KANSAS COMMENT, 1996

This section contains 46 definitions which apply throughout the entire Code. In addition, each other article of the Code also contains separate definitions which apply only to those respective articles.

(1) The definition of "action" is similar to that contained in K.S.A. 58-2543(a) and K.S.A. 34-223(a).

(2) The definition of "aggrieved party" is new to Kansas law.

(3) The term "agreement" is broader than the term "contract" under subsection (11), and differs from other provisions of Kansas law. See K.S.A. 27-201 (defining "agreement" as "contract"). For discussion of the significance of course of dealing, usage of trade, and course of performance, see 1996 Kansas Comments to 84-1-205. See also Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758 (10th Cir. 1983) (applying Kansas law).

(4) The definition of "bank" is broader than that found in the Kansas banking laws. See K.S.A. 9-504 and 9-701.

(5) The definition of "bearer" is somewhat broader than that found in former K.S.A. 52-102. It applies generally in cases involving negotiable paper of various kinds.

(6) There was no statutory definition of "bill of lading" in prior Kansas law, although bills of lading are referred to in other Kansas statutes. See, e.g. K.S.A. 66-255. Although this subsection speaks of a bill of lading as a receipt, the provisions of Article 7 indicate that a bill of lading carries many more rights and obligations than a mere receipt. A bill of lading is a "document of title" under subsection (15).

(7) The definition of "branch" is new to Kansas statutory law with the Uniform Commercial Code.. For the statutory provisions governing the establishment of branch banks in Kansas, see K.S.A. 9-1111.

(8) The term "burden of establishing" is new. It is defined as the burden of persuading the trier of fact that a fact is more likely to exist than not—i.e., it requires proof by a preponderance of the evidence. Compare K.S.A. 60-401(d) (defining the terms "burden of proof" and "burden of persuasion" as synonymous and as requiring fact to be proven either by preponderance of the evidence, clear and convincing evidence, or beyond a reasonable doubt).

(9) The definition of "buyer in ordinary course of business" is a specialized version of the traditional concept of bona fide purchaser, purchasing from one who deals in goods of that kind. "Good faith" is defined in subsection (19) of this section. In Ellsworth v. Worthey, 612 S.W.2d 396 (Mo. App. 1981) (applying Kansas law), the court held that a buyer of a motor vehicle who does not obtain a certificate of title cannot be in good faith and does not qualify as a "buyer in ordinary course of business." As to the "without knowledge" requirement of this subsection, see First Nat'l Bank v. Ford Motor Credit Co., 231 K. 431, 646 P.2d 1057 (1982), which discusses the distinction between a buyer who merely knows of the existence of a security agreement and a buyer who knows that a particular sale was in violation of rights under the security agreement. Under this subsection, a "buyer" is one who acquires property for value. See also 84-2-103(1)(a). "Buyer" is distinguished from "purchaser" throughout the Code. A "purchaser" need not give any value or consideration, and is anyone who acquires by a voluntary transaction. See subsections (32) and (33).

(10) The definition of "conspicuous" is new to Kansas law. This subsection spells out several means—e.g., larger or contrasting type or color — by which a term can be made "conspicuous." The court in J&W Equip., Inc. v. Weingartner, 5 K.A.2d 466, 618 P.2d 862 (1980), however, indicated that whether a term is conspicuous should be evaluated by looking to the document as a whole rather than solely on the basis of type size or ink color. In a number of cases, Kansas courts have examined whether warranty disclaimers were conspicuous as required under section 84-2-316(2). In J&W Equip., Inc. v. Weingartner, supra, a disclaimer which appeared in a standard form contract, in all capital letters in an unnumbered paragraph, was held to be conspicuous even though there were other capitalized portions of the contract. See also Ray Martin Painting, Inc. v. Ameron, Inc., 638 F. Supp. 768 (D. Kan. 1986) (upholding disclaimer as sufficiently conspicuous); Delhomme Indus., Inc. v. Houston Beechcraft, Inc., 669 F.2d 1049 (5th Cir. 1982) (applying Kansas law) (same). However, in Geo. C. Christopher & Son, Inc. v. Kansas Paint & Color Co., Inc., 215 K. 185, 523 P.2d 709, modified on rehearing 215 K. 510, 525 P.2d 626 (1974), a disclaimer appearing in fine print on the backs of invoices was held not conspicuous. See also Kelley Metal Trading Co. v. Al-Jon/United, Inc., 812 F. Supp. 185 (D. Kan. 1993) (holding disclaimer ineffective as not conspicuous); Belger Cartage Service, Inc. v. Holland Constr. Co., 224 K. 320, 582 P.2d 1111 (1978); see also Atlas Industries, Inc. v. National Cash Register Co., 216 K. 213, 531 P.2d 41 (1975) (holding attempted disclaimer in smaller type than the rest of the contract not conspicuous).

(11) The definition of "contract" supplements the definition of "agreement" in subsection (3). The definition of "contract" is a broad one. Compare Restatement (Second) Contracts § 1 (defining contract as "a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty"). In Stanturf v. Quality Dodge, Inc., 3 K.A.2d 485, 596 P.2d 1247 (1979), the court recognized that the Code has substantially liberalized certain contract principles, particularly principles of contract formation. See 84-2-204 and 1996 Kansas Comment 1 to that section.

(12) The term "creditor" was not defined in earlier uniform acts. The definition in this subsection, while broad, does not exclude other categories of persons who might have claims. The term "lien creditor" is defined in 84-9-301(3); the reference to "secured creditor" presumably means "secured party" as defined in 84-9-105(1)(m).

(13) K.S.A. 60-202 provides that the adverse party in a civil action shall be called the "defendant." The term as defined in this subsection includes persons in that position in cross-claims or counterclaims.

(14) The term "delivery" means voluntary transfer. It applies only to the transfer of possession of paper instruments. The Code contains no definition of delivery of goods. Compare "tender" under 84-2-503. However, in Evco Distrib., Inc. v. Commercial Credit Equip. Corp., 6 K.A.2d 205, 627 P.2d 374, rev. denied, 229 K. 669 (1981), the court cited this subsection in discussing the transfer of possession of goods.

(15) The definition of "document of title" is a broad one. The most common documents of title are bills of lading and warehouse receipts, as defined in subsections (6) and (45) of this section, and delivery orders as defined in 84-7-102. However, as is made clear by the Official Comment, the definition is left open so that new types of documents which develop in commercial usage may be included. The term "bailee" is defined in 84-7-102 for Article 7; it would seem that the drafters intended the same definition to apply throughout the Code when used in connection with documents of title. In 84-7-102, the term "document" is adopted as a shorthand term in Article 7 for "document of title." See also 84-9-105(1)(f). It is also worth noting that motor vehicle certificates of title are not "documents of title" within the meaning of the Code definition. See In re Emergency Beacon Corp., 665 F.2d 36 (2d Cir. 1981); National Exch. Bank v. Mann, 81 Wis.2d 352, 260 N.W.2d 716 (1978).

(16) The term "fault" is new to Kansas statutory law, although it was a part of the Uniform Sales Act.

(17) The term "fungible" is in accord with the definition of "fungible grain" in K.S.A. 34-223. Under this subsection, however, the concept of fungibility in Article 2 is extended to securities as well as to goods. See 84-8-107. In addition, the provision for fungibility by agreement is new. On the question of identifying a share of a bulk of fungible goods for sale, see 84-2-105(4), 84-2-501, and Reeves v. Pillsbury Co., 229 K. 423, 625 P.2d 440 (1981).

(18) The definition of "genuine" is new to Kansas statutory law. The term is used throughout the Code only in connection with commercial paper of various kinds and, in the newer amendments, has been replaced by authorized in many provisions. See, e.g., former 84-3-417 and current 84-3-417 and 84-3-418, former 84-4-207 and current 84-4-207 and 84-4-208 on negotiable instruments, 84-7-507, on documents of title, and 84-8-108, on investment securities.

(19) The definition of "good faith" in this subsection is subjective, and requires only honesty in fact. See also 84-1-203 (providing that every contract or duty under the Code imposes an obligation of good faith). In Articles 2 and 2a, the definition of "good faith" is expanded to include an objective standard of "reasonable commercial standards of fair dealing in the trade" when the party involved is a merchant. See 84-2-103(1)(b) and 84-2a-103(3). A party that gives pretextual reasons for canceling a letter agreement when its true reason was to escape a unfavorable business deal has not acted in good faith. See Kansas Mun. Gas Agency v. Vesta Energy Co., 843 F. Supp. 1401 (D. Kan. 1994); see also Iola State Bank v. Bolan, 235 K. 175, 679 P.2d 720 (1984) (bank failed to act honestly toward farmers and so was not good faith purchaser); Dick Hatfield Chevrolet, Inc. v. Bob Watson Motors, Inc., 238 K. 41, 708 P.2d 494 (1985) (bank did not act in good faith when it profited twice by its actions). Compare Nash Finch Co. v. Caspar, 813 F. Supp. 1497 (D. Kan. 1993) (wholesaler's selling of goods to retailer at price higher than other wholesalers does not establish lack of good faith).

"Good faith" has been redefined in Article 3, 4 and 4a to add the requirement of "reasonable commercial standards of fair dealing." See 84-3-103(a)(4), 84-4-104(c) and 84-4a-105(a)(6). Two Kansas cases apply the former Code's definition of "good faith" in situations involving a holder in due course under Article 3. See Kaw Valley State Bank & Trust Co. v. Riddle, 219 K. 550, 549 P.2d 927 (1976); Cairo Coop. Exchange v. First Nat'l Bank of Cunningham, 4 K.A.2d 458, 608 P.2d 1370 (1980), aff'd in part and rev'd in part, 228 K. 613, 620 P.2d 805 (1980), modified, 229 K. 184, 624 P.2d 420 (1981). In Baker v. Ratzlaff, 1 K.A.2d 285, 554 P.2d 153 (1977), the court applied the Code's good faith provisions to wrongful termination of a contract for the sale of goods. In North Central Kansas Prod. Credit Ass'n v. Boese, 19 U.C.C. Rep. Serv. 179 (D. Kan. 1976), the court stated that knowledge of suspicious circumstances did not amount to bad faith.

(20) The definition of "holder" is similar to the definitions found in former K.S.A. 52-102 and former K.S.A. 82-158. For cases applying the definition in the context of negotiable instruments, see Hanover Ins. Cos. v. Brotherhood State Bank, 482 F. Supp. 501 (D. Kan. 1979); Litwin v. Barrier, 6 K.A.2d 128, 626 P.2d 1232 (1981).

(21) The definition of "honor" is new to Kansas law with the Code.

(22) The definition of "insolvency proceedings" is new. The term includes bankruptcy proceedings. See In re SMS, Inc., 15 B.R. 496 (Bankr. Ct. D. Kan. 1981).

(23) The term "insolvent" was not defined in previous uniform laws in Kansas. Compare K.S.A. 9-1902 (defining "insolvency" for banks and trust companies); K.S.A. 40-3607 (defining "insolvent" for insurance companies); K.S.A. 2-3402 (defining "insolvent" under Family Farm Rehabilitation Act, K.S.A. 2-3401 et seq.). The definition in this subsection is broad, and includes general equitable insolvency as well as insolvency under section 101(32) of the federal Bankruptcy Code, 11 U.S.C. § 101(32).

(24) The definition of "money" is intended to be broad, referring only to the sanction of government and not merely to "legal tender." Note the additional definition in 84-3-107, dealing with instruments payable in foreign money. It has been held that coins with a numismatic value were "goods" and not "money" within the meaning of those terms in Article 9. See In re Midas Coin Co., Inc., 264 F. Supp. 193 (E.D. Mo. 1967), aff'd sub nom. Zuke v. St. Johns Community Bank, 387 F.2d 118 (8th Cir. 1968).

(25) This subsection carefully distinguishes between the terms "notice" and "knowledge." Precise use of these terms is essential in applying certain sections of the Code. See, for example, 84-3-303 et seq., dealing with notice of defenses in holder in due course doctrine. See also Kaw Valley State Bank & Trust Co. v. Riddle, 219 K. 550, 549 P.2d 927 (1976).

(26) This subsection defines giving and receipt of notice (not "knowledge") under subsection (25). Compare the definition of "send" in subsection (38).

(27) This subsection is new, and merely determines when notice or knowledge is effective when given to an organization.

(28) The definition of "organization" is new. It complements the definition of "person" in subsection (30).

(29) The term "party" refers to a person who engages in a transaction or an agreement under the Code. It is distinguished from "third party" throughout.

(30) The definition of "person" is very broad and is similar to statutory definitions of the same term in other uniform acts and general statutes in Kansas. See K.S.A. 16a-1-301(29) (Kansas Uniform Consumer Credit Code); K.S.A. 50-624(f) (Kansas Consumer Protection Act). But compare K.S.A. 77-201 (thirteenth) restricting the term to people, bodies politic and corporate, the latter two being more restrictive than the code "organization" in subsection (28).

(31) The last sentence of the definition presumption is not part of the uniform act. The language of subsection (31) is mandatory, but the reference to the introduction of evidence makes it clear that presumptions under the Code, as a general rule, are rebuttable. See also the definition of "burden of establishing" in subsection (8).

(32) The definition of "purchase" is the broad, common law definition of the word, and includes any voluntary transaction creating an interest in property, whether or not there is a price or other consideration. See First Nat'l Bank of Amarillo v. Southwestern Livestock, Inc., 616 F. Supp. 1515 (D. Kan. 1985) (quoting Kansas Comment 1983 to this section), aff'd, 859 F.2d 847 (1988). As noted in the comment to subsection (9), "purchase" must be distinguished from the narrower term, "buying" under the Code.

(33) This subsection defines "purchaser" with reference to the term "purchase" in subsection (32). See Iola State Bank v. Bolan, 235 K. 175, 679 P.2d 720 (1984) (bank with security interest is "purchaser"); First Nat'l Bank of Amarillo v. Southwestern Livestock, Inc., 616 F. Supp. 1515 (D. Kan. 1985) (auction house not "purchaser" because at most had only possessory interest in cattle), aff'd, 859 F.2d 847 (1988). While a "purchaser" may be a person who takes by gift, the Code in several places uses the concept "good faith purchaser for value." See 84-2-403(1). A good faith purchaser for value, naturally, must be in "good faith," see subsection (19), and give "value," see subsection (44), and is distinguished from an ordinary "purchaser."

(34) The definition of "remedy" is broad and includes "rights" as well. See subsection (36). It also includes self-help remedies such as repossession under 84-9-503.

(35) The term "representative" is new. See Rosedale State Bank & Trust Co. v. Stringer, 2 Kan. App.2d 331, 579 P.2d 158 (1978), for an application of this term.

(36) The term "rights" is new, and includes "remedies" as defined in subsection (34).

(37) The section varies from the Official Text only in that the third, and final, subsections "a," "b" and "c" in the Official Text are denominated "x," "y" and "z." The term "security interest," which usually determines whether the priorities of Article 9 apply, is defined in very broad terms. Although most security agreements secure payment, security agreements may also be useful to secure performance of other obligations, such as manufacture or noncompete clauses. For a failed attempt at such a security agreement, see John Miller Supply Co., Inc. v. Western State Bank, 199 N.W.2d 161 (Wis., 1972). Most security interests arise from security agreements entered into under Article 9. See 84-9-102, for included transactions and 84-9-104, for excluded transactions, and 1996 Kansas Comment to 84-9-102. This section defines six transactions which may be construed as security interests: consensual security interests; interests arising under Article 2 on sales; the interests of the buyers of accounts and chattel paper; interests of buyers of goods identified to a contract; consignments and leases.

Security interests may also arise in ways other than through consensual arrangements under Article 9. Under Article 2, the seller of goods may create a security interest in itself by reserving title, see 84-2-401; Holiday Rambler Corp. v. Morris, 32 U.C.C. Rep. Serv. 1222 (D. Kan. 1981), or by shipping goods under reservation, see 84-2-505. A buyer that has prepaid all or part of the price has a security interest under 84-2-711(3) in goods that have been rejected or whose acceptance has been revoked. These security interests, while they arise under Article 2, are subject in part to the provisions of Article 9. See 84-9-113.

The rights of a buyer of accounts and chattel paper is deemed to have a security interest. The practical effect of this provision is that the buyer must file for the accounts and either file or take possession of chattel paper or risk subordination to creditors, buyers and other secured parties. See 84-9-301, 84-9-308 and 84-9-312.

Consignment arrangements have been held to be security interests when they were not intended as true consignments. See In re Phippens, 4 B.R. 155 (Bankr. Ct. M.D. Tenn. 1980). Because a consignment is defined as a "sale or return," 84-2-326(1)(b), for the provisions in 84-2-326(3), the consignor is likely to be subordinate to creditors of the consignee unless the consignor complies with Article 9's filing requirements.

The definition of "security interest" was changed significantly when the Kansas legislature enacted new Article 2a concerning leases. Indeed, one of the reasons for the promulgation of Article 2a was to resolve uncertainty about "whether a transaction creates a lease or a security interest disguised as a lease." See Official Comment to 84-2a-101. Kansas courts have long recognized that a lease may be a security agreement. See Executive Finan. Serv., Inc. v. Pagel, 238 K. 809, 715 P.2d 381 (1986) (security interest disguised as lease); K-B Trucking Co. v. Riss Int'l Corp., 763 F.2d 1148 (10th Cir. 1985) (applying Kansas law) (same); Atlas Indus., Inc. v. National Cash Register Co., 216 K. 213, 531 P.2d 41 (1975) (tripartite commercial equipment lease was really security interest); CIT Fin. Serv., Inc. v. Gott, 5 K.A.2d 224, 615 P.2d 774 (1980) (same). Compare Ford Motor Credit Co. v. Sims, 12 K.A.2d 363, 743 P.2d 1012, rev. denied, 242 K. 902 (1987) (true lease); Wight v. AgriStor Leasing, 652 F. Supp. 1000 (D. Kan. 1987) (same); Evco Distrib., Inc. v. Commercial Credit Equip. Corp., 6 K.A.2d 205, 627 P.2d 374, rev. denied, 229 K. 669 (1981) (sale of equipment for subsequent lease). The former Code test for distinguishing between true leases and security interests disguised as security interests depended on the intent of the parties, which led to substantial uncertainty. As revised, this section "deletes all reference to the parties' intent" and "focus[es] on economics, not the intent of the parties." See Official Comment 37.

Paragraph two of this subsection sets out a two-part test for determining whether a lease is in reality a disguised security interest. A transaction is a security interest if the lessee does not have the right to terminate the lease before the end of the lease term and if one of four additional requirements are satisfied. If the lessee has the right to terminate the lease with no further obligation, the transaction is a true lease. In such a transaction, the lessor at all times retains a residual interest in the goods, which is "[t]he fundamental economic component of a lease." See William H. Lawrence & John H. Minan, The Law of Personal Property Leasing§ 2.01[2][c] (1993). If the lessee has no right to terminate, the first requirement is met, and the question then is whether one of four additional factors is satisfied. If (1) the original term of the lease equals or exceeds the remaining economic life of the goods; or (2) the lessee is required to become the owner of the goods or to renew the lease for the remaining economic life of the goods; or (3) the lessee has the option to renew the lease for the remaining economic life of the goods for nominal consideration; or (4) the lessee has an option to become the owner of the goods for nominal consideration, then the transaction is a security interest rather than a lease. In the case of the first two factors, the purported lessor has no residual interest; in the case of the latter two factors, the lease payments compensate the lessor for its residual interest. This subsection sets out specific circumstances in which consideration is and is not nominal. For a detailed discussion, see William H. Lawrence & John H. Minan, supra, § 2.01[2][c][ii].

In addition to defining when a transaction is a security interest rather than a lease, this section also sets out several factors that, of themselves, do not turn a lease into a security interest. Kansas cases relied on several of these factors in classifying a transaction as a security interest prior to the enactment of Article 2a, see Atlas Indus. v. National Cash Register Co., supra (present value of consideration under lease); CIT Fin. Serv., Inc. v. Gott, supra (same); see also AgriStor Leasing v. Meuli, supra (dicta) (lessee to provide insurance, make repairs, pay taxes), but the Official Comment to this subsection explains that such factors "are as applicable to true leases as to security interests." In particular, this provision makes clear that a full payout lease (lease in which present value of rental payments approximately equals fair market value of goods ) and the typical net lease (lease in which lessee assumes risk of loss or agrees to pay taxes, insurance, etc.) do not per se create a security interest. See the Official Comment.

In addition to the above six transactions which may create security interests,, the term "security interest" is used in 84-4-210 to describe the claim of a collecting bank in checks and other items taken for collection. Not everything is a security interest. In United States Fidelity & Guar. Co. v. First State Bank, 208 K. 738, 494 P.2d 1149 (1972), the court recognized that the right of a surety on a contractor's bond is not a security interest within the meaning of this subsection. See also 84-1-209 regarding other subordinated obligations which are not security agreements.

(38) The definition of "send" is new. Compare the definition of "notifies" in subsection (26).

(39) The definition of "signed" is extremely broad, and includes any symbol executed or adopted with present intention to authenticate a writing. As the Official Comment makes clear, no formal signature is required. A thumbprint, letterhead, or even an "x" would suffice. See Southwest Eng'g Co., Inc. v. Martin Tractor Co., Inc., 205 K. 684, 473 P.2d 18 (1970) (holding that name printed in upper lefthand corner of paper was sufficient). This definition applies only to the Code. In In re Estate of Reed, 229 K. 431, 625 P.2d 447 (1981), the court held that the definition in this subsection would not apply in a case concerning the proper subscription of a will within the meaning of the state law on wills.

(40) The term "surety" is not widely used in the Code. "Guarantor," which is not defined, appears in several sections in the Code. On the term "guarantor," see Benschoter v. First Nat'l Bank of Lawrence, 218 K. 144, 542 P.2d 1042 (1975), appeal dismissed, 425 U.S. 928 (1976). See also the definition of "accommodation party" in 84-3-419.

(41) The definition of "telegram" is new with the original adoption of the code.

(42) The definition of "term" is new with the original adoption of the Code. It will have particular significance in statutes of frauds, such as 84-2-201, and in such sections as 84-2-202, the parol evidence rule.

(43) The term "unauthorized" refers only to signatures or indorsements. Compare "genuine" in subsection (18). See generally Meador v. Ranchmart State Bank, 213 K. 372, 517 P.2d 123 (1973).

(44) The term "value" in this subsection does not apply to Articles 3 and 4, which have their own definitions of "value." See 84-3-303 and 84-4-211. For an illustration of paragraph (a), see E.F. Corp. v. Smith, 496 F.2d 826 (10th Cir. 1974) (applying Kansas law). For an illustration of paragraph (b), see Holiday Rambler Corp. v. Morris, 32 U.C.C. Rep. Serv. 1222 (D. Kan. 1981). The provision in paragraph (b) recognizing value in situations involving the taking of property in satisfaction for a pre-existing debt changes prior Kansas law. See Harbert v. Ft. Smith Canning Co., 134 K. 240, 5 P.2d 849 (1931).

(45) The definition of "warehouse receipt" is new with the adoption of the Code. A warehouse receipt is a "document of title" under subsection (15). K.S.A. 34-223 defines the term "receipt" as meaning "warehouse receipt" for purposes of the Kansas statutes on storage of grain. See 84-7-102 for the definition of "warehouseman."

(46) The terms "written" and "writing" are defined broadly in this subsection to include any intentional reduction to tangible form. It has been held that a tape recording may constitute a "writing" within the meaning of this subsection. See Ellis Canning Co. v. Bernstein, 348 F. Supp. 1212 (D. Colo. 1972); Swink & Co., Inc. v. Caroll McEntee & McGinley, Inc., 266 Ark. 279, 584 S.W.2d 393 (1979).

Revisor's Note:

Notice of sale of secured property in limited actions to be in compliance with this section, see 61-2403.

Section was amended twice in 1991 session, see also 84-1-201a.

Former section 84-1-201 was repealed by L. 2007, ch. 89, § 49 and the number reassigned to the current text.

Law Review and Bar Journal References:

Paragraph (19) mentioned in relating UCC to law of contracts, William G. Zimmerman, 14 K.L.R. 509, 510 (1966).

Paragraphs (19) and (37) cited in "Secured Transactions in Kansas: The New Look," J. Eugene Balloun, 5 W.L.J. 192, 194, 195, 198, 200, 203, 206, 211 (1966).

Paragraph (44) mentioned with respect to secured transactions, J. Eugene Balloun, 14 K.L.R. 359 (1965).

Subsection (9) quoted in footnote to "Some Secured Transactions With the Farmer," Van Smith, 35 J.B.A.K. 299, 302 (1966).

Definition of certain terms discussed with respect to "floor plan" financing, Charles H. Oldfather, 14 K.L.R. 571, 578, 579, 580, 581, 582, 583, 584, 590 (1966).

Concept of "good faith" within UCC provisions discussed, William G. Zimmerman, 14 K.L.R. 509, 510 (1966).

Subsection (37) mentioned in "Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 16K.L.R. 437, 441 (1968).

"URLTA, Kansas, and the Common Law," Michael J. Davis, 21 K.L.R. 387, 394 (1973).

Discussed and applied to similar provisions of K.S.A. 17-6426 in "Close Corporations and the Kansas General Corporation Code of 1972," Edwin W. Hecker, Jr., 22 K.L.R. 489, 534 (1974).

"The New UCC Article 9 Amendments," Barkley Clark, 44 J.B.A.K. 131, 133 (1975).

"U.C.C.: The Farmer is Not a Merchant Under the U.C.C.—Promissory Estoppel to Avoid the Operation of the Statute of Frauds," Mark A. Buck, 16 W.L.J. 230, 231, 236 (1976).

Subsection (37) mentioned in note on warranty violations in Tripartite finance lease agreements, Winton A. Winter, Jr., 25 K.L.R. 573, 577 (1977).

"Uniform Commercial Code: Aspects of a Commercially Reasonable Sale of Repossessed Property," Jon D. Graves, 19 W.L.J. 123, 124 (1979).

"Commercial Law—Problems with Identifiable Proceeds and Transfers in Ordinary Course in Floor Plan Financing," Richard L. Cram, 30 K.L.R. 478, 482, 483, 489 (1982).

"Secured Transactions: The Priority of Future Advances," Jennifer A. Strus, 21 W.L.J. 717 (1982).

"Grain Elevator Bankruptcies: How Can the Grain Producer be Better Protected?" Marc E. Elkins, 31 K.L.R. 157, 160 (1982).

"Survey of Kansas Law: Secured Transactions," J. Eugene Balloun, 32 K.L.R. 351, 353, 354, 358, 359, 360 (1984).

"Agricultural Credit and The Uniform Commercial Code: A Need for Change?" Keith G. Meyer, 34 K.L.R. 469, 484, 485, 492 (1986).

"Bank's Right of Setoff—Iola State Bank v. Bolan," SueAnn S. Bradford, 33 K.L.R. 569, 571, 573 (1985).

"Clear Title: A Buyer's Bonus, A Lender's Loss—Repeal of UCC § 9-307(1) Farm Products Exception by Food Security Act § 1324 [7 U.S.C. § 1631]," Mark V. Bodine, 26 W.L.J. 71, 73, 75, 81 (1986).

"Commercial Law: Identifiable Proceeds and the Knowledge Factor [Farmers State Bank v. Production Credit Association, 243 Kan. 87, 755 P.2d 518 (1988)]," Mahesh I. Patel, 28 W.L.J. 295, 305 (1988).

"Kansas Legislation Governing Credit Agreements of Financial Institutions," George L. Calvert III, 59 J.K.B.A. No. 2, 19, 21 (1990).

"Creditor Beware: From Default Through Deficiency Judgment," Wanda M. Temm, 60 J.K.B.A. No. 8, 17 (1991).

"Electronic Commerce Under the U.C.C. Section 2-201 Statute of Frauds: Are Electronic Messages Enforceable?" Deborah L. Wilkerson, 41 K.L.R. 403, 404 (1992).

"Pork, Pollution, and Pig Farming: The Truth About Corporate Hog Production in Kansas, Eric Voogt, 5 Kan. J.L. & Pub. Pol'y, No. 3, 219, 226, 237 (1996).

"Electronic Commerce in Kansas: Contract Formation and Formalities Under Article 2," Christopher R. Drahozal, 68 J.K.B.A. No. 5, 22 (1999).

"The Kansas Uniform Fraudulent Transfer Act," Leon B. Graves, 68 J.K.B.A. No. 6, 34 (1999).

"Survey of Kansas Tort Law: Part II," William E. Westerbeke, 50 K.L.R. 225 (2002).

"Revised Article 9 in Kansas," Hon. John K. Pearson, 51 K.L.R. 769, 776, 787, 788, 790, 855 (2003).

Attorney General's Opinions:

Lease or installment-purchase agreements; contracts for services. 89-16.

Credit agreements; required notice. 89-19.

CASE ANNOTATIONS

1. Right of holder, subsection (20), to bring action when not real party in interest raised but not decided. Leaderbrand v. Central State Bank of Wichita, 202 Kan. 450, 453, 450 P.2d 1.

2. Subsection (37) mentioned in holding vehicle sale void. Melton v. Prickett, 203 Kan. 501, 508, 456 P.2d 34.

3. Subrogation pursuant to surety contract not a "security interest'' within meaning of statute. United States Fidelity & Guaranty Co. v. First State Bank, 208 Kan. 738, 749, 494 P.2d 1149.

4. Assignee of secured contract, notwithstanding its contrary provisions, must make demand or give notice prior to repossession to avoid liability for unlawful conversion. Klingbiel v. Commercial Credit Corporation, 439 F.2d 1303, 1306, 1308.

5. Subsection (43) considered; no evidence agent lacked authority to endorse check; statutory presumption of genuineness of signatures as to authority operative. Meador v. Ranchmart State Bank, 213 Kan. 372, 377, 517 P.2d 123.

6. Applied; action to recover on implied warranty; disclaimer inadmissible; failure to comply with 84-2-316 (2). Christopher and Son v. Kansas Paint and Color Co., 215 Kan. 185, 194, 523 P.2d 709. Modified: 215 Kan. 510, 525 P.2d 626.

7. Bankruptcy proceeding; past due secured note; to determine whether impermissible preference given, date of transfer was date value given; claim not secured. E. F. Corporation v. Smith, 496 F.2d 826, 828.

8. Guarantor subrogated to rights of creditor; entitled to advantages of self-help repossession provisions of 84-9-503. Benschoter v. First National Bank of Lawrence, 218 Kan. 144, 154, 542 P.2d 1042.

9. Subsections (19) and (25) applied; holder of note admitting total failure of consideration not a holder in due course. Kaw Valley State Bank & Trust Co. v. Riddle, 219 Kan. 550, 556, 549 P.2d 927.

10. Subparagraph (19) applied; defendant breached "good faith". Baker v. Ratzlaff, 1 Kan. App. 2d 285, 288, 564 P.2d 153.

11. Subsection (10) cited; exculpatory clauses transferring employees from one employer to another strictly construed against transferring employer. Belger Cartage Serv., Inc. v. Holland Construction Company, 224 Kan. 320, 330, 582 P.2d 1111.

12. Exclusion of testimony concerning defendant's capacity in signing of note held error. Rosedale State Bank and Trust Co. v. Stringer, 2 Kan. App. 2d 331, 335, 579 P.2d 158.

13. Effect of unauthorized signature reviewed. Coleman v. Brotherhood State Bank, 3 Kan. App. 2d 162, 167, 592 P.2d 103.

14. Definition of "good faith" applied. Cairo Cooperative Exchange v. First Nat'l Bank of Cunningham, 4 Kan. App. 2d 458, 464, 608 P.2d 1370.

15. Bank held liable for conversion and breach of contract. Cairo Cooperative Exchange v. First Nat'l Bank of Cunningham, 228 Kan. 613, 615, 620 P.2d 805. Opinion modified and motion for rehearing denied: 229 Kan. 184, 624 P.2d 420.

16. Purchase of temporary city notes at discount by bank from individual not evidence of bad faith; bank bona fide purchaser for value without notice. Farmers State Bank & Trust Co. of Hays v. City of Yates Center, 229 Kan. 330, 345, 624 P.2d 971.

17. Where lease agreements were intended to create security interests hereunder, provisions of Article 9 of UCC applicable. CIT Financial Services, Inc. v. Gott, 5 Kan. App. 2d 224, 228, 615 P.2d 774.

18. Disclaimer of implied warranty of merchantability held sufficiently conspicuous; factors to be considered discussed. J & W Equipment, Inc. v. Weingartner, 5 Kan. App. 2d 466, 618 P.2d 862.

19. Document executed in another state and not signed by maker is not entitled to original probate as a will in Kansas. In re Estate of Reed, 229 Kan. 431, 433, 625 P.2d 447.

20. Bank's application of funds in debtor's account to antecedent debt should not be considered transaction in ordinary course of business to defeat perfected security interest (dissenting opinion). Tuloka Affiliates, Inc. v. Security State Bank, 229 Kan. 544, 551, 556, 627 P.2d 816.

21. Unauthorized and forged indorsements held substantially the same with respect to conversion of property. Aetna Casualty and Surety Co. v. Hepler State Bank, 6 Kan. App. 2d 543, 546, 630 P.2d 721 (1981).

22. "Buyer in ordinary course of business" defined. Victory Nat'l Bank of Nowata v. Stewart, 6 Kan. App. 2d 847, 852, 636 P.2d 788 (1981).

23. Credit company's perfected purchase money security interest in vehicles has priority over bank's security interest; vehicles not sold to a buyer in ordinary course of business. First National Bank and Trust Co. v. Ford Motor Credit Co., 231 Kan. 431, 435, 646 P.2d 1057 (1982).

24. Creditor with security interest in inventory had security interest in non-cash proceeds by filing and perfecting. In Re SMS, Inc., 15 B.R. 496, 499 (1981).

25. Lease of truck to debtor was true lease and not meant to be security; under facts, lessor could reclaim. In Re Intern. Plastics, Inc., 18 B.R. 583, 584, 585 (1982).

26. Agreement effective between parties and against purchaser (taking by sale, gift, etc.); security interest continues unless disposition authorized by secured party. Clark Jewelers v. Satterthwaite, 8 Kan. App. 2d 569, 571, 662 P.2d 1301 (1983).

27. Absent express term to contrary, term constituting usage of trade is binding term of agreement. Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758, 765 (1983).

28. Bank failed to act in good faith; security against debtor/ buyer did not attach against sellers. Iola State Bank v. Bolan, 235 Kan. 175, 182, 183, 186, 679 P.2d 720 (1984).

29. "Actual knowledge" does not encompass "reason to know" within its meaning as defined in (25). Broadway National Bank v. G & L Athletic Supplies, Inc., 10 Kan. App. 2d 43, 47, 49, 691 P.2d 400 (1984).

30. Where defendant's testimony established existence of oral contract, requirements of (3)(b) satisfied. Quaney v. Tobyne, 236 Kan. 201, 212, 689 P.2d 844 (1984).

31. Cited; defaulting buyer has sufficient rights in collateral for bank's security interest in after-acquired inventory to attach. Dick Hatfield Chevrolet, Inc. v. Bob Watson Motors, Inc., 10 Kan. App. 2d 350, 356, 699 P.2d 566 (1985).

32. Acceleration to maturity (84-1-208) of bank's setoff against depositor (9-1206) discussed; good faith (honesty in fact) required. Karner v. Willis, 10 Kan. App. 2d 432, 434, 700 P.2d 582 (1985).

33. Bank not good faith purchaser when enriched by refusing to complete agreement with defaulting bank customer and plaintiff. Dick Hatfield Chevrolet, Inc. v. Bob Watson Motors, Inc., 238 Kan. 41, 45, 46, 708 P.2d 494 (1985).

34. Paragraph (19) cited; test of good faith in 84-1-208 is subjective and requires only honesty in fact. Karner v. Willis, 238 Kan. 246, 249, 710 P.2d 21 (1985).

35. Cited; lease-purchase agreement under economic development revenue bond act (12-1740 et seq.) not complete sale; filing requirements inapplicable. In re Petition of City of Moran, 238 Kan. 513, 519, 522, 713 P.2d 451 (1986).

36. Cited; where leasing essentially financing transaction, UCC applies; entrustment doctrine (84-2-403(2)) examined and applied. Executive Financial Services, Inc. v. Pagel, 238 Kan. 809, 812, 715 P.2d 381 (1986).

37. Cited; provisions of 84-7-210(1) and (2) must be met to enforce statutory lien on household goods. Owen v. Treadwell, 11 Kan. App. 2d 127, 133, 716 P.2d 585 (1986).

38. Cited; UCC rather than federal common law determines whether FmHA's interest inferior to rights of purchaser for value. United States v. Central Livestock Corp., 616 F. Supp. 629, 634 (1985).

39. Auction house with mere possessory interest which sells collateral on debtor's behalf not purchasers under UCC. First Nat. Bank of Amarillo v. SW Livestock, Inc., 616 F. Supp. 1515, 1518 (1985).

40. Cited by dissent where court held creditor had no claim under Kansas law to liquidation sale proceeds commingled with other funds. Maxl Sales Co. v. Critiques, Inc., 796 F.2d 1293, 1301 (1986).

41. Cited; in sale of industrial paint, alleged breach of express warranties, warranties of fitness for particular purpose examined. Ray Martin Painting, Inc., v. Ameron, Inc., 638 F. Supp. 768 (1986).

42. Under (37), agreement is true lease where option to purchase cannot be fulfilled nominally. Wight v. Agristor Leasing, 652 F. Supp. 1000, 1009 (1987).

43. Cited; implied covenant of good faith and fair dealing in area of termination of employment contracts examined. Morriss v. Coleman Co., 241 Kan. 501, 515, 738 P.2d 841 (1987).

44. Transactions under industrial revenue bond statutes as excluded from Article 9 of UCC noted. In re Petroleum Products, Inc., 72 B.R. 739, 745 (1987).

45. PIK certificates as nonnegotiable, creditor's protection of security interest therein, right to proceeds therefrom determined. In re George, 85 B.R. 133, 134, 144 (1988).

46. Cited; constitutionality of statute on debtor depriving creditor of creditor's own money (21-3734(1)(c)) examined. State v. Jones, 242 Kan. 385, 389, 748 P.2d 839 (1988).

47. Cited; circumstances indicative of duty to exercise good faith examined. Riley State Bank v. Spillman, 242 Kan. 696, 705, 750 P.2d 1024 (1988).

48. Cited; superiority of partnership charging order (56-328) over assignment constituting prior unperfected security interest examined. City of Arkansas City v. Anderson, 242 Kan. 875, 883, 752 P.2d 673 (1988).

49. Unsecured creditor with knowledge of another's unperfected security interest disqualified as purchaser. Farmers State Bank v. Production Cred. Ass'n of St. Cloud, 243 Kan. 87, 97, 755 P.2d 518 (1988).

50. Delivery with respect to instruments, liability of bank in accepting unindorsed returned checks without determining question of delivery examined. Saloga v. Central Kan. Cred. Union, 13 Kan. App. 2d 357, 360, 770 P.2d 847 (1989).

51. Priority between right of setoff and perfected security interest determined. Bank of Kansas v. Hutchinson Health Services, Inc., 13 Kan. App. 2d 421, 428, 773 P.2d 660 (1989).

52. Agreement between small business association borrower and tractor seller was contract for sale/security agreement subject to UCC under facts stated. U.S. v. Ables, 739 F. Supp. 1439, 1445 (1990).

53. Definition of "signature" under code did not apply to case involving a guaranty. Airlines Reporting v. Travel Serv. Clearinghouse, 778 F. Supp. 1141 (1991).

54. Summary judgment granted to payee of promissory notes against guarantors and to foreclose security interests. FDIC v. Central Air Control, Inc., 785 F. Supp. 898 (1992).

55. Disclaimer of implied warranties in contract not conspicuous; cause of action stated. Kelley Metal Trading Co. v. Al-Jon/United, Inc., 812 F. Supp. 185, 186, 188 (1992).

56. Whether previously filed but undiscovered financing statement acts as notice to assignee for 84-9-206 waiver provision purposes examined. Benedictine College v. Century Office Products, 853 F. Supp. 1315, 1321 (1994).

57. Whether lessor may acquire security interest in accounts receivable to protect ownership interest in leased property examined. Baldwin v. Hays Asphalt Constr., Inc., 20 Kan. App. 2d 853, 854, 893 P.2d 275 (1995).

58. Security interest in personal property (inventory), properly secured in accord with law, may be the subject of conversion. Farmers State Bank v. FFP Operating Partners, 23 K.A.2d 712, 714, 935 P.2d 233 (1997).

59. Disclaimer of manufacturer was not conspicuous and did not exclude warranties of merchantability and fitness to buyer. Sithon Maritime Co. v. Holiday Mansion, 983 F.Supp. 977, 987 (1997).

60. UCC held inapplicable, but if so, bank required to have actual knowledge of trustee's misconduct to be liable. Wetherill v. Bank IV Kansas, N.A., 145 F.3d 1187, 1193 (1998).

61. In distinguishing a lease from disguised sales and security agreement, economic realities rather than parties subjective intent are applied. In re Beckham, 275 B.R. 598 (2002).

62. Secured creditor's error in listing itself as owner rather than lienholder on certification of title did not render security interest unperfected. In re Charles, 278 B.R. 216, 221 (2002).

63. Mentioned in case involving no written agreement with sperm donor pursuant to 38-1114(f). In re K.M.H., 285 K. 53, 169 P.3d 1025 (2007).

64. For a buyer to establish constructive possession over goods, so as to demonstrate buyer in ordinary course (BIOC) status, at a minimum, the goods that the prepaying buyer is claiming to have constructively possessed must have been identified in the contract. In re Sunbelt Grain WKS, LLC, 427 B.R. 896 (2010).

65. A contract for sale of goods must identify the bulk in order for identification to have occurred. In re Sunbelt Grain WKS, LLC, 427 B.R. 896 (2010).

66. A buyer must only satisfy the requirements listed in the statute defining "buyer in ordinary course" (BIOC) to attain BIOC status. In re Sunbelt Grain WKS, LLC, 427 B.R. 896 (2010).

67. Loan services entitled to enforce promissory note against debtor, despite servicer's sale of beneficial interest in note to third party. In re Martinez, 455 B.R. 755 (Bkrtcy. D. Kan. 2011).