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General definitions - 13 Pa. Cons. Stat. § 1201Legal Research Home > Pennsylvania Statutes
CHAPTER 12
GENERAL DEFINITIONS AND PRINCIPLES
OF INTERPRETATION
Sec.
1201. General definitions.
1202. Prima facie evidence by third party documents.
1203. Obligation of good faith.
1204. Time; reasonable time; "seasonably."
1205. Course of dealing and usage of trade.
1206. Statute of frauds for kinds of personal property not
otherwise covered.
1207. Performance or acceptance under reservation of rights.
1208. Option to accelerate at will.
1209. Subordinated obligations.
Enactment. Chapter 12 was added November 1, 1979, P.L.255,
No.86, effective January 1, 1980.
§ 1201. General definitions.
Subject to additional definitions contained in the subsequent
provisions of this title which are applicable to specific
provisions of this title, the following words and phrases when
used in this title shall have, unless the context clearly
indicates otherwise, the meanings given to them in this section:
"Action." In the sense of a judicial proceeding includes
recoupment, counterclaim, set-off, suit in equity and any other
proceedings in which rights are determined.
"Aggrieved party." A party entitled to resort to a remedy.
"Agreement." The bargain of the parties in fact as found in
their language or by implication from other circumstances
including course of dealing or usage of trade or course of
performance as provided in this title (sections 1205 and 2208).
Whether an agreement has legal consequences is determined by the
provisions of this title, if applicable; otherwise by the law of
contracts (section 1103 (relating to supplementary general
principles of law applicable)). (Compare definition of
"contract".)
"Airbill." A document serving for air transportation as a
bill of lading does for marine or rail transportation, and
includes an air consignment note or air waybill.
"Bank." Any person engaged in the business of banking.
"Bearer." The person in possession of an instrument,
document of title, or certificated security payable to bearer or
indorsed in blank.
"Bill of lading." A document evidencing the receipt of goods
for shipment issued by a person engaged in the business of
transporting or forwarding goods, and includes an airbill.
"Branch." Includes a separately incorporated foreign branch
of a bank.
"Burden of establishing a fact." The burden of persuading
the triers of fact that the existence of the fact is more
probable than its nonexistence.
"Buyer in ordinary course of business." A person that buys
goods in good faith, without knowledge that the sale violates
the rights of another person in the goods, and in the ordinary
course from a person, other than a pawnbroker, in the business
of selling goods of that kind. A person buys goods in the
ordinary course if the sale to the person comports with the
usual or customary practices in the kind of business in which
the seller is engaged or with the seller's own usual or
customary practices. A person that sells oil, gas or other
minerals at the wellhead or minehead is a person in the business
of selling goods of that kind. A buyer in ordinary course of
business may buy for cash, by exchange of other property or on
secured or unsecured credit and may acquire goods or documents
of title under a preexisting contract for sale. Only a buyer
that takes possession of the goods or has a right to recover the
goods from the seller under Division 2 (relating to sales) may
be a buyer in ordinary course of business. A person that
acquires goods in a transfer in bulk or as security for or in
total or partial satisfaction of a money debt is not a buyer in
ordinary course of business.
"Buying." (Deleted by amendment).
"Conspicuous." A term or clause is conspicuous when it is so
written that a reasonable person against whom it is to operate
ought to have noticed it.
A printed heading in capitals (as: NONNEGOTIABLE BILL OF
LADING) is conspicuous.
Language in the body of a form is conspicuous if it is in
larger or other contrasting type or color. But in a telegram
any stated term is conspicuous.
Whether a term or clause is conspicuous or not is for
decision by the court.
"Contract." The total legal obligation which results from
the agreement of the parties as affected by this title and any
other applicable rules of law. (Compare definition of
"agreement".)
"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.
"Defendant." Includes a person in the position of defendant
in a cross-action or counterclaim.
"Delivery." With respect to instruments, documents of title,
chattel paper or certificated securities, means voluntary
transfer of possession.
"Discover." See definition of "notice."
"Document of title." Includes:
a bill of lading;
a dock warrant;
a dock receipt;
a warehouse receipt or order for the delivery of goods;
and
any other document which in the regular course of
business or financing is treated as adequately evidencing
that the person in possession of it is entitled to receive,
hold and dispose of the document and the goods it covers.
To be a document of title a document must purport to be
issued by or addressed to a bailee and purport to cover goods in
the possession of the bailee which are either identified or are
fungible portions of an identified mass.
"Fault." Wrongful act, omission or breach.
"Fungible." With respect to goods or securities, means goods
or securities of which any unit is, by nature or usage of trade,
the equivalent of any other like unit. Goods which are not
fungible shall be deemed fungible for the purpose of this title
to the extent that under a particular agreement or document
unlike units are treated as equivalents.
"Genuine." Free of forgery or counterfeiting.
"Good faith." Honesty in fact in the conduct or transaction
concerned.
"Holder."
(1) With respect to a negotiable instrument, the person
in possession if the instrument is payable to bearer or, in
the case of an instrument payable to an identified person, if
the identified person is in possession.
(2) With respect to a document of title, the person in
possession if the goods are deliverable to bearer or to the
order of the person in possession.
"Honor." To pay or to accept and pay, or where a credit so
engages to purchase or discount a draft complying with the terms
of the credit.
"Insolvency proceedings." Includes any assignment for the
benefit of creditors or other proceedings intended to liquidate
or rehabilitate the estate of the person involved.
"Insolvent." A person is insolvent who either has ceased to
pay his debts in the ordinary course of business or cannot pay
his debts as they become due or is insolvent within the meaning
of the Federal bankruptcy law.
"Knows" or "knowledge." See definition of "notice."
"Learn." See definition of "notice."
"Money." A medium of exchange authorized or adopted by a
domestic or foreign government and includes a monetary unit of
account established by an intergovernmental organization or by
agreement between two or more nations.
"Notice." A person has "notice" of a fact when:
(1) he has actual knowledge of it;
(2) he has received a notice or notification of it; or
(3) from all the facts and circumstances known to him at
the time in question he has reason to know that it exists.
A person "knows" or has "knowledge" of a fact when he has
actual knowledge of it. "Discover" or "learn" or a word or
phrase of similar import refers to knowledge rather than to
reason to know. The time and circumstances under which a notice
or notification may cease to be effective are not determined by
this title.
A person "notifies" or "gives" a notice or notification to
another by taking such steps as may be reasonably required to
inform the other in ordinary course whether or not such other
actually comes to know of it. A person "receives" a notice or
notification when:
(1) it comes to his attention; or
(2) it is duly delivered at the place of business
through which the contract was made or at any other place
held out by him as the place for receipt of such
communications.
Notice, knowledge or a notice or notification received by an
organization is effective for a particular transaction from the
time when it is brought to the attention of the individual
conducting that transaction, and in any event from the time when
it would have been brought to his attention if the organization
had exercised due diligence. An organization exercises due
diligence if it maintains reasonable routines for communicating
significant information to the person conducting the transaction
and there is reasonable compliance with the routines. Due
diligence does not require an individual acting for the
organization to communicate information unless such
communication is part of his regular duties or unless he has
reason to know of the transaction and that the transaction would
be materially affected by the information.
"Organization." Includes a corporation, government or
governmental subdivision or agency, business trust, estate,
trust, partnership or association, two or more persons having a
joint or common interest, or any other legal or commercial
entity.
"Party." As distinct from "third party," means a person who
has engaged in a transaction or made an agreement within this
title.
"Person." Includes an individual or an organization. See
section 1102 (relating to purposes; rules of construction;
variation by agreement).
"Presumption" or "presumed." Either 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.
"Purchase." Includes taking by sale, discount, negotiation,
mortgage, pledge, lien, security interest, issue or reissue,
gift or any other voluntary transaction creating an interest in
property.
"Purchaser." A person who takes by purchase.
"Remedy." Any remedial right to which an aggrieved party is
entitled with or without resort to a tribunal.
"Representative." Includes an agent, an officer of a
corporation or association, and a trustee, executor or
administrator of an estate, or any other person empowered to act
for another.
"Rights." Includes remedies.
"Security interest."
(1) General definition.--A security interest means an
interest in personal property or fixtures which secures
payment or performance of an obligation.
(2) Interest of consignor or buyer under Division 9.--
The term "security interest" also includes any interest of a
consignor and a buyer of accounts, chattel paper, a payment
intangible or a promissory note in a transaction that is
subject to Division 9 (relating to secured transactions).
(3) Buyer's interest in identified goods.--The special
property interest of a buyer of goods on identification of
those goods to a contract for sale under section 2401
(relating to passing of title; reservation for security;
limited application of section) is not a "security interest,"
but a buyer may also acquire a "security interest" by
complying with Division 9.
(4) Sellers and lessors of goods.--Except as otherwise
provided in section 2505 (relating to shipment by seller
under reservation), the right of a seller or lessor of goods
under Division 2 (relating to sales) or 2A (relating to
leases) to retain or acquire possession of the goods is not a
"security interest," but a seller or lessor may also acquire
a "security interest" by complying with Division 9. The
retention or reservation of title by a seller of goods
notwithstanding shipment or delivery to the buyer (section
2401) is limited in effect to a reservation of a "security
interest."
(5) Determination of lease or security interest.--
Whether a transaction creates a lease or security interest is
determined by the facts of each case; however:
(i) A transaction creates a security interest if the
consideration the lessee is to pay the lessor for the
right to possession and use of the goods is an obligation
for the term of the lease not subject to termination by
the lessee and:
(A) the original term of the lease is equal to
or greater than the remaining economic life of the
goods;
(B) the lessee is bound to renew the lease for
the remaining economic life of the goods or is bound
to become the owner of the goods;
(C) the lessee has an option to renew the lease
for the remaining economic life of the goods for no
additional consideration or nominal additional
consideration upon compliance with the lease
agreement; or
(D) the lessee has an option to become the owner
of the goods for no additional consideration or
nominal additional consideration upon compliance with
the lease agreement.
(ii) A transaction does not create a security
interest merely because it provides that:
(A) the present value of the consideration the
lessee is obligated to pay the lessor for the right
to possession and use of the goods is substantially
equal to or is greater than the fair market value of
the goods at the time the lease is entered into;
(B) the lessee assumes risk of loss of the
goods, or agrees to pay taxes, insurance, filing,
recording or registration fees, or service or
maintenance costs with respect to the goods;
(C) the lessee has an option to renew the lease
or to become the owner of the goods;
(D) the lessee has an option to renew the lease
for a fixed rent that is equal to or greater than the
reasonably predictable fair market rent for the use
of the goods for the term of the renewal at the time
the option is to be performed; or
(E) the lessee has an option to become the owner
of the goods for a fixed price that is equal to or
greater than the reasonably predictable fair market
value of the goods at the time the option is to be
performed.
(iii) For purposes of determining whether the
transaction is a lease or a security interest:
(A) Additional consideration is not nominal if:
(I) 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
(II) when the option to become the owner of
the goods is granted to the lessee, the price is
stated to be the fair market value of the goods
determined at the time the option is to be
performed.
Additional consideration is nominal if it is less
than the lessee's reasonably predictable cost of
performing under the lease agreement if the option is
not exercised.
(B) "Reasonably predictable" and "remaining
economic life of the goods" are to be determined with
reference to the facts and circumstances at the time
the transaction is entered into.
(C) "Present value" means the amount as of a
date certain of one or more sums payable in the
future, discounted to the date certain. The discount
is determined by the interest rate specified by the
parties if the rate is not manifestly unreasonable at
the time the transaction is entered into; otherwise,
the discount is determined by a commercially
reasonable rate that takes into account the facts and
circumstances of each case at the time the
transaction was entered into.
"Send." In connection with any writing or notice, means to
deposit in the mail or deliver for transmission by any other
usual means of communication with postage or cost of
transmission provided for and properly addressed and in the case
of an instrument to an address specified thereon or otherwise
agreed, or if there be none to any address reasonable under the
circumstances. The receipt of any writing or notice within the
time at which it would have arrived if properly sent has the
effect of a proper sending.
"Signed." Includes any symbol executed or adopted by a party
with present intention to authenticate a writing.
"Surety." Includes guarantor.
"Telegram." Includes a message transmitted by radio,
teletype, cable, any mechanical method of transmission, or the
like.
"Term." That portion of an agreement which relates to a
particular matter.
"Unauthorized signature." A signature made without actual,
implied or apparent authority and includes a forgery.
"Value." Except as otherwise provided with respect to
negotiable instruments (section 3303) and bank collections
(sections 4210 and 4211), a person gives "value" for rights if
he acquires them:
(1) in return for a binding commitment to extend credit
or for the extension of immediately available credit whether
or not drawn upon and whether or not a chargeback is provided
for in the event of difficulties in collection;
(2) as security for or in total or partial satisfaction
of a preexisting claim;
(3) by accepting delivery pursuant to a preexisting
contract for purchase; or
(4) generally, in return for any consideration
sufficient to support a simple contract.
"Warehouse receipt." A receipt issued by a person engaged in
the business of storing goods for hire.
"Written" or "writing." Includes printing, typewriting or
any other intentional reduction to tangible form.
(Nov. 26, 1982, P.L.696, No.201, eff. 180 days; July 9, 1992,
P.L.507, No.97, eff. one year; June 8, 2001, P.L.123, No.18,
eff. July 1, 2001)
2001 Amendment. Act 18 amended the defs. of "buyer in
ordinary course of business," "purchase" and "security interest"
and deleted the def. of "buying."
Cross References. Section 1201 is referred to in sections
1206, 3103, 4A105, 4A106, 7102 of this title; section 6902 of
Title 42 (Judiciary and Judicial Procedure); section 7315 of
Title 51 (Military Affairs).
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