.]
(1) Except as otherwise specifically provided by law, a person shall not intentionally communicate an individual’s social security number to the general public.
(2) The state of Idaho, a department, agency, board, commission or other political subdivision may not employ or contract for the employment of an inmate in any facility operated by the department of correction or private correctional facility contracted with the department of correction or county jail in any capacity that would allow any inmate access to any other person’s personal information.
[28-52-108, added 2008, ch. 177, sec. 2, p. 527.]
(1) Except as otherwise specified in this section, any credit reporting agency that willfully fails to comply with any requirement imposed under this chapter with respect to any consumer is liable to that consumer in an amount equal to the sum of:
(a) Any actual damages sustained by the consumer as a result of the failure or damages of not less than one hundred dollars ($100) and not more than one thousand dollars ($1,000); or
(b) Such amount of punitive damages as the court may allow; and
(c) In the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
(2) Any person who obtains a consumer report, requests a security freeze, requests the temporary lifting of a freeze or requests the removal of a security freeze from a consumer reporting agency under false pretenses or in an attempt to violate federal or state law shall be liable to the consumer reporting agency for actual damages sustained by the consumer reporting agency or one thousand dollars ($1,000), whichever is greater.
(3) Any credit reporting agency who is negligent in failing to comply with any requirement imposed under this chapter with respect to any consumer is liable to that consumer in an amount equal to the sum of:
(a) Any actual damages sustained by the consumer as a result of the failure; and
(b) In the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
(4) Upon a finding by the court that an unsuccessful pleading, motion or other paper filed in connection with an action under this chapter was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.
(5) The attorney general may enforce this chapter’s provisions and, notwithstanding any other provision of law, the attorney general has exclusive authority to bring an action against a credit reporting agency for violation of section 28-52-104(3)(b), Idaho Code, concerning the requirement that a credit reporting agency temporarily lift a freeze within fifteen (15) minutes. In an action by the attorney general, a credit reporting agency that violates this chapter’s provisions is subject to a civil penalty not less than one hundred dollars ($100) or greater than one thousand dollars ($1,000) for a violation or series of violations concerning a specific consumer and no greater than one hundred thousand dollars ($100,000) in the aggregate for related violations concerning more than one (1) consumer. In addition to the penalties provided in this section, the attorney general may seek injunctive relief to prevent future violations of this chapter in the district court in Ada county or in the district court for the district in which a consumer resides who is the subject of a credit report on which a violation occurs.
[28-52-109, added 2008, ch. 177, sec. 2, p. 528.]
This chapter shall be known and may be cited as the "Digital Assets Act."
[28-5301, added 2022, ch. 284, sec. 1, p. 901.]
This chapter defines the legal status of digital assets. Digital assets are subject to applicable laws or rules that apply to their business or activity.
[28-5302, added 2022, ch. 284, sec. 1, p. 901.]
As used in this chapter:
(1) "Adverse claim" means a claimant that has a property interest in a virtual currency or a right to payment evidenced by the virtual currency.
(2) "Control" means the ability to exclude others from the use of property and includes the following:
(a) A secured party, or an agent, custodian, fiduciary, or trustee of the party, that has complied with section 28-8-106, Idaho Code, including by means of a private key or the use of a multi-signature arrangement exclusive to the secured party or any substantially similar analogue; and
(b) A smart contract created by a secured party to comply with section 28-8-106, Idaho Code. As used in this paragraph, "smart contract" means an automated transaction as described in section 28-50-114, Idaho Code, or any substantially similar analogue comprised of code, script, or programming language that executes the terms of an agreement and may include taking custody of and transferring an asset or issuing executable instructions for these actions, based on the occurrence or nonoccurrence of specified conditions.
(3) "Digital asset" means a representation of economic, proprietary, or access rights that is stored in a computer-readable format and includes an open blockchain token, digital commodity, digital security, virtual currency, and any other controllable electronic record.
(4) "Digital security" means a digital asset that constitutes a security as defined in section 30-14-102, Idaho Code.
(5) "Multi-signature arrangement" means a system of access control relating to a digital asset for the purposes of preventing unauthorized transactions relating to the asset in which two (2) or more private keys are required to conduct a transaction or any other substantially similar analogue.
(6) "Possession" includes use of a private key, a multi-signature arrangement exclusive to the secured party, a smart contract as defined in this section, or any substantially similar analogue. "Possession" shall also include delivery of certificated digital securities consistent with section 28-8-301(1)(a), Idaho Code.
(7) "Private key" means a unique element of cryptographic data or any substantially similar analogue that is:
(a) Held by a person;
(b) Paired with a unique, publicly available element of cryptographic data; and
(c) Associated with an algorithm that is necessary to carry out an encryption or decryption required to execute a transaction.
(8) "Virtual currency" means a digital asset that is used as a medium of exchange, unit of account, or store of value.
[28-5303, added 2022, ch. 284, sec. 1, p. 902.]
Digital assets are intangible personal property and are classified as follows:
(1) Digital assets are intangible personal property and are general intangibles as defined in section 28-9-102, Idaho Code.
(2) Digital securities are intangible personal property and are investment property as defined in section 28-9-102, Idaho Code.
(3) Virtual currency is intangible personal property and is not a security, notwithstanding section 30-14-102, Idaho Code.
[28-5304, added 2022, ch. 284, sec. 1, p. 902.]
(1) Digital assets may be purchased and sold in the same manner and subject to the same laws of this state as other personal property. A purchaser or seller may be identified in any way including by name, identifying number, private key, office, or account number.
(2) Except as provided in subsection (3) of this section, a purchaser takes a right to payment, right to performance or interest in property evidenced by a digital asset subject to a claim of a property right, right to payment, and right to performance or interest in property evidenced by the digital asset.
(3) An action based on a claim of a property right, right to performance, or right of payment may not be asserted against a qualified purchaser. For the purposes of this subsection, a qualified purchaser is a purchaser of a digital asset or an interest in a digital asset that obtains the digital asset for value, in good faith, and without notice of a claim of a property right in the digital asset.
[28-5305, added 2022, ch. 284, sec. 1, p. 903.]
(1) Perfection by possession creates a possessory security interest under section 28-9-301, Idaho Code.
(2) A security interest held by a secured party having possession or control has priority over a security interest held by a secured party that does not have possession or control, as applicable. Other provisions of law relating to perfection and priority of security interests, including section 28-9-207, Idaho Code, and priority of control over delivery, shall apply, except that section 28-9-322(a)(1) and (b), Idaho Code, shall not apply.
(3) A person that acquires an interest in and obtains control of a virtual currency without notice of any adverse claim takes the interest in the virtual currency and in any right to payment evidenced by the virtual currency free of any adverse claim.
[28-5306, added 2022, ch. 284, sec. 1, p. 903.]
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