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(810 ILCS 5/Art.
1 Pt. 2 heading)
PART
2. GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
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(810 ILCS 5/1-201) (from Ch. 26,
par. 1-201)
Sec. 1-201. General Definitions.
Subject to additional definitions contained in the subsequent
Articles of this Act which are applicable to specific Articles
or Parts thereof, and unless the context otherwise requires,
in this Act:
(1) "Action" in the sense
of a judicial proceeding includes recoupment, counterclaim, set-off,
suit in equity and any other proceedings in which rights are
determined.
(2) "Aggrieved party" means
a party entitled to resort to a remedy.
(3) "Agreement" means
the bargain of the parties in fact as found in their language
or by implication from other circumstances including course of
dealing or usage of trade or course of performance as provided
in this Act (Sections 1-205, 2-208, and 2A-207). Whether an agreement
has legal consequences is determined by the provisions of this
Act, if applicable; otherwise by the law of contracts (Section
1-103). (Compare "Contract".)
(4) "Bank" means any
person engaged in the business of banking.
(5) "Bearer" means the
person in possession of an instrument, document of title, or
certificated security payable to bearer or indorsed in blank.
(6) "Bill of lading" means
a document evidencing the receipt of goods for shipment issued
by a person engaged in the business of transporting or forwarding
goods, and includes an airbill. "Airbill" means a document
serving for air transportation as a bill of lading does for marine
or rail transportation, and includes an air consignment note
or air waybill.
(7) "Branch" includes
a separately incorporated foreign branch of a bank.
(8) "Burden of establishing" a
fact means the burden of persuading the triers of fact that the
existence of the fact is more probable than its non-existence.
(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 pre-existing contract
for sale. Only a buyer that takes possession of the goods or
has a right to recover the goods from the seller under Article
2 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.
(10) "Conspicuous": A
term or clause is conspicuous when it is so written that a reasonable
person against whom it is to operate ought to have noticed it.
A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING)
is conspicuous. Language in the body of a form is "conspicuous" if
it is in larger or other contrasting type or color. But in a
telegram any stated term is "conspicuous". Whether
a term or clause is "conspicuous" or not is for decision
by the court.
(11) "Contract" means
the total legal obligation which results from the parties' agreement
as affected by this Act and any other applicable rules of law.
(Compare "Agreement".)
(12) "Creditor" includes
a general creditor, a secured creditor, a lien creditor and any
representative of creditors, including an assignee for the benefit
of creditors, a trustee in bankruptcy, a receiver in equity and
an executor or administrator of an insolvent debtor's or assignor's
estate.
(13) "Defendant" includes
a person in the position of defendant in a cross-action or counterclaim.
(14) "Delivery" with
respect to instruments, documents of title, chattel paper or
certificated securities means voluntary transfer of possession.
(15) "Document of title" includes
bill of lading, dock warrant, dock receipt, warehouse receipt
or order for the delivery of goods, and also any other document
which in the regular course of business or financing is treated
as adequately evidencing that the person in possession of it
is entitled to receive, hold and dispose of the document and
the goods it covers. To be a document of title a document must
purport to be issued by or addressed to a bailee and purport
to cover goods in the bailee's possession which are either identified
or are fungible portions of an identified mass.
(16) "Fault" means wrongful
act, omission or breach.
(17) "Fungible" with
respect to goods or securities means goods or securities of which
any unit is, by nature or usage of trade, the equivalent of any
other like unit. Goods which are not fungible shall be deemed
fungible for the purposes of this Act to the extent that under
a particular agreement or document unlike units are treated as
equivalents.
(18) "Genuine" means
free of forgery or counterfeiting.
(19) "Good faith" means
honesty in fact in the conduct or transaction concerned.
(20) "Holder" with respect
to a negotiable instrument means the person in possession if
the instrument is payable to bearer or, in the case of an instrument
payable to an identified person, if the identified person is
in possession. "Holder" with respect to a document
of title means the person in possession if the goods are deliverable
to bearer or to the order of the person in possession.
(21) To "honor" is to
pay or accept and pay, or where a credit so engages to purchase
or discount a draft complying with the terms of the credit.
(22) "Insolvency proceedings" includes
any assignment for the benefit of creditors or other proceedings
intended to liquidate or rehabilitate the estate of the person
involved.
(23) A person is "insolvent" who
either has ceased to pay his debts in the ordinary course of
business or cannot pay his debts as they become due or is insolvent
within the meaning of the federal bankruptcy law.
(24) "Money" means 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
2 or more nations.
(25) A person has "notice" of
a fact when
(a) he
has actual knowledge of it; or
(b) he
has received a notice or notification of it;
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(c)
from all the facts and circumstances known to
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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 Act.
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(26) A person "notifies" or "gives" a
notice or notification to another by taking such steps
as may be reasonably required to inform the other in ordinary
course whether or not such other actually comes to know
of it. A person "receives" a notice or notification
when
(a) it
comes to his attention; or
(b) it
is duly delivered at the place of business
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through which the contract was made
or at any other place held out by him as the place
for receipt of such communications.
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(27) Notice, knowledge
or a notice or notification received by an organization
is effective for a particular transaction from the time
when it is brought to the attention of the individual conducting
that transaction, and in any event from the time when it
would have been brought to his attention if the organization
had exercised due diligence. An organization exercises
due diligence if it maintains reasonable routines for communicating
significant information to the person 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.
(28) "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.
(29) "Party", as distinct
from "third party", means a person who has engaged in
a transaction or made an agreement within this Act.
(30) "Person" includes
an individual or an organization (see Section 1-102).
(31) "Presumption" or "presumed" 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 non-existence.
(32) "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.
(33) "Purchaser" means
a person who takes by purchase.
(34) "Remedy" means any
remedial right to which an aggrieved party is entitled with or
without resort to a tribunal.
(35) "Representative" includes
an agent, an officer of a corporation or association, and a trustee,
executor or administrator of an estate, or any other person empowered
to act for another.
(36) "Rights" includes
remedies.
(37) "Security interest" means
an interest in personal property or fixtures which secures payment
or performance of an obligation. The term 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 Article 9. The special property interest of a buyer of goods
on identification of those goods to a contract for sale under Section
2-401 is not a "security interest", but a buyer may also
acquire a "security interest", by complying with Article
9. Except as otherwise provided in Section 2-505, the right of
a seller or lessor of goods under Article 2 or 2A 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 Article 9. The retention or reservation of title
by a seller of goods notwithstanding shipment or delivery to the
buyer (Section 2-401) is limited in effect to a reservation of
a "security interest".
Whether a transaction creates a
lease or security interest is determined by the facts of each case;
however, a transaction creates a security interest if the consideration
the lessee is to pay the lessor for the right to 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
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greater than the remaining economic
life of the goods;
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(b)
the lessee is bound to renew the lease for the
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remaining economic life of the goods
or is bound to become the owner of the goods;
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(c)
the lessee has an option to renew the lease for
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the remaining economic life of the goods
for no additional consideration or nominal additional
consideration upon compliance with the lease agreement;
or
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(d)
the lessee has an option to become the owner of
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the goods for no additional consideration
or nominal additional consideration upon compliance
with the lease agreement.
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A transaction
does not create a security interest merely because it provides
that:
(a) the
present value of the consideration the
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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;
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(b)
the lessee assumes risk of loss of the goods, or
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agrees to pay taxes, insurance, filing,
recording, or registration fees, or service or
maintenance costs with respect to the goods;
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(c)
the lessee has an option to renew the lease or
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to become the owner of the goods;
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(d)
the lessee has an option to renew the lease for
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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
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(e)
the lessee has an option to become the owner of
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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.
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For purposes of
this subsection (37):
(x) Additional
consideration is not nominal if (i)
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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;
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(y) "Reasonably
predictable" and "remaining economic
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life of the goods" are to be determined
with reference to the facts and circumstances at
the time the transaction is entered into; and
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(z) "Present
value" means the amount as of a date
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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 as of each
case at the time the transaction was entered into.
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(38) "Send" in
connection with any writing or notice means to deposit
in the mail or deliver for transmission by any other usual
means of communication with postage or cost of transmission
provided for and properly addressed and in the case of
an instrument to an address specified thereon or otherwise
agreed, or if there be none to any address reasonable under
the circumstances. The receipt of any writing or notice
within the time at which it would have arrived if properly
sent has the effect of a proper sending.
(39) "Signed" includes
any symbol executed or adopted by a party with present intention
to authenticate a writing.
(40) "Surety" includes
guarantor.
(41) "Telegram" includes
a message transmitted by radio, teletype, cable, any mechanical
method of transmission, or the like.
(42) "Term" means that
portion of an agreement which relates to a particular matter.
(43) "Unauthorized" signature
means one made without actual, implied, or apparent authority and
includes a forgery.
(44) "Value". Except
as otherwise provided with respect to negotiable instruments and
bank collections (Sections 3-303, 4-210, and 4-211), a person gives "value" for
rights if he acquires them:
(a) in
return for a binding commitment to extend
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credit or for the extension of immediately
available credit whether or not drawn upon and
whether or not a charge-back is provided for in
the event of difficulties in collection; or
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(b)
as security for or in total or partial
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satisfaction of a pre-existing claim;
or
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(c)
by accepting delivery pursuant to a pre-existing
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contract for purchase; or
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(d)
generally, in return for any consideration
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sufficient to support a simple contract.
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(45) "Warehouse
receipt" means a receipt issued by a person engaged
in the business of storing goods for hire.
(46) "Written" or "writing" includes
printing, typewriting or any other intentional reduction to tangible
form.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/1-202) (from Ch. 26, par. 1-202)
Sec. 1-202. Prima facie evidence
by third party documents.
A document in due form purporting
to be a bill of lading, policy or certificate of insurance, official
weigher's or inspector's certificate, consular invoice, or any
other document authorized or required by the contract to be issued
by a third party shall be prima facie evidence of its own authenticity
and genuineness and of the facts stated in the document by the
third party.
(Source: Laws 1961, p. 2101.)
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(810 ILCS 5/1-203) (from Ch. 26, par. 1-203)
Sec. 1-203. Obligation of good
faith.
Every contract or duty within this
Act imposes an obligation of good faith in its performance or
enforcement.
(Source: Laws 1961, p. 2101.)
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(810 ILCS 5/1-204) (from Ch. 26, par. 1-204)
Sec. 1-204. Time; reasonable time; "seasonably".
(1) Whenever this Act requires
any action to be taken within a reasonable time, any time which
is not manifestly unreasonable may be fixed by agreement.
(2) What is a reasonable time for
taking any action depends on the nature, purpose and circumstances
of such action.
(3) An action is taken "seasonably" when
it is taken at or within the time agreed or if no time is agreed
at or within reasonable time.
(Source: Laws 1961, p. 2101.)
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(810 ILCS 5/1-205) (from Ch. 26, par. 1-205)
Sec. 1-205. Course of dealing and
usage of trade.
(1) A course of dealing is a sequence
of previous conduct between the parties to a particular transaction
which is fairly to be regarded as establishing a common basis
of understanding for interpreting their expressions and other
conduct.
(2) A usage of trade is any practice
or method of dealing having such regularity of observance 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 are to be proved as facts.
If it is established that such a usage is embodied in a written
trade code or similar writing the interpretation of the writing
is for the court.
(3) A course of dealing between
parties and any usage of trade in the vocation or trade in which
they are engaged or of which they are or should be aware give
particular meaning to and supplement or qualify terms of an agreement.
(4) The express terms of an agreement
and an applicable course of dealing or usage of trade shall be
construed wherever reasonable as consistent with each other;
but when such construction is unreasonable express terms control
both course of dealing and usage of trade and course of dealing
controls usage of trade.
(5) An applicable usage of trade
in the place where any part of performance is to occur shall
be used in interpreting the agreement as to that part of the
performance.
(6) Evidence of a relevant usage
of trade 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 to the latter.
(Source: Laws 1961, p. 2101.)
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(810 ILCS 5/1-206) (from Ch. 26, par. 1-206)
Sec. 1-206. Statute of frauds for
kinds of personal property not otherwise covered.
(1) Except in the cases described
in subsection (2) of this Section a contract for the sale of
personal property is not enforceable by way of action or defense
beyond $5,000 in amount or value of remedy unless there is some
writing which indicates that a contract for sale has been made
between the parties at a defined or stated price, reasonably
identifies the subject matter, and is signed by the party against
whom enforcement is sought or by his authorized agent.
(2) Subsection (1) of this Section
does not apply to contracts for the sale of goods (Section 2-201)
nor of securities (Section 8-113) nor to security agreements
(Section 9-203).
(Source: P.A. 89-364, eff. 1-1-96.)
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(810 ILCS 5/1-207) (from Ch. 26, par. 1-207)
Sec. 1-207. Performance or acceptance
under reservation of rights.
(1) A party who, 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.
(2) Subsection (1) does not apply
to an accord and satisfaction.
(Source: P.A. 87-582.)
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(810 ILCS 5/1-208) (from Ch. 26,
par. 1-208)
Sec. 1-208. Option to Accelerate
at Will.
A term providing that one party
or his successor in interest may accelerate payment or performance
or require collateral or additional collateral "at will" or "when
he deems himself insecure" or in words of similar import
shall be construed to mean that he shall have power to do so
only if he in good faith believes that the prospect of payment
or performance is impaired. The burden of establishing lack of
good faith is on the party against whom the power has been exercised.
(Source: Laws 1961, 1st SS., p. 7.)
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(810 ILCS 5/1-209) (from Ch. 26,
par. 1-209)
Sec. 1-209. Subordinated Obligations.
An obligation may be issued as
subordinated to payment of another obligation of the person obligated,
or a creditor may subordinate his right to payment of an obligation
by agreement with either the person obligated or another creditor
of the person obligated. Such a subordination does not create
a security interest as against either the common debtor or a
subordinated creditor. This Section shall be construed as declaring
the law as it existed prior to the enactment of this Section
and not as modifying it.
(Source: P. A. 77-2810.)
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