Commercial Code

§ 1101 Division 1, Chapter 1 This code may be cited as the Uniform Commercial Code. (Amended by Stats. 2006, Ch. 254, Sec. 6. Effective January 1, 2007.) § 1102 Division 1, Chapter 1 This division applies to a transaction to the extent that it is governed by another division of this code. (Repealed and added by Stats. 2006, Ch. 254, Sec. 8. Effective January 1, 2007.) § 1103 Division 1, Chapter 1 (a) This 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 this 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. (Amended by Stats. 2006, Ch. 254, Sec. 9. Effective January 1, 2007.) § 1104 Division 1, Chapter 1 This 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being a general act intended as a unified coverage of its subject matter, no part of it shall be deemed to be impliedly repealed by subsequent legislation if such construction can reasonably be avoided. (Enacted by Stats. 1963, Ch. 819.) § 1105 Division 1, Chapter 1 If any provision or clause of this code or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the code which can be given effect without the invalid provision or application, and to this end the provisions of this code are severable. (Added by renumbering Section 1108 by Stats. 2006, Ch. 254, Sec. 14. Effective January 1, 2007.) § 1106 Division 1, Chapter 1 In this 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. (Added by Stats. 2006, Ch. 254, Sec. 12. Effective January 1, 2007.) § 1108 Division 1, Chapter 1 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. (Added by Stats. 2006, Ch. 254, Sec. 15. Effective January 1, 2007.) § 1201 Division 1, Chapter 2 (a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other divisions of this code that apply to particular divisions or chapters thereof, have the meanings stated. (b) Subject to definitions contained in other divisions of this code that apply to particular divisions or chapters thereof: (1) “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, 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 1303. (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 possession of a negotiable instrument, document of title, or certificated security that is payable to bearer or endorsed in blank. (6) “Bill of lading” means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods. (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 Division 2 (commencing with Section 2101) 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, based on the totality of the circumstances, a reasonable person against whom it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. (11) [Reserved] (12) “Contract,” as distinguished from “agreement,” means the total legal obligation that results from the parties’ agreement as determined by this code and 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 an authoritative tangible copy of a record evidencing chattel paper, means voluntary transfer of possession. (16) “Document of title” includes a bill of lading, dock warrant, dock receipt, warehouse receipt, or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers. To be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass. (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,” except as otherwise provided in Division 5 (commencing with Section 5101), means honesty in fact and the observance of reasonable commercial standards of fair dealing. (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 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, other than pursuant to subdivision (g) of Section 7106, 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 that is 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 or more countries. The term does not include an electronic record that is a medium of exchange recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by the government. (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 this code. (27) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. The term includes a protected series, however denominated, of an entity if the protected series is established under law other than this code that limits, or limits if conditions specified under the law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series. (28) “Present value” means the amount as of a date certain of one 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) “Right” 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 Division 9 (commencing with Section 9101). “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 2401, but a buyer may also acquire a “security interest” by complying with Division 9 (commencing with Section 9101). Except as otherwise provided in Section 2505, the right of a seller or lessor of goods under Division 2 (commencing with Section 2101) or Division 10 (commencing with Section 10101) 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 (commencing with Section 9101). The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2401 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 1203. (36) “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 it would have been received if properly sent under subparagraph (A). (37) “Sign” means, with present intent to authenticate or adopt a record: (A) execute or adopt a tangible symbol; or (B) attach to or logically associate with the record an electronic symbol, sound, or process. “Signed,” “signing,” and “signature” have corresponding meanings. (38) “Spouse” includes “registered domestic partner,” as required by Section 297.5 of the Family Code. (39) “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. (40) “Surety” includes a guarantor or other secondary obligor. (41) “Term” means a portion of an agreement that relates to a particular matter. (42) “Unauthorized signature” means a signature made without actual, implied, or apparent authority. The term includes a forgery. (43) “Warehouse receipt” means a receipt issued by a person engaged in the business of storing goods for hire. (44) “Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning. (45) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. (Amended by Stats. 2023, Ch. 210, Sec. 1. (SB 95) Effective January 1, 2024.) § 1202 Division 1, Chapter 2 (a) Subject to subdivision (f), 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 subdivision (f), 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. (Added by Stats. 2006, Ch. 254, Sec. 18. Effective January 1, 2007.) § 1203 Division 1, Chapter 2 (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. (7) in the case of a motor vehicle, as defined in Section 415 of the Vehicle Code, or a trailer, as defined in Section 630 of that code, that is not to be used primarily for personal, family, or household purposes, that the amount of rental payments may be increased or decreased by reference to the amount realized by the lessor upon sale or disposition of the vehicle or trailer. Nothing in this paragraph affects the application or administration of the Sales and Use Tax Law (Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code). (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. (Added by Stats. 2006, Ch. 254, Sec. 20. Effective January 1, 2007.) § 1204 Division 1, Chapter 2 Except as otherwise provided in Divisions 3, 4, 5, 6, and 12, 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 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 under a preexisting contract for purchase; or (4) in return for any consideration sufficient to support a simple contract. (Amended by Stats. 2023, Ch. 210, Sec. 2. (SB 95) Effective January 1, 2024.) § 1205 Division 1, Chapter 2 (a) Whether a time for taking an action required by this 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. (Added by renumbering Section 1204 by Stats. 2006, Ch. 254, Sec. 21. Effective January 1, 2007.) § 1206 Division 1, Chapter 2 Whenever this 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. (Repealed and added by Stats. 2006, Ch. 254, Sec. 25. Effective January 1, 2007.) § 1301 Division 1, Chapter 3 (a) Except as otherwise provided 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 the other state or nation shall govern their rights and duties. (b) In the absence of an agreement effective under subdivision (a), and except as provided in subdivision (c), this code applies to transactions bearing an appropriate relation to this state. (c) If one of the following provisions specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified: (1) Section 2402. (2) Section 4102. (3) Section 5116. (4) Section 6103. (5) Section 8110. (6) Sections 9301 to 9307, inclusive. (7) Sections 10105 and 10106. (8) Section 11507. (9) Section 12107. (Amended by Stats. 2023, Ch. 210, Sec. 3. (SB 95) Effective January 1, 2024.) § 1302 Division 1, Chapter 3 (a) Except as otherwise provided in subdivision (b) or elsewhere in this code, the effect of provisions of this code may be varied by agreement. (b) The obligations of good faith, diligence, reasonableness, and care prescribed by this 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 this 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 of certain provisions of this 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. (Added by Stats. 2006, Ch. 254, Sec. 30. Effective January 1, 2007.) § 1303 Division 1, Chapter 3 (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 subdivision (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever 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; (3) course of dealing prevails over usage of trade. (f) Subject to Section 2209, 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 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. (Added by renumbering Section 1205 by Stats. 2006, Ch. 254, Sec. 23. Effective January 1, 2007.) § 1304 Division 1, Chapter 3 Every contract or duty within this code imposes an obligation of good faith in its performance and enforcement. (Added by renumbering Section 1203 by Stats. 2006, Ch. 254, Sec. 19. Effective January 1, 2007.) § 1305 Division 1, Chapter 3 (a) The remedies provided by this 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 damages nor penal damages may be had except as specifically provided in this code or by other rule of law. (b) Any right or obligation declared by this code is enforceable by action unless the provision declaring it specifies a different and limited effect. (Added by renumbering Section 1106 by Stats. 2006, Ch. 254, Sec. 11. Effective January 1, 2007.) § 1306 Division 1, Chapter 3 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 a signed record. (Amended by Stats. 2023, Ch. 210, Sec. 4. (SB 95) Effective January 1, 2024.) § 1307 Division 1, Chapter 3 (1) 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 admissible as evidence of the facts stated in the document by the third party in any action arising out of the contract that authorized or required the document. (2) In any action arising out of the contract that authorized or required the document referred to in subdivision (1): (a) A document in due form purporting to be the document referred to in subdivision (1) is presumed to be authentic and genuine. The presumption is a presumption affecting the burden of producing evidence. (b) If the document is found to be authentic and genuine, the facts stated in the document by the third party are presumed to be true. The presumption is a presumption affecting the burden of proof. (Added by renumbering Section 1202 by Stats. 2006, Ch. 254, Sec. 17. Effective January 1, 2007.) § 1308 Division 1, Chapter 3 (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) Subdivision (a) does not apply to an accord and satisfaction. (Added by renumbering Section 1207 by Stats. 2006, Ch. 254, Sec. 26. Effective January 1, 2007.) § 1309 Division 1, Chapter 3 A term providing that one 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. (Added by renumbering Section 1208 by Stats. 2006, Ch. 254, Sec. 27. Effective January 1, 2007.) § 1310 Division 1, Chapter 3 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. (Added by renumbering Section 1209 by Stats. 2006, Ch. 254, Sec. 28. Effective January 1, 2007.) § 2101 Division 2, Chapter 1 This division shall be known and may be cited as Uniform Commercial Code—Sales. (Enacted by Stats. 1963, Ch. 819.) § 2102 Division 2, Chapter 1 (a) Unless the context otherwise requires, and except as provided in subdivision (c), this division applies to transactions in goods and, in the case of a hybrid transaction, it applies to the extent provided in subdivision (b). (b) In a hybrid transaction: (1) If the sale-of-goods aspects do not predominate, only the provisions of this division which relate primarily to the sale-of-goods aspects of the transaction apply, and the provisions that relate primarily to the transaction as a whole do not apply. (2) If the sale-of-goods aspects predominate, this division applies to the transaction but does not preclude application in appropriate circumstances of other law to aspects of the transaction which do not relate to the sale of goods. (c) This division does not: (1) Apply to a transaction that, even though in the form of an unconditional contract to sell or present sale, operates only to create a security interest; or (2) Impair or repeal a statute regulating sales to consumers, farmers, or other specified classes of buyers. (Amended by Stats. 2023, Ch. 210, Sec. 5. (SB 95) Effective January 1, 2024.) § 2103 Division 2, Chapter 1 (1) In this division unless the context otherwise requires: (a) “Buyer” means a person who buys or contracts to buy goods. (b) [Reserved] (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 division or to specified chapters thereof, and the sections in which they appear are: “Acceptance.” Section 2606. “Banker’s credit.” Section 2325. “Between merchants.” Section 2104. “Cancellation.” Section 2106(4). “Commercial unit.” Section 2105. “Confirmed credit.” Section 2325. “Conforming to contract.” Section 2106. “Contract for sale.” Section 2106. “Cover.” Section 2712. “Entrusting.” Section 2403. “Financing agency.” Section 2104. “Future goods.” Section 2105. “Goods.” Section 2105. “Identification.” Section 2501. “Installment contract.” Section 2612. “Letter of Credit.” Section 2325. “Lot.” Section 2105. “Merchant.” Section 2104. “Overseas.” Section 2323. “Person in position of seller.” Section 2707. “Present sale.” Section 2106. “Sale.” Section 2106. “Sale on approval.” Section 2326. “Sale or return.” Section 2326. “Termination.” Section 2106. (3) The following definitions in other divisions apply to this division: “Check.” Section 3104. “Consignee.” Section 7102. “Consignor.” Section 7102. “Consumer goods.” Section 9102. “Control.” Section 7106. “Dishonor.” Section 3502. “Draft.” Section 3104. (4) In addition, Division 1 (commencing with Section 1101) contains general definitions and principles of construction and interpretation applicable throughout this division. (Amended by Stats. 2006, Ch. 254, Sec. 31. Effective January 1, 2007.) § 2104 Division 2, Chapter 1 (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 2707). (3) “Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants. (Amended by Stats. 2006, Ch. 254, Sec. 32. Effective January 1, 2007.) § 2105 Division 2, Chapter 1 (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 (Division 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 2107). (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. (Enacted by Stats. 1963, Ch. 819.) § 2106 Division 2, Chapter 1 (1) In this division 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 2401). 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. (5) “Hybrid transaction” means a single transaction involving a sale of goods and: (a) the provision of services; (b) a lease of other goods; or (c) a sale, lease, or license of property other than goods. (Amended by Stats. 2024, Ch. 80, Sec. 25. (SB 1525) Effective January 1, 2025.) § 2107 Division 2, Chapter 1 (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 division 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 subdivision (1) or of timber to be cut is a contract for the sale of goods within this division 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 in the same manner 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. (Amended by Stats. 1974, Ch. 997.) § 2201 Division 2, Chapter 2 (1) Except as otherwise provided in this section, a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there is a record 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 the party’s authorized agent or broker. A record is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this subdivision beyond the quantity of goods shown in the record. (2) Between merchants if within a reasonable time a record 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 subdivision (1) against the party unless notice in a record of objection to its contents is given within 10 days after it is received. (3) A contract which does not satisfy the requirements of subdivision (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; (b) If the party against whom enforcement is sought admits in its 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 2606). (4) Subdivision (1) of this section does not apply to a qualified financial contract as that term is defined in paragraph (2) of subdivision (b) of Section 1624 of the Civil Code if either (a) there is, as provided in paragraph (3) of subdivision (b) of Section 1624 of the Civil Code, sufficient evidence to indicate that a contract has been made or (b) the parties thereto, by means of a prior or subsequent written contract, have agreed to be bound by the terms of the qualified financial contract from the time they reach agreement (by telephone, by exchange of electronic messages, or otherwise) on those terms. (Amended by Stats. 2024, Ch. 80, Sec. 26. (SB 1525) Effective January 1, 2025.) § 2202 Division 2, Chapter 2 Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record 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, course of performance, or usage of trade (Section 1303); and (b) By evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement. (Amended by Stats. 2023, Ch. 210, Sec. 8. (SB 95) Effective January 1, 2024.) § 2204 Division 2, Chapter 2 (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. (Enacted by Stats. 1963, Ch. 819.) § 2205 Division 2, Chapter 2 (a) An offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. (b) Notwithstanding subdivision (a), when a merchant renders an offer, oral or written, to supply goods to a contractor licensed pursuant to the provisions of Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code or a similar contractor’s licensing law of another state, and the merchant has actual or imputed knowledge that the contractor is so licensed, and that the offer will be relied upon by the contractor in the submission of its bid for a construction contract with a third party, the offer relied upon shall be irrevocable, notwithstanding lack of consideration, for 10 days after the awarding of the contract to the prime contractor, but in no event for more than 90 days after the date the bid or offer was rendered by the merchant; except that an oral bid or offer, when for a price of two thousand five hundred dollars ($2,500) or more, shall be confirmed in a record by the contractor or the contractor’s agent within 48 hours after it is rendered. Failure by the contractor to confirm the offer in a record shall release the merchant from the merchant’s offer. Nothing in this subdivision shall prevent a merchant from providing that the bid or offer will be held open for less than the time provided for herein. (Amended by Stats. 2023, Ch. 210, Sec. 9. (SB 95) Effective January 1, 2024.) § 2206 Division 2, Chapter 2 (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. (Enacted by Stats. 1963, Ch. 819.) § 2207 Division 2, Chapter 2 (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 code. (Enacted by Stats. 1963, Ch. 819.) § 2209 Division 2, Chapter 2 (1) An agreement modifying a contract within this division needs no consideration to be binding. (2) A signed agreement which excludes modification or rescission except by a signed writing or other signed record 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 division (Section 2201) 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 subdivision (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. (Amended by Stats. 2023, Ch. 210, Sec. 10. (SB 95) Effective January 1, 2024.) § 2210 Division 2, Chapter 2 (1) A party may perform his or her duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his or her 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 9406, 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 or her by his or her contract, or impair materially his or her 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 or her 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 subdivision (2) 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 (A) 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 (B) 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 or her 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 or her rights against the assignor, demand assurances from the assignee (Section 2609). (Amended (as to be amended by Stats. 1999, Ch. 991) by Stats. 2000, Ch. 1003, Sec. 4. Effective January 1, 2001. Operative July 1, 2001, by Sec. 56 of Ch. 1003.) § 2301 Division 2, Chapter 3 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. (Enacted by Stats. 1963, Ch. 819.) § 2303 Division 2, Chapter 3 Where this division 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. (Enacted by Stats. 1963, Ch. 819.) § 2304 Division 2, Chapter 3 (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 division, but not the transfer of the interest in realty or the transferor’s obligations in connection therewith. (Enacted by Stats. 1963, Ch. 819.) § 2305 Division 2, Chapter 3 (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 canceled 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. (Enacted by Stats. 1963, Ch. 819.) § 2306 Division 2, Chapter 3 (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. (Enacted by Stats. 1963, Ch. 819.) § 2307 Division 2, Chapter 3 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. (Enacted by Stats. 1963, Ch. 819.) § 2308 Division 2, Chapter 3 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. (Enacted by Stats. 1963, Ch. 819.) § 2309 Division 2, Chapter 3 (1) The time for shipment or delivery or any other action under a contract if not provided in this division 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. (Enacted by Stats. 1963, Ch. 819.) § 2310 Division 2, Chapter 3 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 2513); and (c) If delivery is authorized and made by way of documents of title otherwise than by subdivision (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 postdating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period. (Amended by Stats. 2006, Ch. 254, Sec. 35. Effective January 1, 2007.) § 2311 Division 2, Chapter 3 (1) An agreement for sale which is otherwise sufficiently definite (subdivision (3) of Section 2204) 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 subdivisions (1)(c) and (3) of Section 2319 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 co-operation 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 co-operate as a breach by failure to deliver or accept the goods. (Enacted by Stats. 1963, Ch. 819.) § 2312 Division 2, Chapter 3 (1) Subject to subdivision (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 subdivision (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. (Enacted by Stats. 1963, Ch. 819.) § 2313 Division 2, Chapter 3 (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. (Enacted by Stats. 1963, Ch. 819.) § 2314 Division 2, Chapter 3 (1) Unless excluded or modified (Section 2316), 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 de